Stablecoin bill moves closer to bipartisan agreement in House

Bloomberg News

WASHINGTON — The House Financial Services Committee has posted another draft of a stablecoin bill, this time including several Democrat-led priorities, in a powerful signal that negotiations between the two parties could lead to some actionable legislation out of the House this year. 

House Republicans released the draft just before a June 13 hearing on digital asset legislation, which will feature Jeremy Allaire, CEO of stablecoin issuer Circle. 

Unlike a previous version of the bill McHenry released in April, the new version merged in some important Democratic priorities. Specifically, the new bill would have the Federal Reserve write requirements for issuing stablecoins, although it would still allow state regulators to have oversight over the tokens' issuers. 

A sticking point for Democratic lawmakers in the previous bill was the preeminence it gave state regulators over the Fed. The most recent draft would give the Fed power to intervene in emergency situations over state regulators, and the ability for states to give their authority to the central bank. 

The most recent draft also eliminated a section requiring the Fed to study the merits of central bank digital currency, an increasingly controversial topic for the more conservative factions of the Republican party. 

The newly published draft of stablecoin legislation is a sure sign that negotiations are continuing to move forward on the topic in the House. While Republicans could pass a stablecoin bill alone in the chamber, they will need the buy-in of Democrats in the Senate to get anything passed into law. 

The progress comes as stablecoin and digital asset policy has heated up in Washington. The Securities and Exchange Commission has cracked down on Binance Holdings Ltd and Coinbase, two of the world's largest crypto exchanges, and crypto companies are rethinking their banking relationships after the unwinding of Signature and Silvergate banks as part of the banking crisis in March. 

The bill is also the second discussion draft that McHenry has published this year, and the first that shows the conversation is moving forward with his counterpart, ranking member of the House Financial Services Committee Rep. Maxine Waters, D-Calif. 

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Waters released her own discussion draft ahead of a May hearing on stablecoin oversight, which included a nearly identical definition of digital assets to McHenry's. Waters' bill features a new section that would bar the commingling of customer funds with assets held by a stablecoin issuer — a clear reference to the turmoil caused by complicated intermingling of funds in the collapse of crypto exchange FTX. 

That bill would also give the Federal Reserve the option to deny any registration of a state-approved stablecoin issuer, which Waters said would ensure a strong federal floor for stablecoin registration, and ensure that stablecoin issuers couldn't engage in regulatory arbitrage. 

"I remain convinced that members on both sides of the aisle are actively working in good faith to find agreement on these key points," said Rep. French Hill, R-Ark., at the previous hearing. "We also agree on the basic protections that must be included in any stablecoin legislation. Consumer, investor protection is at the heart of our bill. So, I want to be clear that while we noticed two different legislative proposals today, we are not starting from scratch. To do so would have ignored all the effort that was made and common ground that was found during the negotiations on the previous proposal."