Legislation to create a comprehensive regulatory framework for stablecoins in the U.S. could be approaching a speed bump, with Federal Reserve Chair Jerome Powell arguing for a robust federal role in the regulation of the sector.
“We do see payment stablecoins as money,” he said in testimony in front of the House Financial Services Committee on Wednesday, adding that the central bank should play a role in approving stablecoin issuance. “We believe that it would be appropriate to have a quite robust federal role in what happens in stablecoins going forward, and leaving us with a weak role and allowing a lot of private money creation at the state level would be a mistake.”
Powell sounded skeptical of state approval and preemption for stablecoin issuers, currently part a Republican-led proposal set for debate at the committee level.
Top Democrat is also concerned
The top Democrat on the House Financial Services Committee, Rep. Maxine Waters, also sounded critical of the proposal from her Republican counterparts to allow state regulators to approve stablecoin issuance.
“This proposal takes state preemption to a whole new level,” Waters said, referencing how a stablecoin approved in one state could then be sold across the country, whether or not other state regulators signed off.
Though Republicans can advance the bill out of committee and the House of Representatives on a party line vote, it needs support from Democrats in order to become law. Democrats hold a majority in the Senate and President Joe Biden would be loath to sign legislation that his own party does not support.
Stablecoin framework
U.S. stablecoin giant Circle, among others, supports the creation of a new framework for stablecoin issuers. Fintech companies, especially payments providers, have long complained about their lack of access to a single registration to do business across the U.S., instead needing to register state-by-state as money service providers.
The bill aims to allow a simpler path for stablecoin providers, who would also be subject to disclosures and regulatory oversight. U.S. financial regulators have called on Congress to pass new regulations for stablecoins, with more urgency to the matter since the Terra/Luna collapse last year.
House Financial Services Committee Chair Patrick McHenry, R-N.C., said he expects a vote on the stablecoin bill, along with a digital assets market structure bill, in the second week of July.