US House Stablecoin Hearing Focuses on Competing Regulation Bills

19. May 2023 By admin Off

• The US House of Representatives held a hearing on May 18 to review two proposed bills that seek to regulate stablecoins.
• One bill would allow stablecoin operators to choose the state they register in, while the other bill preserves access to regulation in federal hands.
• A witness suggested a middle road between federal and state-level regulation which would involve setting a floor for federal involvement and creating a toggle based on the size of the issue.

US House Focuses on Stablecoin Regulation

The US House Committee on Financial Services’ new Subcommittee on Digital Assets, Financial Technology and Inclusion heard testimony from five experts as it considered two proposed bills to regulate stablecoins. The first bill, sponsored by Republicans, would allow stablecoin operators to choose their own registration state without going through the Federal Reserve Board. Democrats countered with a bill that seeks to preserve access to regulation in federal hands with the appropriate regulator.

Competing Bills

The Republican proposal was published ahead of an April hearing concerning stablecoins in the Financial Services Committee. Ranking member Maxine Waters later introduced a competing draft based on a bill that was introduced but not passed in the last session of Congress. Both bills have sparked debate over state versus federal regulation; supporters of one argue for preventing a “race to the bottom” while those behind the other maintain that federal regulation can offer more uniformity and consistency in policymaking.

Finding Middle Ground

David Portilla, partner at Davis Polk & Wardwell, suggested finding middle ground between federal and state-level regulation which involved setting up both a “floor” mechanism for federal involvement with minimum standards as well as creating an option toggle based on issuance size. Portilla argued current regulations were not suited for stablecoins, making new legislation necessary.

Opposing Views

State versus Federal regulation continues to be contentious among lawmakers when discussing how best to handle stablecoins within existing frameworks or create entirely new ones altogether. Supporters of one bill argue it will prevent “races-to-the-bottom” while opponents maintain it is important for regulators at higher levels have authority over certain aspects of these projects while allowing states some flexibility in regulating smaller issues.

Conclusion

The answers surrounding how best to regulate stablecoins are far from clear and no consensus has been reached yet among lawmakers about whether or not there should be more emphasis placed upon either state or federal authorities during this process. More hearings are likely needed before any final decisions can be made about this matter moving forward into implementation phase.