In a recent hearing, the US House Financial Services Committee discussed a bill that was released over the weekend. The bill aims to regulate stablecoins, a type of digital currency designed to maintain price stability by being pegged to the value of another asset. Prominent Democrats on Wednesday cast doubt on the prospects of U.S. stablecoin legislation, which the cryptocurrency industry sees as the first real attempt at regulation.
The need for updated legislation
As leading Democrats express skepticism about proposed stablecoin legislation, the cryptocurrency industry faces uncertainty over the first real surveillance effort in the United States. The House Financial Services Committee held its first stablecoin 2023 audience, focusing on a talk bill introduced by Reps. Maxine Waters (D-Calif.) and Patrick McHenry (RN.C.) last year. Although Republicans welcomed the bill, Democrats argued it was now obsolete.
In his opening remarks, Waters acknowledged the collaborative nature of the bill; however, she also pointed out that negotiations regarding its provisions had not yet reached a conclusion. The period between last fall and Wednesday was marked by unfortunate events, including the disintegration of major cryptocurrency exchange FTX. She says:
“Mr. McHenry alarmed me somewhat when he said that MPs on his side of the aisle had introduced a brand new bill. The posted bill does not in any way represent…negotiations between the two of us…I think we are starting from scratch.
In contrast, Rep. French Hill, chair of the subcommittee, praised the bill’s bipartisan nature, calling it “Maxine McHenry.” He urged both sides of the aisle to review, review and discuss potential revisions while addressing the benefits and risks outlined in the Biden administration’s 2021 report on stablecoins.
Stablecoins can be manipulated easily
However, Rep. Stephen Lynch (D-Mass.), the lead Democrat on the digital assets subcommittee, questioned the need for stablecoins and criticized the draft language as outdated. He claimed that it did not reflect lessons learned from the implosion of major crypto players the previous year.
Despite the disagreements, Rep. Patrick McHenry, chairman of the entire Financial Services Committee, stressed the importance of federal stablecoin legislation both domestically and internationally.
Last year, the House Stablecoin initiative looked promising, with senior committee members largely in agreement on key points. However, progress stalled as McHenry and then-President Waters failed to finalize the bill. Since then, no meaningful discussions have taken place between the parties.
US financial regulators have prioritized oversight of stablecoins — tokens tied to stable assets like the dollar — seeing them as potential risks to future financial stability. Lawmakers on both sides of the aisle argue that tackling this specific segment of the industry would be a more feasible approach compared to a broader, all-encompassing bill.