Yahoo Finance Rep. Maxine Waters suggests House needs to start stablecoin bill from scratch
Rep. Maxine Waters (D-Calif.), the top Democrat on the House Financial Services Committee, suggested during a subcommittee hearing examining stablecoin regulation on Wednesday that lawmakers may need to start stablecoin legislation from scratch.
Waters, who was previously chair of the full committee and led negotiations with Republicans on stablecoin legislation last year, said the bill doesn't account for issues tied to crypto exchange FTX's failure as well as separate bills Republicans led by now Committee chair Patrick McHenry (R-N.C.) and Democrats came up with last year.
"The posted bill in no way, represents the final work on stablecoins by negotiations between the two of us," said Waters during a House Financial Services Subcommittee on Digital Assets hearing.
"It does not represent any final product of any kind, and so I think we're starting from scratch to deal with stablecoins. We must get a stablecoin bill. I think we can do that, but disregard the bill that has been posted altogether."
Waters said McHenry "alarmed" her when he told her Republicans had come up with their own whole new bill.
"I suggested that if he was going to have a Republican bill that we would go back to work with a Democratic bill, then we'll get together and decide who's gonna give on what and what we were going to do to work out the differences. That has not happened."
Earlier this year, Waters told Yahoo Finance in an interview stablecoin legislation was "ready to go" and that problems between Democrats and Republicans on the bill were "just about solved."
Waters said lawmakers now need to get back together to negotiate.
'Imperfect in many ways'
McHenry, who has repeatedly called the legislation an "ugly baby," confessed the bill is "imperfect to us in many, many ways to each of us in different ways."
Subcommittee Chair French Hill (R-Ark.) called to work together to urgently pass legislation.
"I want to reiterate the urgency for those of us in this room to work together to pass payment stablecoin legislation," said Hill. "It's time for Congress to act now to pass legislation to establish a regulatory framework for payment stablecoins."
Divisions emerged during Wednesday's hearing with subcommittee ranking member Stephen Lynch (D-Mass.) saying he's concerned the legislation does not address co-mingling or how conflicts of interest will be managed between issuers and crypto exchanges.
He also said giving states the authority to regulate stablecoins allows issuers to easily avoid federal oversight and seek out more permissive states. Lynch also takes issue with offering stablecoin issuers access to the Federal Reserve’s discount window, master accounts and payment services.
"These programs are typically limited to banks who are heavily regulated and that is for good reason," said Lynch. "It is the danger of allowing shadow banking products, particularly stable coins to issue deposits like products without FDIC insurance. So I strongly believe we need to separate crypto assets from our banking system and this bill does just the opposite."
Last Congress, Democrats and Republicans worked on a stablecoin regulatory framework before the midterm elections. The draft legislation from last Congress would allow nonbanks to issue stablecoins and require stablecoin issuers to maintain reserves backing their stablecoins on an at least one-to-one basis.
Those reserves could include US dollars, Treasury bills and central bank reserve deposits.
House lawmakers Wednesday heard from a range of stakeholders on how best to regulate stablecoins, including Dante Disparte, chief strategy officer for Circle – the largest US stablecoin issuer – and Adrienne Harris, Superintendent for New York State Department of Financial Services.
Disparte told Yahoo Finance last month he favored the House Financial Services legislation and is urgently calling on Congress to pass legislation.
In testimony, Disparte warned if the US does not lead at the national level, including by properly defining what is and what is not a payment stablecoin, "Then we can expect a future stable-in-name-only coin like Terra-Luna to emerge into the federal regulatory vacuum.”
Algorithmic stablecoin Terra Luna collapsed last year after facing a bank run, with the fallout ultimately leading to the bankruptcy of Voyager, Celsius, and crypto hedge fund Three Arrows.
The Biden administration has called on Congress to craft a regulatory framework for stablecoins.
Read the latest financial and business news from Yahoo Finance
