Federal Reserve to Gain Oversight of Stablecoins in New Draft Bill

Updated: 18 July 2023

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The US House of Representatives is nearing the creation of a new bill meant to regulate stablecoins in the country. The bill was drafted by two senior members of the Financial Services Committee, and they said that Republicans want a bill to regulate stablecoins state-wise.

However, the creators of the draft do not see this as a major issue in advancing the bill ahead.

Both parties seemingly agree that they cannot create a “race to the bottom” for guardrails regarding fiat-backed crypto assets.

However, it is encouraging to hear that the two leading parties are inching toward an agreement, as prior reports noted that they were having conflicts regarding the proposed legislation.

US Fed to be in charge of stablecoins

James French Hill, the Republican representative for Arkansas, said everyone agrees to create a state pathway for regulating stablecoins. He noted,

But to quote my colleagues on the other side of the aisle, we don’t want any race to the bottom.

With that in mind, the House Financial Services Committee decided to change its scheduled vote on legislation that would set up a regulatory framework for stablecoins and crypto trading in the US.

Further commenting on the situation, French Hill said that the existing version of the draft bill had granted the authority over stablecoins to the US Federal Reserve.

The Fed would be able to enforce or review stablecoin regulations moving forward, rather than the SEC or another regulatory body in the country.

The vote was pushed to the end of July

Previously, Fed Chairman Jerome Powell stated in his testimony against Congress that the country’s central bank needs to play a role in regulating payment tokens.

Similar views on the matter also came from Rep. Jim Himes, D-Conn., who is a senior Democrat on the FSC.

Rep. Himes acknowledged the state v. federal policy debate regarding the law involving stablecoins, but he also noted that he doesn’t believe that the debate would be a major obstacle to the bill.

At this point, both representatives hope that the upcoming regulatory framework will advance by the end of the month.

As for the House FSC, it moved the vote that was supposed to occur this week. The new date for the vote, as well as the debate, was set for July 26th.

Assuming that the bill passes the vote, the proposed legislation will next re-emerge in the Senate, meaning that it will need approval from the Democrats.

Finally, in order for it to become law, it will also need the approval of the Biden administration.

If it becomes law, the bill will also allow the CFTC greater oversight over the crypto industry than the SEC.

Given the SEC’s history with the crypto industry and constant crackdowns, many believe that the industry would see more favorable treatment under the CFTC.

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