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The US House lawmakers passed a regulatory framework for stablecoins, but bipartisan talks collapsed, jeopardizing its prospects of becoming law.
The House Financial Services Committee voted 34-16 to approve the regulatory framework. But the decision was deeply divided along party lines, underscoring the tensions between Democrats and Republicans. Each side blamed the other for the lack of progress in the negotiations.
House Financial Services Committee Chair Patrick McHenry, a Republican representing North Carolina, held the White House responsible for obstructing the negotiations. On the other hand, committee Democrats accused the Republicans of rushing the process without adequate consideration.
Earlier in the day’s proceedings, Democrats raised objections to the vote and employed procedural tactics to slow down the process deliberately. They contended that Republicans should have exercised patience and postponed the vote until September or later.
Initially, optimism surrounded the possibility of a bipartisan compromise on the legislation. For now, it remains uncertain whether talks will be reinitiated to provide the bill with an opportunity to become law.
In addition to stablecoin regulation, a separate measure related to self-custody in the crypto space also advanced past the panel with a party-line vote. However, due to the split control of Congress, it is unlikely to go further into law.
Stablecoin Regulation: Challenges Ahead
Despite the partisan clash, the progress is still the most significant leap forward for stablecoin regulations in the U.S. Congress. The bill now heads for a vote on the House floor but still needs to clear the Senate and get presidential approval to become law.
Yes! An important vote on an important protection for US investors. It turns out Ds and Rs can do good things when they focus on the American people. https://t.co/ktEdX2ZHvm
— paulgrewal.eth (@iampaulgrewal) July 28, 2023
The lack of bipartisan support for the bill in the House of Representatives raises concerns about its prospects in the Democrat-led Senate. While the bill’s advancement may please Republicans, it could also diminish its chances of gaining broader support.
One of the main points of contention within the bill revolves around the reserve provisions and the scope of federal regulators’ authority over stablecoin issuers, particularly in relation to the Federal Reserve’s enforcement and supervisory reach into issuers licensed by state agencies.
The Clarity for Payment Stablecoins Act, introduced by McHenry, seeks to provide a regulatory framework for cryptocurrencies pegged to fiat currencies. Stablecoins play a crucial role in the crypto markets, offering a stable bridge for investors to trade in and out of more volatile assets.
During the markup session for the stablecoin bill, debates had taken place, with Republicans forging ahead while Democrats consistently raised their concerns at every turn. The ongoing stalemate surrounding stablecoin oversight became apparent and was further complicated by the breakdown of negotiations.
The White House, the Federal Reserve, and the U.S. Treasury Department have yet to express their support for the bill in its current form.
Despite the divisions, a few Democrats, including Reps. Jim Himes, Josh Gottheimer, and Ritchie Torres crossed party lines to side with the Republican membership of the committee in approving the stablecoin bill.
Apart from stablecoin regulation, the committee addressed several other bills, including one focused on protecting people’s ability to maintain self-custodied wallets for crypto assets. Though some Democrats raised concerns about potential illicit use and asset concealment, the panel approved the measure 29-21.
The fate of stablecoin regulation in the United States now hinges on further discussions and negotiations, as well as potential changes to the bill to accommodate the concerns of both Democrats and Republicans.
As the crypto industry continues to evolve, finding common ground on regulatory measures remains a complex challenge for policymakers.
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