Negotiating Stablecoin Legislation

Top Democrat of the House Financial Services Committee, Maxine Waters, aims to “strike a grand bargain on stablecoins” before year’s end, potentially concluding two years of legislative debate.

Waters and Republican Rep. Patrick McHenry, the committee chair, have collaborated on a regulatory framework for stablecoins since 2022. While the bill passed through the Republican-led committee last year, it has struggled to gain momentum. Waters previously labeled the proposal “deeply problematic” for permitting state regulators to authorize stablecoin issuances without Federal Reserve oversight.

During a recent committee hearing, Waters expressed optimism about achieving a deal that prioritizes consumer protections and federal oversight:

“Mr. Chairman, before the end of this year, I want us to strike a grand bargain on stablecoins and other long overdue bills. Since 2022, we have been working for hours on end to reach an agreement and have each made concessions.”

Waters emphasized the necessity of secure reserves, like short-term Treasury bills, for stability in stablecoins, stating:

“The Federal Reserve needs to have a dominant role. Stablecoins must be backed by safe reserves to be truly stable.”

Waters challenged McHenry, citing her commitment to bipartisanship:

“I’ve made a public statement to you about bipartisanship — let’s see what you do with it.”

McHenry remains hopeful about the legislation and wishes for clarity regarding digital assets. However, time is running short in Congress as McHenry plans to retire in January. He mentioned optimism for his separate crypto market structure bill, nicknamed FIT21, gaining traction as the year closes.

The hearing on Tuesday also included testimonies from all five SEC commissioners, including Chair Gary Gensler, about the agency’s oversight, particularly concerning digital assets and rulemaking.