Hopes for a bipartisan agreement on stablecoin legislation were dashed on Thursday and Republicans in the House are blaming the Biden administration.
The Clarity for Payment Stablecoins Act has been months in the making, with Republicans seeking input from Democrats in order to craft a viable piece of legislation that would pass muster in both chambers of Congress and land on President Joe Biden’s desk.
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The bill seeks to establish a regulatory framework for stablecoins, which represent a $123 billion market. Stablecoins are a form of cryptocurrency that ties their value to an underlying asset, such as gold or fiat currency, and don’t typically fluctuate in value wildly, as some cryptocurrencies, such as bitcoin, have, because they are asset-backed.
House Financial Services Chairman Patrick McHenry (R-NC) had hoped to announce an agreement on the legislation during its markup on Thursday morning but said that the White House had sunk the effort.
McHenry said the blame for the failure doesn’t lie with Democratic leadership on the committee, but rather with the Biden administration. He said Rep. Maxine Waters (D-CA), the ranking member on the committee, and her staff have “negotiated in good faith” on the legislation and commended them for their work.
“Unfortunately, there was a third party in this negotiation that did not share our same sense of urgency — the White House,” he said. “A bipartisan deal was within reach — we were closer than we’ve ever been. A few small, but nonetheless important, provisions stood between us and a deal. It was the White House’s unwillingness to compromise that has once again brought negotiations to a halt.”
The bill has been repeatedly tweaked and changed in the lead-up to a planned markup. The latest version would reportedly set up a federal regulatory structure while still assigning a role to individual states. The legislation applies to payment stablecoins and would define what assets can be used to back stablecoins (for instance, gold or U.S. dollars).
It also requires that stablecoin issuers submit certificates to either state or federal regulators with information about their coins and sets parameters for banks issuing stablecoins and establishes capital requirements for stablecoin issuers.
Waters and Democrats laid the blame at the Republicans' feet. She said that an agreement wasn’t reached “because of the impatience of Republican leadership.
“Important legislation takes time, but the chair is impatient and has decided to abruptly end our negotiations and move forward with the bill that is deeply problematic,” Waters told the committee. She said that the bill “promotes a race to the bottom.”
Waters has pushed for more involvement by the Federal Reserve in the legislation, which gives state regulators the power to approve non-bank stablecoin companies.
Calls for regulation of stablecoins became increasingly vocal following the collapse of stablecoin TerraUSD, which wiped out some $40 billion in crypto market value.
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Amid Thursday’s tense hearing, Rep. Stephen Lynch (D-MA) called for the markup to be postponed until after the August recess in September. He argued that Republicans will still have the majority and the votes to push through legislation then but that it would give Democrats a “full and fair opportunity” to be heard and part of the process.
The Washington Examiner reached out to the White House for comment about McHenry’s claim that it was the reason for the legislation’s derailment.