Democrats blasted draft Stablecoin law in first hearing in 2023 over questions

Skeptical comments from key Democrats on Wednesday cast doubt on the chances of US stablecoin legislation that the crypto industry has relied on as the first real regulatory effort.

The House Financial Services Committee held its first hearing on stablecoins in 2023 on Wednesday, anchored in a discussion draft created by Reps. Maxine Waters (D-Calif.) and Patrick McHenry (RN.C.) last year and shared over the past. weekend. And while Republicans praised the effort that went into the bill, Democrats called it outdated during opening statements.

During her opening statement, Waters said the bill was a joint effort, but negotiations on the provisions remained incomplete and “unfortunately, a lot happened in between” last fall and Wednesday, such as the collapse of crypto exchange FTX.

“Mr. McHenry kind of scared me when he said that the members on his side of the aisle had come up with a whole new bill,” Waters said. “The posted bill in no way represents … negotiations between the two of us … I think we’re starting from scratch.”

Rep. French Hill (R-Ark.), the chairman of the subcommittee holding the hearing, took a different tone, calling the bill a bipartisan baby “named Maxine McHenry.”

“It’s here today for both sides of the aisle to consider and assess, and hear from our panelists. So today we’re going to discuss that, think about revisions. How do we address the benefits and risks described in the Biden administration’s 2021 report on stablecoins?” he said during his opening remarks.

His counterpart across the aisle, Rep. Stephen Lynch (D-Mass.), the senior Democrat on the Digital Assets Subcommittee, said lawmakers should question “whether stablecoins are even necessary.” He said the draft language released by Republicans is “outdated” and does not reflect any lessons from the implosion of major crypto players last year.

Still, the need for a federal bill on stablecoins is obvious, said Rep. Patrick McHenry, Chair of the parent Financial Services Committee.

– It is important for us internationally and nationally. It is very important that we have that understanding on a bipartisan basis, the usefulness and importance of this legislation, he said.

The House stablecoin effort was the most promising crypto effort to take place in the US Congress last year, with the top members of the committee agreeing on most of the key points as the US Treasury also weighed in. But McHenry and then chairman Waters were unable to reach the finish line in the committee. Since then, there have been no significant talks between the parties.

Regulation of stablecoins – tokens pegged to fixed assets like the dollar – has been a priority for US Treasury agencies who see them as potential threats to future financial stability, with lawmakers from both parties arguing that this narrow part of the industry could be dealt with more easily than a broader one bill.

One of the main sticking points has been the question of whether any legislation can win the necessary support from Sen. Sherrod Brown (D-Ohio), the chairman of the Senate Banking Committee. So far, he has offered no definitive comments on his position, and other Democrats on his committee have suggested that giving the industry tailored oversight could only encourage a sector they believe is too dangerous to exist at all.

A spokesperson for Brown previously told CoinDesk that stablecoins are not currently used for payments, and that the senator “continued to look carefully at all the different approaches that his colleagues have advanced,” in a statement responding to the bill.