The U.S. House Financial Services Committee has been working on drafting a bipartisan bill to regulate stablecoins with input from the Treasury. An expedited first vote was intended for tomorrow Jul 27, during a markup session. However, yesterday the session’s agenda was published with no sign of the stablecoin bill. Additionally, the Wall Street Journal reported sources confirming that the bill has been pushed back until after the August recess.
It said that there are still core issues being debated, including standards over custodial wallets.
The work is being led by Committee Chairwoman Maxine Waters and Republican ranking member Patrick McHenry.
The legislation aims to reduce the risks of stablecoins, particularly if they become more widely used for everyday payments as expected. In that scenario, a run on a stablecoin where people expect it to lose its one-for-one peg to the dollar could impact the financial stability of other institutions as well as Treasury markets. That’s because Treasuries are the primary instrument that backs the stablecoins.
Yesterday, the trade association, the Independent Community Bankers of America (ICBA), warned about rushing the legislation asking for the opportunity to review it and get input from stakeholders.
It also raised concerns about plans to license non-banks, saying it is unclear whether the Federal Reserve would have sufficient oversight authority, including over a stablecoin issuer’s parent. The ICBA also wants clarity over whether a stablecoin issuer will have access to master accounts at the Fed.
The ICBA letter made two points, perhaps the crux of its concerns. It said:
- “the dramatic increase in the volume of stablecoins in circulation represents a concentration of economic power and risk, potentially distorting American finance and commerce.”
- “community banks that are not regulated by the OCC may find they are at a competitive disadvantage relative to their OCC-regulated peers and non-bank digital asset companies.”