House Republicans Propose Bill To Strip SEC Of Regulatory Power Over Stablecoins

The Block reported that the House Republicans, who are unhappy with the Securities and Exchange Commission's position on cryptocurrency, have proposed a new draft legislation on stablecoins that would transfer authority over payment stablecoins from the agency to federal and state bank and credit union regulators. The draft legislation was released amid negotiations for a comprehensive framework for stablecoins and was designed to complement legislation governing digital asset markets in the United States.

Unlike previous discussions, the proposed bill would not address algorithmic stablecoins or mandate a central bank digital currency study, but would focus solely on stablecoins used for payments. This move to limit the SEC's influence is not surprising, as both congressional Republicans and industry executives have criticized the agency's approach to digital assets, particularly stablecoins. Arkansas Republican French Hill, who chairs a new subcommittee on digital assets and financial technology, is a key figure in stablecoin negotiations and expressed disappointment with the SEC's lack of clarity on digital assets.

House Financial Services Chair Patrick McHenry and others were frustrated with SEC Chair Gary Gensler's lack of clarity on whether ether is a security or commodity and his jurisdiction over stablecoins. The proposed bill shifts stablecoin oversight to federal and state regulators, requires every stablecoin to be backed by legal tender or short-term Treasury bonds, and mandates a monthly reporting requirement.

States can approve stablecoin issuances using their own standards, but there is a regulatory floor, and payment stablecoin holders receive preferential treatment in the event of a bankruptcy. The bill has been shared with Democratic staff and the Biden administration, and any digital asset-related bill will need bipartisan support to become law.

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