House Democrats and Republicans on the House Financial Services Committee have clashed over a proposed new stablecoin bill to regulate digital assets such as cryptocurrencies. The proposal, first led by Reps. Maxine Waters (D-Calif.) and Patrick McHenry (R-N.C.) last year, had neared a compromise, however due to grievances concerning the lack of Democratic involvement and unsatisfactory input, the legislators ultimately decided to start from scratch.

Recently, Republicans on the committee released a discussion draft that grants strong authority to state governments to govern stablecoin issuers. In contrast, the Democrats’ version would give the Federal Reserve the authority to oversee the registration of these issuers. Moreover, the Democrat proposal follows a philosophy of greater client protection, as it does not allow non-bank stablecoin issuers to take advantage of Federal Reserve programs.

A distinct classification of digital asset, “payment stablecoins”, is a point both the Democrat and Republican efforts agree on. Additionally, the Democrat proposal seeks to impose a moratorium on algorithmic stablecoins, although this stipulation was removed from the Republican counterpart.

To address ongoing concerns, the House committee is set to convene another hearing May 18 concerning the proposed stablecoin bill. The prospect of a legislative framework regulating stablecoins brings up important questions such as whether the Federal Reserve or state governments should have primary authority, and how consumer protection regulations should be enforced. With two versions of the bill being proposed, addressing these complex questions without causing a further separation in policies between the two sides will be no easy feat.



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