Lawmakers on each side of the aisle have recently put forth ideas on how best to regulate stablecoins, but a House subcommittee hearing on Thursday demonstrated that a finding a consensus won't be easy.
Both sides, however, during the House Financial Services Committee's Subcommittee on Digital Assets, Financial Technology, and Inclusion hearing agreed that stablecoin legislation is needed.
A stablecoin is a cryptocurrency that sets its value to other assets, such as the U.S. dollar. There are more than two hundred different types of stablecoins, collectively worth more than $130 billion, according to a subcommittee memorandum.
Democrats and Republicans on the committee worked on a bipartisan stablecoin bill during the previous congressional session, but have since floated their own ideas. Broadly, in respective discussion drafts recently released, Republicans are calling for state regulators to have more say on regulating stablecoins, while Democrats think the Federal Reserve should have more power.
Rep. Stephen Lynch, D-Mass., the subcommittee's ranking member, said that the two sides have "shifted further apart" from last year's bipartisan work and added that recent turmoil in the banking and crypto sectors has changed things. He's concerned that stablecoins "contain structural fragilities that make them vulnerable to runs and pose risks to monetary policy, national security and financial stability. As we consider the recent bank failures and threats to economic stability, we need to ensure that any proposal provides adequate safeguards to our financial system."
But in his opening statement, Rep. French Hill, R-Ark., the subcommittee's chairman, was more upbeat. "There are clearly many ways where members have different views, and you can see that from the two proposals," he said. "But from my seat as chairman of this subcommittee, I remain convinced that members on both sides of the aisle are actively working in good faith to find agreement on these key points."
During a hearing before the full committee in February, Nellie Liang, the Treasury Department's undersecretary for domestic finance, said clear and consistent regulation is needed to mitigate risks and support potential benefits associated with stablecoins.
Ms. Liang was representing the President's Working Group on Financial Markets, which in November issued a report on stablecoins along with the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency. The report noted that stablecoins are primarily used to facilitate trading of other digital assets, but could be more widely used in the future as a means of payment by households and businesses.