In a recent hearing, the US House of Representatives Committee on Financial Services discussed a bill that was released over the weekend. The bill aims to regulate stablecoins, a type of digital currency that is designed to maintain price stability by being tied to the value of another asset. Leading Democrats on Wednesday cast doubt on the prospects of US stablecoin legislation, which the cryptocurrency industry has hailed as the genuine, inaugural regulatory effort.

The need for updated legislation

As Key Democrats Express Skepticism Over Proposed Stablecoin Legislation, Cryptocurrency Industry Faces Uncertainty Regarding First Real U.S. Oversight Effort House Financial Services Committee held its initial 2023 stablecoin hearing, focusing on a debate bill introduced by Reps. Maxine Waters (D-Calif.) and Patrick McHenry (RN.C.) last year. Although Republicans praised the bill, Democrats argued that it is now outdated.

In his opening remarks, Waters acknowledged the collaborative nature of the bill; however, he also stressed that negotiations on its provisions have not yet been concluded. The period between last fall and Wednesday was marked by unfortunate events, including the breakup of the prominent cryptocurrency exchange FTX. She said:

“Mr. McHenry somewhat alarmed me when you said that members on your side of the aisle had introduced an entirely new bill. The published bill in no way represents…negotiations between the two of us…I think we’re just starting right from the start”.

By contrast, Rep. French Hill, the subcommittee’s chair, praised the bipartisan nature of the bill, referring to it as “Maxine McHenry.” She urged both sides of the aisle to review, consider, and discuss potential revisions while addressing the benefits and risks outlined in the Biden Administration’s 2021 report on stablecoins.

Stablecoins can be easily managed

However, Rep. Stephen Lynch (D-Mass.), the top Democrat on the digital assets subcommittee, questioned the need for stablecoins and criticized the draft’s language as outdated. He claimed that it did not reflect the lessons learned from the implosion of major crypto players the previous year.

Despite the disagreements, Rep. Patrick McHenry, chairman of the at-large Financial Services Committee, stressed the importance of federal stablecoin legislation both domestically and internationally.

Last year, the House’s stablecoin initiative looked promising, with top committee members largely in agreement on key points. However, progress stalled as McHenry and then-Chairwoman Waters failed to finalize the bill. Since then, no meaningful talks have taken place between the parties.

US financial regulators have prioritized oversight of stablecoins, tokens tied to stable assets like the dollar, perceiving them as potential risks to future financial stability. Lawmakers on both sides of the aisle argue that addressing this specific segment of the industry would be a more feasible approach compared to a broader, all-encompassing bill.

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