Lawmakers Object to Federal Reserve’s Stablecoin Guidelines — Say They Undermine Legislative Progress

Several U.S. lawmakers have objected to the Federal Reserve’s stablecoin regulatory tips, which they imagine “will undoubtedly deter financial institutions from participating in the digital asset ecosystem.” According to the lawmakers, “The Fed has chosen to effectively prevent banks from issuing payments stablecoins — or engaging in the payment stablecoin ecosystem.”

Fed’s Efforts ‘Subvert Progress Made by Congress’

Three U.S. representatives despatched a letter to Federal Reserve Chairman Jerome Powell concerning stablecoin regulation final week. The letter, dated Aug. 23, was signed by Patrick McHenry (R-NC), chairman of the House Financial Services Committee; French Hill (R-AR), chairman of the Subcommittee on Digital Assets, Financial Technology and Inclusion; and Bill Huizenga (R-MI), chairman of the Subcommittee on Oversight and Investigations.

Congressman Hill said Monday on the social media platform X:

I despatched a letter alongside Rep. Patrick McHenry and Rep. Bill Huizenga to the Federal Reserve objecting to their efforts to undermine the Financial Services Committee’s progress on stablecoin laws. The Fed has chosen to successfully stop banks from issuing fee stablecoins.

In their letter, the lawmakers expressed considerations concerning “the Federal Reserve Board’s recent Supervision and Regulation Letters titled ‘Creation of Novel Activities Supervision Program’ (SR 23-7) and ‘Supervisory Nonobjection Process for State Member Banks Seeking to Engage in Certain Activities Involving Dollar Tokens’ (SR23-8).” Both letters had been issued on Aug. 8. The lawmakers pressured:

We are involved that these actions are being taken to subvert progress made by Congress to ascertain a fee stablecoin regulatory regime. Moreover, if these letters are left in place, they are going to undoubtedly deter monetary establishments from collaborating within the digital asset ecosystem.

Noting that the House Committee on Financial Services recently passed a invoice titled “Clarity for Payment Stablecoins Act,” which has bipartisan assist, the congressmen said that “instead of working with Congress to establish a workable regime, less than two weeks after the Committee’s action, the Fed released SR 23-7 and SR 23-8.”

The lawmakers defined that the Fed’s Novel Activities Supervision Program “appears designed to impose additional regulatory burdens on banking institutions to engage with crypto assets and to provide the Fed with additional tools to deny crypto asset-related activities.”

Moreover, they identified that “SR 23-7 and SR 23-8 were not issued in accordance with the notice and comment process as required under the Administrative Procedure Act. This guidance represents an effort by the Fed to set policy without being held accountable to market participants and the public, which is unacceptable.”

The lawmakers concluded their letter to Chair Powell with a request for written solutions to quite a lot of questions pertaining to SR 23-7 and SR 23-8. They embrace how the Fed intends to “implement a fair and consistent process for determining which banking organizations will be subject to supervisory examinations.” The congressmen additionally requested the Federal Reserve chairman to offer paperwork pertaining to SR 23-7 and SR 23-8, together with all associated information and communications amongst workers and all associated information and communications of Vice Chair for Supervision Michael Barr.

The lawmakers emphasised:

By issuing the letters, the Fed has chosen to successfully stop banks from issuing funds stablecoins — or partaking within the fee stablecoin ecosystem.

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