Fed and House of Representatives at odds over stablecoins

It has become increasingly rare in the United States for Democrats and Republicans to agree on something in recent years. In this respect, it was almost a political feat when the Finance Committee of the House of Representatives introduced several laws last month that were intended to provide uniform rules for the crypto sector. It was not only about more regulatory clarity for authorities and providers, but also about the legal treatment of stablecoins. To do this, the Federal Reserve (Fed) should set guidelines that would have allowed banks to set up their own stablecoins. What was intended as a step for more clarity is now causing new political tensions between the House of Representatives, the Senate and the US Federal Reserve.

The starting point was two guidelines published by the Fed’s monetary authorities at the beginning of August. In it, they demanded that banks that want to use their own stablecoins must first obtain permission from the central bank.

The members of the Finance Committee see this as an attack on the “Clarity for Payment Stablecoins Act”, which was also passed in early August. in one Letter of appeal the politicians are now turning to Fed Chair Jerome Powell. The Fed has “exceeded authority” and is undermining “the progress that Congress has made toward creating consistent rules for stablecoins,” it said. And further:

By issuing the instructions, the Fed has decided to effectively prevent banks from issuing stablecoins or engaging in the stablecoin ecosystem.

Stablecoins: A bone of contention in US politics

Crypto divides the political landscape in the US. Stablecoins in particular are a constant bone of contention in US politics. With the launch of PayPal (PYUSD), the disputes picked up speed again. This was also noticeable in the negotiations on the stablecoin law. First, the Democratic parliamentary group leader, Maxine Waters, blocked the vote. Her Republican opponent, Patrick McHenry, blamed the White House for trying to block the bill.

In the end, the Republicans were able to win several Democrats over to their side. The bill passed the committee by a vote of 34 to 16. But it wasn’t more than a partial victory. Because the legislative process in the USA is long and the hurdles for crypto are numerous. It is quite possible that the Republicans will have to make some concessions. In the end, President Joe Biden also has to give the green light – and as is well known, he is not considered a big crypto friend.