The Federal Reserve is seemingly running interference with congressional efforts to regulate stablecoins, according to a letter recently sent to Fed Chairman Jerome Powell. The letter came from Chairman of the U.S. House of Representatives Financial Services Committee Patrick McHenry and subcommittee chairs French Hill and Bill Huizenga.
The legislators were objecting to two Fed letters: SR 23-7 on the Novel Activities Supervision Program and SR 23-8 titled “Supervisory Nonobjection Process for State Member Banks Seeking to Engage in Certain Activities Involving Dollar Tokens.” They wrote:
“We are concerned that these actions are being taken to subvert progress made by Congress to establish a payment stablecoin regulatory regime. Moreover, if these letters are left in place, they will undoubtedly deter financial institutions from participating in the digital asset ecosystem.”
The letters, issued simultaneously, supplement a January policy statement and impose additional limitations on activities with crypto assets.
According to the legislators, the Fed letters “effectively prevent banks from issuing payment stablecoins — or engaging in the payment stablecoin ecosystem” while “masked as guidance outlining a process by which these activities can be permissible.” The January policy extended restrictions placed by the Office of the Comptroller of the Currency on national banks to state banks.
In addition, the letter claimed that the Fed letters were issued without observing the notice and comment processes required by the Administrative Procedure Act.
Huge breakdown on stablecoin bill process; odds are this proceeding doesn’t get done today and there’s a new markup after Labor Day.
Ironically, this probably gives both sides more time for negotiations and for Chair McHenry to do direct negotiating with the White House. https://t.co/hNrQ2WF6RN
— Justin Slaughter (@JBSDC) July 27, 2023
The legislation referred to by the legislators is the Clarity for Payment Stablecoins Act of 2023, which McHenry introduced on July 20.
The committee members’ letter included a list of eight questions, the bulk of which concern implementation of the guidance found in the two Fed letters. Besides that, the letter demands records to determine the timeline of the drafting of the Fed letters.