Congress Hearing Bodes Well for Stablecoin Issuers

Key Takeaways

  • The House Financial Services Committee met to discuss stablecoins yesterday.
  • Committee members mostly argued that stablecoin issuers should not have to become regulated banks.
  • U.S. regulators have been watching stablecoins closely over the last year. How the technology will be regulated remains unclear.

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The committee mostly argued that stablecoin issuers should not have to become insured depository institutions. 

Committee Discusses Stablecoin Report

Stablecoin issuers may escape the Biden Administration’s recommendation of limiting distribution to insured banks and credit unions. 

In a Tuesday hearing, members of the House Financial Services Committee mostly agreed that stablecoin issuers should not have to become insured depository institutions. The committee met to discuss a November report on stablecoins published by the President’s Working Group on Financial Markets. 

While members of the committee were in agreement that stablecoins need a balanced regulatory framework, both Republicans and Democrats in attendance opposed the President’s Working Group proposal to limit stablecoin issuance to banks. 

Rep. Tom Emmer, R-Minn., who’s shown strong support for the crypto industry in the past, criticized the report and remarked that “banks should not be the only institutions in the ecosystem with dibs to issue the potential array of financial products that the President’s Working Group report simply lumps together as a stablecoin.”

“It occurs to me that limiting stablecoin issuance to insured depository institutions, which have a high barrier to entry, could limit competition,” added Rep. Gregory Meeks, before arguing that imposing a limit could impact racial equality due to the high proportions of people of color that do not use traditional bank services. 

Other key topics discussed during the four-hour discussion were the potential risks of stablecoins, including the impact their growth could have on the U.S. dollar. As stablecoins typically track the price of traditional currencies like the dollar, regulators have long feared that they could threaten its supremacy as the world’s reserve currency. 

Still, the conclusions the committee reached on whether stablecoin issuance should be limited to banks and credit unions will likely be well received by the likes of Circle and Tether, the issuers of crypto’s most popular two stablecoins, USDC and USDT. As crypto has grown over the last year, fears surrounding stablecoins like USDC and USDT have escalated in the U.S. The Treasury and Federal Reserve has warned of the risks of stablecoins, raising questions about how companies like Circle and Tether may be regulated in the near future. 

While the Biden Administration has pushed to limit stablecoin issuance and regulate the sector with strict oversight, members of the House Financial Services Committee appear open to embracing stablecoins as crypto technology gains adoption. 

Disclosure: At the time of writing, the author of this feature owned USDC, ETH, and several other cryptocurrencies. 

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Biden to nominate anti-crypto and anti-big bank law professor to run the OCC

The Biden administration reportedly intends to nominate Kazakhstani-American attorney, academic and former policy advisor Saule Omarova to head the Office of the Comptroller of the Currency (OCC) — the institution that oversees the U.S. banking sector.

Omarova has levied criticisms at both crypto assets and the legacy banking sector in the past, having once pledged to “end banking as we know it”. She has characterized cryptocurrency as “benefiting mainly the dysfunctional financial system we already have.”

According to a Sept. 22 report from Bloomberg citing three anonymous sources “familiar with the nomination process,” Omarova could be nominated as soon as this week.

Currently working as a law professor at Cornell University Law School, Omarova is expected to seek tighter regulations for crypto as she has described the sector as threatening the stability of the economy and ripe for abuse from large private financial entities. The academic specializes in banking law and corporate finance.

If confirmed, Omarova’s tenure at the OCC would likely comprise a significant shift from the previous administration, with former Coinbase legal officer and crypto proponent Brian Brooks having headed the agency toward the end of Trump’s presidency.

Omarova has also offered radical prescriptions for the finance industry, having advocated for consumer banking services to exclusively be administered by the Federal Reserve rather than private institutions. She previously served as a special adviser for regulatory policy to the U.S. Treasury Department during George W. Bush’s presidency.

However, analysts don’t believe Omarova will get the OCC jobwithout a fight, with the Democrats currently holding a slim majority in the Senate and the banking sector expected to lobby against her appointment.

If appointed, Omarova would become the first woman to formally lead the agency, although the OCC has been directed by a female acting head in the past.

Related: CFTC commissioner: Agency doesn’t have enforcement resources without Congress

The New York Times reported that the Biden administration had started vetting Omarova for the role in early August.

While the Democrats were previously considering former Treasury official Michael Barr and law professor Mehra Baradaran for the role, they were dropped after the Democrats decided neither candidate was likely to garner enough support to secure confirmation.