The Struggle Behind the Stablecoin Bill: Regulatory Power Battle between Federal and State Governments, Beyond the Two Parties
Original Author: Leo Schwartz, Fortune Crypto
Original Translation: Babywhale, Foresight News
Translator's Note: On the evening of July 27th, Beijing time, it was reported that US House of Representatives failed to reach a bipartisan agreement on stablecoin legislation. Patrick McHenry, Chairman of the Financial Services Committee, stated that negotiations have been deadlocked due to opposition from the White House. Democratic leaders, on the other hand, claimed that it was McHenry who halted the negotiations. Then, on the afternoon of July 28th, Beijing time, the US House of Representatives Financial Services Committee tweeted that the committee had passed the "Payment Stablecoin Transparency Act".
Although the House Financial Services Committee did create some memorable moments last week, legislation does not always proceed smoothly.
In hindsight, it is believed that the two bills passed by the House Financial Services Committee, one regarding regulation of the cryptocurrency market structure and the other regarding stablecoins, received moderate support from both parties, which was a significant victory. To a certain extent, this is correct, as the core political goal of the industry is legalization, and either through direct regulation or legislator recognition of regulation, it is necessary.
Legislation on market structure always seems to be an elusive hope, and the above situation seems to confirm this—passing this bill was an important step in advancing the dialogue and overcoming the obstacles that others have encountered.
It is difficult to argue that the stablecoin bill has failed, as the stablecoin bill has always been the most likely legislative effort. Former Chairman Maxine Waters (Democrat, California) and Commissioner Patrick McHenry (Republican, North Carolina) were close to reaching a final version last year. Their roles changed this year, but it appears they still have the intention to advance the legislation. When Patrick McHenry earlier in this session proposed a version involving only Republicans, observers attributed Maxine Waters' frustration to political maneuvering.
However, in the discussions of the two bills, the stablecoin bill faced greater controversy and ultimately received less support. Though there were a few Democratic votes in favor, the majority expressed opposition at increasingly heated hearings. As Pedersen mentioned in his Twitter.
According to McHenry, the main obstacle comes from the White House. Subsequent reports show that the priority of regulating stablecoins at the state level or federal level has been a constant question in the debate. The Biden administration, especially National Economic Council Chair Lael Brainard, advocates for federal priority (the Republican version still calls for a federal baseline for stablecoin regulation).
The peculiar thing about this divide is that it doesn't come from partisan competition. Remember that New York is the only state in the US that has comprehensive oversight of stablecoins, thanks to the New York Department of Financial Services. Earlier this year, Adrienne Harris, the Democratic-appointed superintendent of the New York Department of Financial Services, testified before the House Financial Services Committee, advocating for an approach that preserves New York's autonomy. Another strange thing that came up during the hearing was that Maxine Waters seemed unclear on whether New York has a stablecoin regulatory regime.
According to an anonymous Democratic staffer from that committee, the New York Department of Financial Services was involved in the conversations around the legislation, advocating for a mechanism of regulation at the state level, which the White House subsequently opposed. If you look at the five Democratic congress members who voted in favor of the bill, two of them are from New York: Ritchie Torres and Gregory Meeks. A spokesperson for the New York Department of Financial Services declined to comment to Fortune Crypto.
The result is a new divide on cryptocurrency regulation, one that is not along party lines but other questions, such as state regulation versus federal regulation. When I asked the staffer why most Democrats were opposed to at least preserving New York's system, he answered, "That's a million-dollar question."
