The power struggle behind the stablecoin bill: Beyond the two parties, the conflict between federal and state regulatory authority
The most interesting aspect of the disagreement over the stablecoin bill is that it is not a competition between the two parties, but a struggle for regulatory authority between the federal government and the states.Author: Leo Schwartz, Fortune Magazine
Compiled by: Babywhale, Foresight News
Translator's Note: On the evening of July 27, Beijing time, reports indicated that U.S. House members failed to reach a bipartisan agreement on stablecoin legislation. Financial Services Committee Chairman Patrick McHenry stated that negotiations had stalled due to opposition from the White House. Meanwhile, Democratic leaders claimed that McHenry halted the talks. Subsequently, on the afternoon of July 28, Beijing time, the U.S. House 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.
Post-event commentary suggests that the two bills passed by the House Financial Services Committee—one regarding cryptocurrency market structure regulation and the other concerning stablecoins—received moderate bipartisan support, marking a significant victory. To some extent, this is correct, as the core political goal of the industry is legalization, whether through direct regulation or legislative acknowledgment of regulation, both of which are necessary.
Legislation on market structure seems to always be a long shot, and the aforementioned situation appears to be true—the passage of the bill is an important step forward in advancing dialogue, overcoming obstacles faced by others.
It is hard to believe that the stablecoin bill has failed, as it has always been the effort with the best chance of becoming legislation. Last year, then-Chair Maxine Waters (D-CA) and committee member Patrick McHenry (R-NC) were close to reaching a final version. Their roles have changed this year, but they still seem intent on advancing legislation. When Patrick McHenry proposed a version involving only Republicans earlier in this session, observers attributed Maxine Waters' frustration to political maneuvering.
However, during the discussions of the two bills, the stablecoin bill faced greater controversy and ultimately garnered less support. While a few Democrats voted in favor, most expressed opposition during increasingly heated hearings, as Pedersen mentioned on his Twitter.
According to McHenry, the main obstacle comes from the White House. Subsequent reports indicated that the debate over stablecoin regulation has revolved around whether to prioritize state-level or federal-level regulation. The Biden administration, particularly National Economic Council Chair Lael Brainard, advocates for federal priority (the Republican version would still establish a federal baseline for stablecoin regulation).
The intriguing aspect of this divide is that it does not stem from partisan competition. Recall that the only comprehensive oversight of stablecoins in the U.S. comes from New York, thanks to the New York Department of Financial Services. Earlier this year, Adrienne Harris, the Democratic-appointed head of the New York Financial Regulatory Agency, testified before the House Financial Services Committee, advocating for an approach that would maintain New York's autonomy. An odd moment during the hearing was that Maxine Waters seemed unclear about whether New York had a stablecoin regulatory framework.
According to an anonymous Democratic staffer from the committee yesterday, the New York Department of Financial Services participated in discussions about the legislation, advocating for a state-based regulatory mechanism that the White House later opposed. If you look at the five Democratic House members who voted in favor of the bill, two 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 forming around cryptocurrency regulation, one that is not a partisan battle but rather revolves around other issues, such as state versus federal regulation. I asked this staffer why most Democrats opposed at least retaining New York's system. He replied, "That's a million-dollar question."
