US House Financial Services Representatives Express Disapproval to Fed’s Powell for Hindering Stablecoin Bill

Recent correspondence sent to Federal Reserve Chairman Jerome Powell has raised concerns about the central bank’s potential interference with congressional efforts aimed at regulating stablecoins. The letter was authored by Patrick McHenry, Chairman of the U.S. House of Representatives Financial Services Committee, and subcommittee chairs French Hill and Bill Huizenga.

The lawmakers expressed objections to two specific letters issued by the Fed: SR 23-7, centered 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.”

In their letter, the legislators voiced apprehensions that these actions by the Fed could undermine the progress made by Congress in establishing a regulatory framework for payment stablecoins. They further emphasized that if these letters remain unaltered, they could potentially dissuade financial institutions from participating in the rapidly evolving digital asset ecosystem.

The simultaneous release of the two Fed letters served to complement a policy statement issued in January, imposing added restrictions on activities involving crypto assets. According to the lawmakers, the Fed letters effectively impose limitations that could deter banks from entering the payment stablecoin landscape. Despite appearing as guidance outlining a permissible process, these limitations could curtail banks’ ability to issue payment stablecoins or engage in related activities.

It’s noteworthy that the January policy extended the same constraints set by the Office of the Comptroller of the Currency on national banks to state banks.

Furthermore, the legislators contended that the issuance of these Fed letters did not adhere to the necessary notice and comment procedures as stipulated by the Administrative Procedure Act.

The lawmakers’ concerns are aligned with the Clarity for Payment Stablecoins Act of 2023, introduced by McHenry on July 20, which seeks to establish a clear regulatory framework for payment stablecoins.

The letter from the committee members included a list of eight inquiries, primarily focusing on the practical implementation of the guidance provided in the two Fed letters. Additionally, the lawmakers demanded access to records to ascertain the timeline and context surrounding the drafting of these letters by the Federal Reserve.

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