Republican lawmakers are pushing for a new bill to strip the Securities and Exchange Commission (SEC) of its regulatory power over payment stablecoins. The move comes amid growing frustration over the SEC’s approach to digital assets and its Chair, Gary Gensler, who has been accused of lacking clarity on regulating stablecoins, media reports said.
According to the proposed legislation, regulatory authority over stablecoins would be shifted to federal and state bank and credit union regulators. This would limit the SEC’s role in regulating stablecoins, a source of contention for industry executives and Republican lawmakers.
The proposed legislation, designed to complement a bill regulating digital asset markets within the United States, focuses on stablecoins used for payments. It would require that stablecoins be backed by legal tender or short-term Treasury bonds, subject nonbank stablecoin issuers to regulatory examinations, and include a monthly report to an independent CPA firm.
States could still approve stablecoin issuances using their standards, but the bill sets a minimum floor for state regulators to evaluate projects. The Federal Reserve could also halt projects if a stablecoin does not meet those baseline criteria.
Furthermore, the proposed legislation aims to enforce anti-money laundering and know-your-customer regulations on stablecoin issuers, placing them under similar obligations as banks. If an issuer is awaiting full authorization from regulatory bodies, they may be granted provisional permission to issue stablecoins for one year, subject to evaluation.
The proposed legislation has been shared with Democratic staff of the House Financial Services Committee and the Biden administration. Still, any digital asset-related bill will require bipartisan support to become law. House Financial Services Chair Patrick McHenry, a Republican, has expressed optimism that the Biden administration is receptive to a deal on stablecoins after blaming the Treasury Department last year for bipartisan talks stalling.
It remains uncertain whether the bill will gain traction among Democratic lawmakers, who hold a majority in the Senate, or whether President Joe Biden will ultimately authorize it. However, it is clear that Republican lawmakers are determined to limit the SEC’s role in regulating stablecoins and are willing to push for legislation to achieve this goal.
