The U.S. House of Representatives held a stablecoin hearing to consider whether non-banking institutions can issue stablecoins

Tencent Technology News On February 9, the House Financial Services Committee of the US House of Representatives held a virtual hearing on the issue of stablecoins on Tuesday. At the meeting, participants expressed skepticism about a key recommendation of the Biden administration's financial regulator and urged lawmakers to limit the issuance of stablecoins to banks and credit unions guaranteed by the federal government.

During the hearing, the House Financial Services Committee discussed a report on the financial risks of stablecoins and other digital assets released by the U.S. Presidential Working Group on Financial Markets last November. Nellie Liang, the Treasury Department's undersecretary for domestic finance, attended the hearing and presented the report's findings, highlighting the need for lawmakers to introduce some sort of legal framework for stablecoins and other new digital assets.

In her testimony, Nellie Leung said there could be regulatory "flexibility" to allow non-bank institutions to issue stablecoins. "The current legal and regulatory framework does not provide a consistent and comprehensive standard for the risks arising from stablecoins as new payment products," she said in her testimony.

But Republican lawmakers have repeatedly slammed the idea that stablecoins should only come from insured depository institutions, a concern that appears to be shared by some key Democrats. Rep. Tom Emmer, Republican of Minnesota, is one of the leading advocates of cryptocurrencies in the House. He criticized the report of the U.S. Presidential Working Group on Financial Markets, arguing that "banks should not be the only institutions in the ecosystem with the right to issue potential financial products, and the report of the Presidential Financial Markets Task Force simply combines these products together as stablecoins." ”

Emer's concerns were echoed by many other Republicans on the committee, including veteran Republican Patrick McHenry. But Rep. Gregory Meeks of New York, who joined them, said he was concerned that a legal framework that only allows banks to issue stablecoins could have a negative impact on competition in the industry. "In my opinion, it may limit competition by restricting the issuance of stablecoins by allowing insured depository institutions to issue stablecoins," Meeks said. He also noted that "the number of non-bank financial institutions attracted is disproportionate." ”

At Tuesday's hearing, Nellie Leung reiterated the working group's determination that banks would be fully prepared to monitor some of the inherent risks of stablecoins. But she also acknowledged that a company focused on issuing stablecoins doesn't necessarily have the same risks as a full-service bank, suggesting that there may be a degree of "flexibility" in the government's approach. "Within the framework, there is flexibility not to pay attention to the credit risk of loans," Liang said, referring to the recommendations of the presidential working group on financial markets. "Issuers of stablecoins do not issue loans. They are not engaged in partial reserve banking. But they do have payment businesses, and there are operational and exchange risks associated with them. You want to have some oversight to make sure that the payment system continues to function well, which is a public service to the financial system. ”

At the beginning of the hearing, Committee Chair Maxine Waters ,D-California asked Nellie Leung if she thought "tech companies like Facebook" should be allowed to issue stablecoins. Nellie Leung said they should not do so, noting that the United States has historically practiced a "separation of banks from commerce." "The issue of the separation of banking and commerce is something that Congress has been grappling with for years. In this case, we believe that stablecoins, as a payment tool, should not be issued by tech companies," she said.

Democrats have been circulating legislation in recent weeks that would not limit the issuance of stablecoins to banks, but would allow "qualified" non-bank institutions to also issue stablecoins. The draft bill, written by Rep. Josh Gottheimer of New Jersey, would also create a deposit insurance fund for non-bank stablecoin issuers.

In her testimony, Nellie Leung noted that the Presidential Financial Markets Task Force's report did not make recommendations on whether stablecoins should be backed by some sort of federal insurance. Depending on the way lawmakers regulate the banking sector, "the capital and liquidity standards that apply to stablecoin issuers may not require deposit insurance," she said. ”

Multiple Republicans on the House Financial Services Committee criticized the report for lacking analysis of the need for stablecoin issuers and other digital asset companies to comply with existing state-level regulations, arguing that new rules from the federal government could weaken the industry's ability to innovate. "The report doesn't mention any state regulatory frameworks," McHenry said. "Lessons learned from states are not included. Why are these not included in the report? ”

Nelly Leung responded that the Presidential Working Group on Financial Markets consulted national regulators in the process of formulating the recommendations. But as national regulators, they prefer "sweeping oversight" of the stablecoin ecosystem rather than relying on a "decentralized" system of state regulation.

At Tuesday's hearing, Democrats were generally more supportive of monitoring stablecoins at the national level. Rep. Brad Sherman, Democrat of California, said: "Imagine if we didn't have any federal regulation of state chartered banks, the FDIC wouldn't come up with any capital rules, and the FDIC wouldn't conduct any audits." Such an approach will only lead to vicious competition among states for trying to solicit business from the digital asset industry. We were told to look at the benefits of these digital systems, but this is really just a potential or hopeful benefit. (Compiled by Tencent Technology/No Taboo)