Several U.S. lawmakers have objected to the Federal Reserve’s stablecoin regulatory guidelines, which they believe “will undoubtedly deter financial institutions from participating in the digital asset ecosystem.” According to the lawmakers, “The Fed has chosen to effectively prevent banks from issuing payments stablecoins — or engaging in the payment stablecoin ecosystem.”
Fed’s Efforts ‘Subvert Progress Made by Congress’
Three U.S. representatives sent a letter to Federal Reserve Chairman Jerome Powell regarding stablecoin regulation last week. The letter, dated Aug. 23, was signed by Patrick McHenry (R-NC), chairman of the House Financial Services Committee; French Hill (R-AR), chairman of the Subcommittee on Digital Assets, Financial Technology and Inclusion; and Bill Huizenga (R-MI), chairman of the Subcommittee on Oversight and Investigations.
Congressman Hill stated Monday on the social media platform X:
I sent a letter alongside Rep. Patrick McHenry and Rep. Bill Huizenga to the Federal Reserve objecting to their efforts to undermine the Financial Services Committee’s progress on stablecoin legislation. The Fed has chosen to effectively prevent banks from issuing payment stablecoins.
In their letter, the lawmakers expressed concerns regarding “the Federal Reserve Board’s recent Supervision and Regulation Letters titled ‘Creation of Novel Activities Supervision Program’ (SR 23-7) and ‘Supervisory Nonobjection Process for State Member Banks Seeking to Engage in Certain Activities Involving Dollar Tokens’ (SR23-8).” Both letters were issued on Aug. 8. The lawmakers stressed:
We are concerned that these actions are being taken to subvert progress made by Congress to establish a payment stablecoin regulatory regime. Moreover, if these letters are left in place, they will undoubtedly deter financial institutions from participating in the digital asset ecosystem.
Noting that the House Committee on Financial Services recently passed a bill titled “Clarity for Payment Stablecoins Act,” which has bipartisan support, the congressmen stated that “instead of working with Congress to establish a workable regime, less than two weeks after the Committee’s action, the Fed released SR 23-7 and SR 23-8.”
The lawmakers explained that the Fed’s Novel Activities Supervision Program “appears designed to impose additional regulatory burdens on banking institutions to engage with crypto assets and to provide the Fed with additional tools to deny crypto asset-related activities.”
Moreover, they pointed out that “SR 23-7 and SR 23-8 were not issued in accordance with the notice and comment process as required under the Administrative Procedure Act. This guidance represents an effort by the Fed to set policy without being held accountable to market participants and the public, which is unacceptable.”
The lawmakers concluded their letter to Chair Powell with a request for written answers to a number of questions pertaining to SR 23-7 and SR 23-8. They include how the Fed intends to “implement a fair and consistent process for determining which banking organizations will be subject to supervisory examinations.” The congressmen also asked the Federal Reserve chairman to provide documents pertaining to SR 23-7 and SR 23-8, including all related records and communications among employees and all related records and communications of Vice Chair for Supervision Michael Barr.
The lawmakers emphasized:
By issuing the letters, the Fed has chosen to effectively prevent banks from issuing payments stablecoins — or engaging in the payment stablecoin ecosystem.
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