Republicans propose stablecoin legislation taking away SEC power

A group of House Republicans has introduced a draft bill limiting the power of the Securities and Exchange Commission (SEC) over stablecoins used for payments.

The bill, still under negotiation, was made public on April 24 and came as the SEC investigates BUSD, a stablecoin co-issued by crypto exchange Binance and fintech firm Paxos.

If the bill passes, it would transfer the authority over payment stablecoins from the SEC to federal and state bank and credit union regulators. 

It would also require non-bank stablecoin issuers to undergo regulatory examinations, back every stablecoin with legal tender or short-term Treasury bonds, and report monthly to a certified public accounting firm.

While state regulators could define their criteria for approving stablecoin issuances, the measure codified in the bill would provide a starting point for their evaluation.

The bill also subjects stablecoin issuers to anti-money laundering (AML) and know-your-customer (KYC) regulations, similar to banks. 

Additionally, issuing a stablecoin without a regulatory license might result in criminal and civil fines.

Dissatisfaction with SEC chair

The Republicans behind the bill have expressed dissatisfaction with the SEC’s approach to digital assets, especially stablecoins.

The lawmakers argue that the SEC’s approach to crypto regulation is unclear and overreaching and that SEC Chair Gary Gensler has not clarified whether stablecoins are securities or commodities.

Furthermore, the Republicans have also accused Gensler of trying to undermine previous bipartisan talks on a stablecoin framework.

Unlike a previous version of the bill posted on the House Financial Services Committee’s website before a hearing on stablecoins last week, this one would not affect algorithmic stablecoins or mandate a study of a central bank digital currency (CBDC).

The bill would only focus on stablecoins used for payments. It is intended to be a companion piece to a broader legislative package on the US digital asset markets that the Republicans plan to unveil soon.

This bill will unlikely receive the immediate bipartisan support required to become law. During last week’s meeting, Maxine Waters, the House Financial Services Committee’s senior Democrat, stated that the legislative body should “start from scratch,” signaling Democrats’ displeasure at the Republicans having worked on the draft without consulting them.