- Some have criticized the Fed’s actions as being too restrictive and could stifle innovation.
- The Fed has argued that its actions are necessary to protect consumers and financial stability.
- The tension between Congress and the Fed has delayed the passage of legislation to regulate stablecoins.
Leading Republican House Financial Services Committee lawmakers have criticized the Federal Reserve Board’s (Fed) recent guidance on stablecoins, saying it could deter financial institutions from participating in the digital asset ecosystem.
Congressional Concern Over Fed’s Crypto Restrictions Heats Up
In a letter to Fed Chairman Jerome Powell, the lawmakers expressed concern that the guidance contradicts the Committee’s efforts by effectively preventing banks under the Fed’s purview from issuing payment stablecoins or engaging in the payment stablecoin ecosystem.
The lawmakers argued that the Fed’s supervisory no-objection process, presented as guidance outlining permissible activities, is intended to prohibit any such activities, particularly those related to public, permissionless blockchains.
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The lawmakers also expressed reservations about the Novel Activities Supervision Program established under SR 23-7, which they believe imposes additional regulatory burdens on banking institutions seeking to engage with crypto-assets.
They asserted that when combined with previous policy statements and decisions, this approach could eventually lead to a de facto prohibition on banks interacting with the digital asset ecosystem.
Lawmakers Question Legality of the Fed’s Stablecoin Regulatory Guidance
The letter also pointed out that SR 23-7 and SR 23-8 were not issued in compliance with the notice and comment process required by the Administrative Procedure Act. The lawmakers argued that the Fed’s issuing such guidance without accountability to market participants and the public is unacceptable.
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The concerns raised by these leading Republican committee members highlight the increasing tension between Congress and the Federal Reserve regarding the regulation of stablecoins and the broader digital asset industry.
It remains to be seen how the Federal Reserve will respond to these objections from Republican lawmakers and whether there will be further dialogue and potential revisions to the supervision and regulation letters.
On the Flipside
- The tension between Congress and the Fed could be good, as it may lead to a more comprehensive and balanced regulatory framework for stablecoins.
- The debate over the regulation of stablecoins will likely be beneficial in the long run, as it will help ensure that the industry is properly regulated and that consumers are protected.
Why This Matters
This tension between the Fed and GOP committee members could delay the passage of legislation to regulate stablecoins. It could also make it difficult for businesses to operate in the digital asset industry. The outcome of this debate will have significant implications for the future of the crypto market.
To learn more about the recent celebration by Ripple in response to the SEC’s appeal, read here:
Ripple to Host a Celebratory Event as Bold Response to the SEC’s Appeal
To learn more about Tether’s recent transparency report, which highlighted a $3.29 billion liquidity cushion, read here:
Tether Transparency Report Highlights $3.29B Liquidity Cushion
