Ron Hammond

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Stablecoins have been the hot topic on Capitol Hill for quite some time, but the successful and largely bipartisan takeaway from the House Financial Services hearing last week was that there is a need for regulation and Congress, not the regulators, should lead to address it. The House has typically been farther ahead of the Senate when it comes to understanding crypto (especially on the D side of the aisle), but stablecoins are unique as many of the policy topics of banking and reserves are familiar to older Members, many of whom are in the Senate.

The Senate Banking hearing tomorrow will likely not be as in-depth as last week’s House hearing was and probably go off topic like previous hearings. Members will focus on stablecoins but also CBDCs, China, and Fed Accounts. However, don’t take the lack of expertise for granted. The old DC saying goes “House passes bills, Senate passes laws” and when the Senate takes notice of an issue, usually it will have a better chance of being considered by the general body than a bill in the House. Especially if it is bipartisan and with senior Senators.

For the hearing, be sure to watch Ranking Member Sen Toomey who has been the leader on stablecoins for quite some time. He recently led a letter to the PWG expressing concerns about how the PWG solicited feedback from the industry and the role of FSOC. https://www.banking.senate.gov/imo/media/doc/toomey_letter_to_yellen_on_pwg_report.pdf

Like most Senate Banking hearings, expect Sen Warren to grab the headlines. Her criticism though will likely be on limiting stablecoins issuers’ ability to affiliate with non-financial commercial companies, the need for stablecoin issuers to be depository institutions and Tether. With this being the last crypto hearing for 2021, we enter 2022 with a Congress laser-focused on stablecoin regulation. Both House/Senate, D/R have expressed to us a desire to work together. The question is, can Congress come to a bipartisan consensus before the midterms?