Everyone Seems to Agree: House Stablecoin Bill Needs Lots of Work

Credit union trade groups, House Democrats and consumer groups have all panned draft stablecoin legislation. Learn why.

David Baumann


Apr 20



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David Baumann

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David Baumann

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CUNA, NAFCU among those questioning cryptocurrency legislation.

Credit union trade groups, House Democrats and consumer groups all panned draft stablecoin legislation presented to a House Financial Services subcommittee on Wednesday.

“Disregard the bill that was posted altogether,” committee ranking Democrat, Rep. Maxine Waters of California, said in her opening remarks, as the Digital Assets, Financial Technology and Inclusion Subcommittee began its hearing on the matter.

And in a letter, a coalition of consumer groups said, “The bill provides an overly permissive regulatory approach to stablecoins, allowing issuers to seek primarily state regulatory oversight in lieu of meaningful federal oversight, even as state oversight often falls short of what is needed to manage the systemic risks these assets pose.”

Even subcommittee Chairman Rep. French Hill, R-Ark., failed to endorse the measure, echoing full committee Chairman Rep. Patrick McHenry, R-N.C., in saying, “It’s an ugly baby, make no mistake. But it’s our ugly baby.”


So, how did the subcommittee end up examining such a lousy piece of legislation?

Hill explained that in the last Congress, Democrats and Republicans worked on a proposal to bring stablecoin issuers under a regulatory framework.

“Last year, members from both sides of the aisle reviewed the proposal, provided feedback, and worked to reach an imperfect compromise that nobody really liked,” he said. “But the clock ran out due to the elections. No one walked away from bipartisan negotiations, and nobody is saying the bill noticed to the hearing is perfect.”

The draft is serving as a starting point for renewed negotiations, Hill said.

Credit Union Reaction 


In a letter to the subcommittee, CUNA President/CEO Jim Nussle urged Congress to adopt a Biden Administration proposal that would subject payment stablecoins to a federal prudential regulatory framework.

“This legislation should direct that insured depository institutions, that are subject to stringent regulations and oversight, and their subsidiaries serve as the sole issuers and conduit for payment stablecoins to ensure the safety, security, and continuity of the market,” Nussle wrote. He added that there must be parity among all depository institutions—both banks and credit unions.

Nussle said further that the risks to the financial system also need to be considered.

“Payment stablecoins holdings would not be liabilities of the financial institution and would be unable to be utilized for the lending and investment operations of the institution, thus reducing the credit supply, increasing the cost of credit, and causing a slow-down of the economy,” he stated.

Nussle added that, “Decreased lending power by financial institutions would be particularly acute for community financial institutions like credit unions that are not-for-profit financial institutions and rely on deposit accounts to accumulate necessary capital to support their members.”


In a separate letter, NAFCU Vice President of Legislative Affairs Brad Thaler said that while the Biden Administration’s working group called for allowing stablecoins to only be issued by insured depository institutions, the definition used did not include credit unions.

“NAFCU also supports enforcement and examination being left up to existing regulators—in the case of credit unions, the National Credit Union Administration (NCUA)—as well as establishing a basic framework for oversight of non-depository stablecoin issuers,” he wrote.

Consumer Groups Weigh In

In their letter, the consumer groups—including the Center for Responsible Lending, Americans for Financial Reform and the National Consumer Law Center—wrote that stablecoins have not yet proven to be an effective means of payment.

“Instead, stablecoins are primarily used to facilitate speculative cryptocurrency trading, lending or various types of decentralized finance,” they said.

The groups added, “The committee should thoroughly consider the possibility that stablecoin legislation intended to transform stablecoins into a mainstream, reliable mode of payment might instead further fuel the mining and trading of cryptocurrencies in an environment rife with pump-and-dump scams, lack of consumer protections, extreme volatility, and cybersecurity risks.”

They additionally concluded that the draft bill provides overly permissive oversight, which would allow issuers to seek primarily state oversight.

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