Republican Lawmakers Criticize Federal Reserve Policy Towards Stablecoins
A group of three Republican legislatures have raised their concerns regarding stablecoins regulations. The trio has alleged Federal Reserve with overlooking their stablecoin bill. As per the lawmakers, Fed has proceeded to increase its influence in stablecoin dealings of regulated banks that has overshadowed their efforts to regulate stablecoins.
The alliance shared their concerns on the matter in a letter addressed to Fed chain Jerome Powell. The main objection in the letter rebuked the Fed’s decision to prevent banks from issuing stablecoins for payments.
This letter was signed by House Financial Services Committee head Patrick McHenry. He was joined by his contemporaries representative French Hill and Representative Bill Huizenga.
The contents of the letter retained that questionable action of Fed is an attempt to counter the progress taking place in Congress towards establishing a proper stablecoin regulatory framework for payments. The group further maintained that as per Fed’s restrictions banks and traditional financial enterprises will be unable to participate in virtual asset sector.
Federal Reserve circulated a new letter namely SR 23-8 for state banks under its jurisdiction at the start of August. The notification has directed towards banks that was applying for participation in the stablecoin sector.
On this account, Federal Reserve has decreed new controls in place and conditioned the banks to get a supervisory non-objection note in black and white from Fed before proceeding. In the preceding letter namely SR 23-7, Fed activated the Novel Activities Supervision Program.
Under this program, Fed intends to increase regulatory oversight over all banks that are focused on cryptocurrencies, distributed ledgers, and other fintech projects. The Fed will also monitor banks that have a contract with non-banking entities to offer financial services for consumers under the same letter.
As per Republican whips, the non-objection supervisory process has been enforced by the Fed to guise blockade on permission blockchain under the guideline process. As per the trio, Fed does not intend to allow any type of stablecoin activity for payments purposes.
Republican Legislators Question Federal Reserve for Not Consulting State Banks
The legislators have also raised some question on Federal Reserve for not consulting with State banks on the matter of stablecoin payments. The lawmakers have set a deadline for September 29th for Fed to respond. For context, it is worth mentioning that House Financial Services Committee has recently issued a detailed regulatory framework for stablecoins.
However, the bipartisan unanimity on the matter came to an abrupt halt in July this year. As per the statement issued in the letter, the Republican lawmakers have maintained that Congress will make progress in the matter by the way of passing relevant regulations.
At the same time, the laws proposed by Congress will protect consumer interests while providing more certainty to the markets. The legislators have also highlighted that rather than working with Congress to establish regulatory clarity for the stablecoin market Fed has diverted.
The letter has objected that Fed has proceeded to issue SR 23-7 and 23-8 only two weeks following the issuance of stablecoin regulatory bills by the Committee subverting the legislative process. It is worth noting that stablecoins have become a central debate among regulators across the globe with focus on their ability to back the fiat currency value and provide payment alternatives for legal tender.
