USDT, USDC: Subcommittee Chair French Hill calls for congressional legislation to regulate payment stablecoins

• Lawmakers have failed to reach a consensus between political parties on a stablecoin bill.
• One witness warns that this lack of regulatory clarity could drive certain projects abroad.
• Stablecoins USDT and USDC have come to the limelight after their depegging histories.

United States lawmakers debated the role of stablecoins, with some expressing concerns about the country’s regulatory ecosystem. The news comes after an April 19 hearing of the US Subcommittee on Digital Assets, Financial Technology, and Inclusion.

During the hearing, an adjunct professor at Columbia Business School, Austin Campbell, highlighted that regions like Singapore, Dubai, Abu Dhabi and the United Kingdom have already presented structures for stablecoins to offer encouraging regulatory atmosphere for issuers looking to set up shop.

If you look around the world, you are starting to see legislation that deals specifically with fiat-backed stablecoins. I think we can do better in America. Our financial regulation and systems are more robust. [...] If we don’t act, those are the best options and people will take advantage of them.

Campbell believes that stablecoins will expand the reach of the US dollar (USD) and increase financial inclusion if legislation stops derailing the progress.

Further in his written testimony, Campbell revealed that when asked to consult or advise for projects attempting to build stablecoins or use stablecoins, his initial advice would be to avoid US operations and a US domicile. According to him, such a state of affairs encourages prospective jobs to go elsewhere as investors look for friendlier environments.

Several legislators sitting on the committee reiterated Campbell’s concerns on legislation meant to control stablecoins in the US. Leading the pack, House Financial Services Committee Chair, Patrick McHenry, issued a discussion draft bill detailing approaches Congress could use in addressing stablecoins for transaction settlements and a central bank digital currency (CBDC).

Ugly baby comments, French Hill

Nevertheless, Maxine Waters, a ranking member of the committee, argued that there have been a lot of incidences in the crypto and financial markets at large, which have affected how the stablecoin legislation could be drafted. According to her, the published draft did not represent a compromise between the Democrats and Republicans.

In addition to FTX and a lot of other things going on, this bill that we have posted in no way represents any final work because so much has happened in between, and we need to get back together in negotiations.

Chair of the Digital Assets Subcommittee, French Hill, who is also an Arkansas Representative, termed the previous comprise bill “ugly baby.”

Others who testified before the hearing were New York State Department of Financial Services Superintendent Adrienne A. Harris, Circle Chief Strategy Officer and Global Policy Head Dante Disparte and Consumer Reports Director of Financial Fairness Delicia Reynolds Hand.

Stablecoins USDT and USDC in the limelight

Following their depegging histories, Tether (USDT) and USD Coin (USDC) stablecoins have come to the limelight after their temporary instances of depegging from the dollar. This was the aftermath of financial market turbulence, such as the ripple effect of the FTX and Alameda Research implosions and their contagion effect. Also, the shutdown of Silicon Valley Bank (SVB) played a role.

In Campbell’s opinion, Tether has been “the biggest winner of the US regulatory actions and legislative inaction over the past year,” presented as an offshore stablecoin that provides very little in the way of transparency or consumer protection.

Some US lawmakers have drafted bills calling for algorithmic stablecoins like TerraUSD Classic (USTC) to be banned after it depegged significantly from the USD in May 2022. 

Drawing reference to Jake Chervinksy in a February tweet, “Neither the US Securities and Exchange Commission nor the Commodities Futures Trading Commission (CFTC) has the authority to comprehensively regulate crypto, neither can obtain it through any amount of enforcement, and neither will ever have it without an act of Congress.”

Chervinsky is the Blockchain Association chief policy officer, hailed for calling stablecoins “a revolutionary upgrade” of the traditional payment systems. 

---