A Stablecoin Law May Not Happen This Year

Hey folks. Monday was a federal holiday in the U.S. so we’re taking it easy today. Reporting from my colleague Jesse Hamilton suggests that stablecoin legislation we expected to see released this month may not be coming after all. Plus, a few other stories that caught my eye over the past week.

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A Stablecoin Bill is on Deck, But Expect Delays

The narrative

One of the few pieces of crypto-specific legislation we expected to see in 2022 was a stablecoin bill. It’s looking like this bill may no longer be ready in time for lawmakers to debate and vote into law this year.

Why it matters

Stablecoins might be the area in which we are most likely to see actual laws, as far as crypto regulation goes. Any possible bill is likely going to address issues such as how stablecoin issuers can tap banking services, what their reserves must look like, whether they can engage in fractional reserves, what sort of licensing stablecoin issuers need and what kind of consumer protections must be baked in.

Breaking it down

My colleague and Reg Team Deputy Managing Editor Jesse Hamilton reported late last week that the House Financial Services Committee’s (FSC) anticipated stablecoin bill may not actually be introduced, let alone passed, ahead of November’s midterm elections.

From his article:

“A legislative push toward the crypto industry’s first significant set of U.S. regulations remains bogged down over negotiations between the panel’s Democratic chairwoman and its ranking Republican, despite initial plans that aimed to release a draft of the bill as early as this week, according to three people familiar with the talks. There have been a number of points to iron out, including such thorny topics as the role of state regulators, the possibility of a future digital dollar in the U.S. and the treatment of customer money held by crypto platforms.”

That being said, the bill isn’t dead. Rep. Maxine Waters (D-Calif.), who chairs the committee, and Rep. Patrick McHenry (R-N.C.), who is the ranking member, are the lead negotiators on this effort, and they’re both coming back in the new year (though it’s possible their titles will be swapped).

Of course, as I was writing this the new FSC hearing schedule for September came out, saying there may, in fact, be a markup for stablecoin legislation sometime this month, though “date and time TBD,” so all is not yet lost.

Stablecoins have always gotten a fair amount of interest, but as a regulatory issue this seems to continue to be the area lawmakers will tackle before getting to other issues such as whether a law is needed to treat crypto trading platforms similarly to national securities exchanges.

The problem is, timing-wise anyway, that the House is only one body. A bill needs to be passed by both the House of Representatives and the U.S. Senate to become a law, meaning every minute counts.

Right now Sen. Pat Toomey (R-Pa.), the ranking member in the Senate Banking Committee, is at a guess the most likely lawmaker in the upper house to introduce a similar bill – if the House passes, or at least advances, the Waters-McHenry effort. He’s also retiring from public office after this year, to be replaced either by current Pennsylvania Lieutenant Governor John Fetterman or former cardiothoracic surgeon and TV personality Mehmet Oz.

I’m not sure who might succeed Toomey as ranking member, but this bill is likely going to take some time to get through the Senate regardless.

Other items

In other stablecoin news, Binance is delisting USD coin (USDC), the Paxos dollar (USDP) and trueUSD (TUSD). It’s going to convert customers’ holdings in those stablecoins into its own branded Binance dollar (BUSD) (which is also issued by Paxos) on a 1:1 basis at the end of the month.

A Voyager creditor filed Monday asking a court to require the crypto lender to either refund him $10,000 or revert a 10,000 USDC buy order made minutes after the company claimed it suspended all buys and withdrawals. According to Shaik Taj Baba, he placed an order for 10,000 USDC at 2:07 p.m. ET on July 1, and placed a withdrawal order at 2:09 p.m. ET. Voyager processed the buy order, did not process the withdrawal order and announced shortly after that it had halted all activity at 2:00 p.m.

Biden’s rule

Changing of the guard

Key: (nom.) = nominee, (rum.) = rumored, (act.) = acting, (inc.) = incumbent (no replacement anticipated)

I’m actually kind of curious if U.S. President Joe Biden can even nominate someone to fill one of the acting roles before the congressional term ends, given the upcoming elections.

Outside CoinDesk:

  • (Electronic Frontier Foundation) Peter Eckersley passed away over the weekend. You may not be familiar with this former cybersecurity expert and EFF technologist but I’ve recommended projects he worked on in the past, namely Privacy Badger, but he was responsible for far more.
  • (The Verge) Cloudflare dropped Kiwi Farms shortly after announcing it wouldn’t be doing that. The internet infrastructure player said this was due to “an immediate threat to human life.” The Verge has a good write-up of what all that means.

If you’ve got thoughts or questions on what I should discuss next week or any other feedback you’d like to share, feel free to email me at [email protected] or find me on Twitter @nikhileshde.

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See ya’ll next week!