The US House of Representatives held a stable currency hearing to consider whether non bank institutions can issue stable currencies

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Tencent technology news on February 9, the House Financial Services Committee held a virtual hearing on the issue of stable currency on Tuesday. At the meeting, members expressed doubts about a key proposal of the Biden government’s financial regulator and urged lawmakers to limit the issuance of stable currency to banks and credit cooperatives guaranteed by the federal government.
At the hearing, the House Financial Services Committee discussed a report on financial risks of stabilizing currencies and other digital assets issued by the U.S. president’s financial markets working group last November. Nellie Liang, the US Treasury’s Deputy Secretary for domestic finance, attended the hearing and introduced the findings of the report, emphasizing the need for lawmakers to introduce a legal framework for stabilizing currencies and other new digital assets.
Nelly Liang said in her testimony that there may be regulatory “flexibility” to allow non banking institutions to issue stable currencies. “The current legal and regulatory framework does not provide a consistent and comprehensive standard for the risks arising from a stable currency as a new payment product,” she said in her testimony.
However, Republican lawmakers have repeatedly attacked the view that the stability currency should only come from insured depositors, a concern that seems to be shared by some key Democrats. Minnesota Republican representative Tom emmer is one of the main advocates of cryptocurrency in the house of Representatives. He criticized the report of the U.S. president’s financial market working group, saying that “banks should not be the only institution with the right to issue potential financial products in the ecosystem. The report of the president’s financial market working group only combines these products as a stabilizing currency.”
Emer’s concerns were echoed by many other Republicans on the committee, including veteran Republican Patrick McHenry. However, New York congressman Gregory Meeks joined them, saying he was concerned that a legal framework that only allows banks to issue stable currency could have a negative impact on competition in the industry. “In my opinion, by limiting the permission of insured depository institutions to issue stable currency, it may limit competition,” Meeks said He also pointed out that “the number of non bank financial institutions attracted is disproportionate.”
At Tuesday’s hearing, Nelly Leung reiterated the determination of the working group that banks will be fully prepared to monitor some of the inherent risks of a stable currency. But she also admitted that a company focusing on Issuing stable currency does not necessarily have the same risk as a full-service bank, suggesting that the government may have a certain degree of “flexibility” in its approach. “Within the framework, there is flexibility not to pay attention to loan credit risk,” Liang said, referring to the proposal of the president’s financial market working group. “Stable currency issuers do not make loans. They do not engage in partial reserve banking. But they do have payment business, and there are operational and exchange risks associated with it. You want some supervision to ensure that the payment system continues to operate well. This is a public service to the financial system.”
At the beginning of the hearing, Maxine Waters (d-california), chairman of the committee, asked Nelly Liang whether she thought “technology companies like facebook” should be allowed to issue stable coins. Nelly Leung said they should not do so and pointed out that the practice of “separating banks from businesses” has been practiced in American history. “The separation of banks and businesses is a problem that Congress has been trying to solve for many years. In this case, we believe that the stability currency, as a payment instrument, should not be issued by technology companies,” she said.
Democrats have been disseminating legislation in recent weeks that would not restrict the issuance of stability coins to banks, but would allow “qualified” non bank institutions to issue stability coins as well. The draft bill, written by representative Josh gottheimer of New Jersey, will also establish a deposit insurance fund for non bank stable currency issuers.
Nelly Liang pointed out in her testimony that the report of the president’s financial market working group did not make recommendations on whether the stable currency should be supported by some kind of federal insurance. She said that according to the way lawmakers regulate the banking industry, “the capital and liquidity standards applicable to stable currency issuers may not require deposit insurance.”
Several Republicans in the house financial services committee criticized the report for its lack of analysis of the existing state-level regulatory requirements that must be complied with by stable currency issuers and other digital asset companies, saying that the continuous introduction of new rules by the federal government may weaken the innovation ability of the industry. “The report does not mention any state regulatory framework,” McHenry said. “Lessons learned from states are not included. Why are these not included in the report?”
Nelly Leung responded that the president’s financial markets working group consulted national regulators in formulating its recommendations. However, as national regulators, they prefer to conduct “comprehensive supervision” on the stable currency ecosystem rather than relying on the “decentralized” national regulatory system.
At Tuesday’s hearing, Democrats generally supported the supervision of the stable currency at the national level. California democratic representative Brad Sherman said: “Imagine that if we didn’t have any federal regulation of state chartered banks, the FDIC wouldn’t propose any capital rules, and the FDIC wouldn’t conduct any audits. This approach would only lead to vicious competition among States trying to solicit business from the digital asset industry. We were told to look at the benefits of these digital systems, but it’s not practical It’s just a potential or desired benefit. ” (compiled by Tencent technology / Wuji)