House punts on stable coin bill after Yellen raises flag on key provision

Although the text of the draft has been largely kept under wraps, the details of the proposed framework have aligned watchdog groups and banking lobbyists who have warned that it may not protect the financial system from risk. Late last week, the Independent Community Bankers of America sent a letter to Waters and McHenry urging them to delay the July 27 markup.

Lawmakers were said to be close to final agreement on the bill late last week. Yellen raised concerns with Waters in a call on Friday about how he handled digital assets held by consumers. The Treasury sought changes that would require digital wallet providers to keep customer assets separate — ensuring their protection in the event of bankruptcy, according to a source familiar with the discussions.

Democratic efforts to include Treasury’s desired changes complicated negotiations over the weekend. Although lawmakers are still pushing to release the text of the bill this week, multiple sources say, they could not unite around a framework in time for Wednesday’s markup.

Spokesmen for Waters and McHenry did not immediately respond to requests for comment.

Both Waters and McHenry identified stablecoins as a top legislative priority after the president’s working group report warned that tokens could pose systemic risks if they continue to grow unchecked. can become The same report encouraged lawmakers to pass legislation that would regulate tokens in the same way as banks.

Many in the industry have considered this a clear shot by Congress to create a rulebook for popular digital assets, which are commonly used to fund popular cryptocurrencies like Bitcoin and Ether. The most widely used stablecoins are denominated in US dollars backed by monetary reserves.

The collapse of the widely used stablecoin TerraUSD earlier this year led to a decline in all crypto markets, ultimately forcing major digital lending platforms into bankruptcy. Unlike reserve-backed stablecoins, TerraUSD’s peg was maintained through a combination of computer code and market incentives.

“If stablecoins are backed by high-quality assets, they are very low-risk and can become a fundamental building block — a cornerstone — of a payment system,” Treasury Undersecretary for Domestic Finance Nelly Liang said this year. told the Financial Services Panel earlier in “If there are questions about the quality of the assets in the reserve pool that back them, that creates risk.”