Three Republican lawmakers have lashed out at the Federal Reserve regarding its recent moves to strengthen oversight of banks’ cryptocurrency and stablecoin activities.
In a Monday letter to Fed Chair Jerome Powell, the lawmakers argued that these actions are undermining their efforts to pass a bill aimed at regulating stablecoins.
The trio, which included House Financial Services Committee Chair Patrick T. McHenry (R-N.C.), Rep. Bill Huizenga (R-Mich.), and Rep. French Hill (R-Ark.), said the Fed’s actions effectively prevent banks from issuing payment stablecoins.
“We are concerned that these actions are being taken to subvert progress made by Congress to establish a payment stablecoin regulatory regime,” they wrote.
“Moreover, if these letters are left in place, they will undoubtedly deter financial institutions from participating in the digital asset ecosystem.”
The Federal Reserve recently issued a letter, SR 23-8, outlining requirements for supervised state banks wishing to engage in stablecoin activities.
The central bank said that banks must have specific controls in place and obtain a “written notification of supervisory nonobjection from the Federal Reserve” before proceeding with stablecoin activities.
The Federal Reserve has also launched the “Novel Activities Supervision Program” (SR 23-7), which is intended to enhance its oversight of banking organizations engaged in crypto, distributed ledger technology, and technology-driven partnerships with nonbanks.
“While the supervisory non objection process is masked as guidance outlining a process by which these activities can be permissible, it is clear the Fed does not intend to allow any such activity, at least as it relates to public, permissionless blockchains,” the lawmakers said.
In their letter, the Republican lawmakers posed a series of questions to the Federal Reserve, including whether it plans to consult state banking regulators, particularly when a state regulator permits certain payment stablecoin activities.
They have requested a response from the central bank by September 29.
Crypto Might Exit the US Amid Regulatory Uncertainty
The US is currently suffering from a lack of regulatory clarity regarding digital assets.
Regulatory ambiguity, particularly regarding the jurisdiction of the US Securities and Exchange Commission and Commodity Futures Trading Commission, has resulted in numerous challenges to the industry.
For one, it has forced some high-profile crypto companies to explore other markets such as the UK and Brazil, where regulations are clearer.
Coinbase is already expanding its global virtual currency footprint aggressively with operations in Germany, Ireland, Italy, and the Netherlands.
Last week, Antonio Juliano, founder of the decentralized exchange dYdX, even suggested that crypto developers forget about serving customers in the United States for the next five to 10 years due to a hostile regulatory environment.
The crypto veteran encouraged crypto builders to focus on experimenting in other markets and return to the US when the time is right.
“It’s not really worth the hassle / compromises. Most of the market is overseas anyways. Innovate there, find PMF, then come back with more leverage,” he wrote in a X thread.
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