Rep. McHenry gives progress report on stablecoin legislation, says it’s an ‘ugly baby’

Patrick McHenry, ranking member of the United States House of Representatives Financial Services Committee, thinks the “conversation has become unmoored” about financial technology and needs to return to solving real world problems. He is in talks on legislation that may at least bring more clarity to stablecoins.

Currently, there is no U.S. federal definition of digital assets or stablecoin, McHenry said, calling the situation “retrograde.” McHenry, House Financial Services Committee chair Maxine Waters and the Treasury Department have been in negotiations for months on legislation to regulate stablecoins “in an election year, in a divided Washington.” He spoke positively about the bipartisan nature of the legislation taking shape and tradeoff that have been made between himself and Waters, and said:

“We agree on the asset, that is, a narrowly defined set of assets, 1:1 backing, no leverage. [..] Then we get into more complex conversations.”

Speaking at DC Fintech Week, McHenry named “the means by which we hold” stablecoin, regulating wallets and determining the federal regulator for it as outstanding questions. Those decisions are “less science, more art,” he said. The resulting draft is “a pretty ugly baby,” according to McHenry, who added that it may grow into something more attractive.

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McHenry has said that, if he becomes chair of the Financial Services Committee after the midterm elections, he would make crypto regulation a priority. McHenry could become chair of the committee if the Republican party gains a majority in the House. He has been a longtime advocate of bipartisanship in crypto legislation.

Current panel with Patrick Collison and Patrick McHenry about fintech's post-pandemic scorecard. #DCFintechWeek pic.twitter.com/cPASNRJBCN

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Waters, who addressed the conference briefly a day earlier, also mentioned stablecoin and the question of digital wallets. She stressed the need to make the technology user friendly, especially for “People are often excluded from the traditional financial system.”

On Oct. 3, the Treasury Department’s Financial Stability Oversight Council urged lawmakers to pass legislationto assign regulatory responsibility for crypto to regulators. There are numerous bills to regulate crypto. They include the Digital Commodities Consumer Protection Act of 2022 in the Senate and in the House they include the Lummis-Gillibrand Responsible Financial Innovation Act and the Digital Commodity Exchange Act of 2022.