WASHINGTON — The House Financial Services Committee might have put on a fiery show last week in its stablecoin legislation markup, but some Senate lawmakers quietly made more progress on advancing some kind of cryptocurrency bill into law as part of a
But meanwhile, a bipartisan group of Senators — made up of Sens.
Stablecoin debacle
McHenry said that, despite months of negotiations between his office and Waters' on the bill, the White House ultimately had an issue with the lack of federal oversight for state-chartered nonbanks, and Republicans chose to move forward with a markup without Democratic support.
Democrats staged a walkout early in the markup to try and prevent a quorum, and spent the rest of the day trying to throw up administrative barriers for Republicans in protest of the markup being held, Democratic party members said, without enough time for them to propose substantial amendments.
"A bipartisan deal was within reach — we were closer than we've ever been," McHenry said at the markup. "A few small, but nonetheless important, provisions stood between us and a deal. It was the White House's unwillingness to compromise that has once again brought negotiations to a halt. It's a shame, but at some point you have to put the pens down."
Banking groups have largely shared the concerns of the committee's Democrats. In a July letter to McHenry and Waters, a coalition of state banking groups, led by the American Bankers Association, said they are concerned about the state regulation element of the stablecoin bill. The groups asked lawmakers to apply the same level of federal oversight to state-licensed stablecoin issuers, similar to what is applied to state-chartered banks, to avoid the risk of arbitrage.
"Federal oversight applied in this equivalent manner — reflecting the principle of same activity, same risk, same regulation — would include state-licensed stablecoin issuers having a primary federal regulator that evaluates and approves or rejects license applications, establishes and enforces compliance with rules to ensure financial stability and consumer protection, and participates in ongoing supervision," the groups said in the letter.
The bill ultimately passed the committee in a 34-16 vote, with just five Democrats voting in favor. That puts the stablecoin bill's chances in the Senate very low, where Senate Banking Committee Chairman Sherrod Brown, D-Ohio, has shown little interest in tackling the issue with Republicans.
What's up with AML?
But just as the stablecoin fireworks were going off in the House, a bipartisan group of Senators moved ahead with their own tailored pieces of legislation that would govern how crypto players deal with anti-money-laundering concerns.
A short amendment, backed by Gillibrand, Lummis, Warren and Marshall has the best chance of any crypto legislation to make it into the final version of the defense spending package and thus to the president's desk, experts said. The amendment requires regulators to create "a risk-focused examination and review process for financial institutions" that deal in crypto.
The Senate passed the National Defense Authorization Act with that amendment attached last week before Congress broke for August recess. When lawmakers return in November, both the House and Senate will have to negotiate a version that can pass both chambers.
The amendment has a chance of staying through to the final version because anti-money-laundering is typically considered a bipartisan issue, and it's one of the more well-developed areas of the law, said Liz Boison, a partner at Hogan Lovells and formerly a founding member of the U.S. Department of Justice's National Cryptocurrency Enforcement Team, as well as a lawyer at the Financial Crimes Enforcement Network. The co-sponsors of the amendment — ranging from Warren, a noted crypto critic, and more crypto-friendly Lummis — suggest that the bill has broad enough appeal to go the distance.
The amendment is fairly narrow in scope, but a more ambitious bill gained significant steam as well. A bill reintroduced by Warren and Marshall — sporting new co-sponsors Sens. Lindsey Graham, R-S.C., and Joe Manchin, D-W.Va. — earned critical endorsements from the banking industry with the support of the Bank Policy Institute.
"They want to be on a level playing field with the crypto companies," said Dina Ellis Rochkind, a fintech lawyer at Paul Hastings and former Senate Banking Committee staffer. "They're thinking, if they're moving money around, why should they not have the same kind of requirements on AML and sanctions as us?"
Rochkind said that many banks also understand that AML is a national security issue as well, so it's one of the easier issues by which to garner support for AML legislation from the financial industry.
Graham and Manchin's support could also be key — both have critical voices to their party, who have positions that make it difficult for Congress to pass any bill without their support.
Banking groups also typically support anti-money-laundering bills that target crypto, viewing them as low-hanging fruit that could even the playing field between crypto and the banking industry, and giving crypto the legitimacy that might make it possible for banks to enter the business.
"Once there is more regulatory clarity around this, there are players in the marketplace who are lining up and making business plans waiting for that regulatory clarity," Boison said. "Once that does come, there's going to be a need for players in the market like qualified custodians and those who are actually holding, safekeeping the value in whatever form."
