And with Chair Patrick McHenry (R, NC) and Ranking Member Maxine Waters (D, CA) negotiating the night before over federal versus state jurisdiction according to Rep. Ritchie Torres (D, NY), an HFS member, there was some question as to whether the stablecoin bill would be ready for today’s hearing or would have to be postponed until the Fall.
But after a marathon, 12-hour hearing that included rancorous debate and a parliamentarian’s delight of rules and rulings, the stablecoin bill passed by a tally of 34-16 with five Democrats splitting from Democratic leadership and joining all of the Committee’s Republicans.
Democrats voting for the bill included: Rep. Gregory Meeks (NY), Rep. Jim Himes (CT), Rep. Josh Gottheimer (NJ), Rep. Ritchie Torres (NY) and Rep. Wiley Nickel (NC).
Himes, Gottheimer, Torres and Nickel also voted to pass yesterday’s market structure bill, too.
From the start, the markup for the stablecoin bill was a steady stream of lawmaker fireworks.
Chair McHenry began by explaining his frustration that even though the new bipartisan version of the stablecoin bill was nearly ready, the White House was not helping move the negotiation to the next step.
After completing his opening remarks, he passed the baton to Ranking Member Waters who asked for a quorum which was a way to use Congressional rules and shutdown the hearing given the lack of attendance by Committee members at the time.
Republicans scrambled and delivered the quorum.
And then, Ranking Member Waters took her 5-minute opening remarks to say that Republicans had stepped away from negotiations and proceeded to identify all the problems with the stablecoin bill which was the featured attraction of the day’s markup. Read her opening statement.
Waters continued to delay any review of the bill through several parliamentary tactics involving a request of votes on voting. The reading of the section-by-section of the bill took additional time – a tactic that had not been used yesterday.
House Ag floors it
Meanwhile, Chair Glenn “GT” Thompson noted a quorum was present at the beginning of the House Agriculture markup on the digital asset market structure bill, and then delivered opening remarks which included affirmation that the Committee can handle the Farm Bill and the digital asset market sture structure bill;. Then, Ranking Member Scott sounds more conciliatory today than yesterday and says “We definitely need to act in this space.” But Scott says he can’t accept this bill without amendment.
The 2.5 hour hearing resulted in passage of the bill, “Financial Innovation and Technology for the 21st Century Act,” by voice vote led by the Republican majority. Therefore, there was no drama like yesterday’s HFS digital asset market structure markup on whether more Democrats would come aboard to support the bill.
Next step for the bill is a vote on the House floor in September/October.
Back at the HFS markup, the hearing became increasingly heated with Rep. Stephen Lynch (D, MA) starting to yell at the Chair which had been taken over by Rep. Blaine Leutkeymeyer (R, MO).
McHenry returned to the gavel and told the Committee and the Ranking Member, in particular: “So we had high hopes 48 hours ago that we were going to come to conclusion. And then the White House reviewed where we were and disagreed. So I had high hopes for this. But we’ve been 15 months into this, this markup is eight days delayed. I delayed about one week in accommodation of the negotiations and in discussion with Ranking Member – and a further day in the hopes we can ‘land the plane.’ We can.”
Democrats continued to claim they have not had enough time to prepare – perhaps arguing the case for the White House at this point. But, Democrats did not deny Chair McHenry’s claim of White House involvement in slowing the stablecoin bill.
Chair McHenry explains
As temperatures rose, Chair McHenry took a moment to explain to the chamber what would follow:
“The procedure we’re following is in accordance with house rules and committee rules and house practice and committee practice.”
“It is in the authority of the Chair to lay down an amendment in the nature of substitute at any time during discussion and debate of an amendment of the bill. It is under the Chair’s prerogative to do so. With the dilatory tactics this morning, the unwillingness to move forward normal procedure, the Chair has the ability to lay this down and move the process along more quickly and accommodation of the majority votes on the committee. That is where we are.”
“That is what the amendment the nature of a substitute enables at this moment, under the whole, for under the hope of the Chair, it was that the amendment in the nature of a substitute would be agreed upon by the Ranking Member and the Administration. That is why we negotiated to the final moments late last night with final calls. But unfortunately, that came to naught.”
“And the determination I made was even at that late date to lay before you a complete rewrite of a bill you’d never seen, which is frankly draft somewhere 60-something that the Waters team and the Financial Services team have have negotiated over 15 months.”
“The Chair made a decision to move forward the markup today, the Administration needs to see clearly that there’s a majority supportive of the votes on this committee for regulatory clarity, legal clarity for stablecoins and a federal floor which is what this represents. It is by no means the completeness of what we hope to achieve in legislating. It is the interest of our committee to agree and come to comity on this important matter.”
“For safety and soundness of these products which currently lack the ANS is a representation of the Chair’s ability to move the process forward and expedite procedures when there are dilatory tactics such as this morning.”
on bill deficiencies
After more reading of the bill and amendments, various members discussed where they thought the stablecoin bill had shortcomings.
Rep. Ralph Norman (R, SC) extended an olive branch to Democrats on precluding the ability for “big tech” to have their own stablecoins (No doubt, Libra was wafting in the air.). Rep. Pete Sessions (R, TX) and Chair McHenry also spoke to Proof-of-Reserves – more than monthly – and how this regimen would provide appropriate safety and soundness.
Democrats, such as Rep. Nydia Gonzalez (D, NY), continued to stress a Democrat hobby-horse: the need for the Federal Reserve to provide ultimate oversight.
Rep. Warren Davidson (R, OH) said that he had concerns around commodity-backed stablecoins saying, “If you had a commodity-backed stablecoin, backed by gold, it’s stable because the value of it represents one ounce of gold. In the case of New York Department of Financial Services (NYDFS), they regulate a commodity-backed stablecoin backed by gold and they [require] the entity offering it have physical custody of gold that is audited, in conformance with the process laid out by this bill. And so I hope that we can get there.” Chair McHenry said he will work with Davidson on including this in a future stablecoin bill.
Rep. Bill Foster (D, IL) said the bill would enable a “big tech” stablecoin. He also questioned the need for many stablecoin types as well as whether the states are equipped for stablecoin infrastructure.
Rep. French Hill (R, AR) expressed hope on continued bipartisan work on a payment stablecoin bill. He pointed out how even U.S. Treasury has advocated for stablecoin legislation and that there are Federal requirements on all stablecoins in the bill, despite what Democrats have said. He blamed “White House staffers” on delaying the stablecoin bill.
still more drama
After a lunch time recess for House voting was called, reported drama ensued inside the Committee chamber while Democrats, led by Ranking Member Waters, claimed to want to work on the bill into August. McHenry was not having it. Given the fact that Waters has a recent history of saying she wants to pass stablecoin legislation and then steps back, McHenry’s reaction may not be surprising.
Crypto policy executive Zach Wong posits on X (was Twitter) that the lack of flexibility by Republicans may be due to targeting the spending bill coming to a vote on the Senate floor in late September. Republicans may have visions of the stablecoin legislation riding along on the Senate’s must-pass bill.
After nearly three hours of recess, the Chair gaveled the Committee back to order at 4 p.m. ET.
The Chair was clear that he intended to complete the markup for all 7 bills: “It’s the intention of the Chair to complete that work. How we complete that work will be up to the members, but that will happen here.”
Ranking Member Maxine Waters promised only 3 or 4 more amendments by her caucus beginning with Rep. Joyce Beatty (D, OH) who proposed diversity and inclusion reporting for stablecoin issuers. The amendment was rejected by voice vote by the Majority Republicans.
Next, Rep. Brad Sherman (D, CA) introduced an amendment which says that the Securities and Exchange Commission (SEC) will be the regulator for the crypto industry. Rep. French Hill (R, AR) responded that the SEC was, explicitly, the regulator for stablecoins in the digital asset market structure marked up yesterday.
Rep. Sean Casten (D, IL) offered an amendment that required stablecoin issuers to agree to anti-price manipulation requirements. Rep. Hill appeared interested and asked that Rep. Casten work with him on the themes of his specific amendment.
After Waters gave it one last try and asked McHenry to continue to negotiate the stablecoin bill, McHenry declined.
The Committee moved on to the remainder of the bills on the docket for the markup.
At 9:45 p.m., the vote on the stablecoin bill began with questions swirling if any Democrats would support the bill given the rancorous start to the day. The results did not disappoint. Five Democrats defected from Democratic party leadership’s guidance.
The stablecoin bill vote finished with a vote of 34-16 sending the bill for a vote on the House floor – perhaps as soon as September.
Shortly thereafter, Rep. Davidson’s “Keep Your Coins Act of 2023” act passed along party lines (29-21) and is headed to the House floor, too.