U.S. Congress May Push Stablecoin Legislation in Lame Duck Session Amid Growing Global Interest

There’s a chance that Congress might advance laws on stablecoins during its “lame duck” session. This is the time between elections and the start of a new Congress. Insiders in Washington have shared with DL News that they believe stablecoin legislation could be tackled before the year ends.

Lawmakers are motivated to push for a bipartisan stablecoin bill. A source on The Hill noted that stablecoins have become a hot topic lately. This is due to new regulations popping up around the world and major financial players like Stripe, PayPal, and Robinhood entering the market.

Currently, around $170 billion worth of stablecoins are in circulation globally. A whopping 98% of these are pegged to the U.S. dollar, according to a report from the Digital Chamber. This rapid growth brings both risks and opportunities. Many in the industry worry that without proper regulation, the U.S. could fall behind.

For years, Democrats and Republicans in the House Financial Services Committee have been trying to finalize a draft law on stablecoins. A Republican version of this bill made it through the committee to the full House of Representatives in 2023, but it has been stuck since then.

Maxine Waters, the top Democrat on the committee, recently expressed urgency about getting a bipartisan effort out of the House. Patrick McHenry, the committee chair and a Republican, is set to retire soon. He may want to leave with a significant policy win, especially since he has worked on this bill since the last Trump administration.

Even Sherrod Brown, the chair of the Senate Banking Committee and known for being skeptical about crypto, has said he would support stablecoin legislation if it reaches his committee. The main hold-up seems to be the federal banking regulators. They are pushing for federal oversight of this sector. Treasury Secretary Janet Yellen has consistently emphasized that Congress should provide a federal framework for stablecoin regulation.

Stablecoin laws were expected to be an easy win for U.S. crypto regulation. There’s broad agreement across party lines that they are necessary. However, a key issue in negotiations has been that Republicans generally prefer state regulators to take the lead on stablecoins, while Democrats want a federal oversight framework.

Another bill to keep an eye on is the FIT21 Act, also known as the market structure act. This legislation aims to create a tailored regulatory framework for crypto. It would designate the Commodity Futures Trading Commission as the primary regulator. The crypto industry views the FIT21 Act as a way to escape stricter SEC rules.

The FIT21 Act passed the full House of Representatives this summer. However, lobbyists suggest that Congress is less likely to address this market structure bill this year. It still needs significant revisions before it’s fully ready.