Stablecoin Bill Gains Ground in Congress, Possible Inclusion in FAA Reauthorization

Movement on stablecoin legislation may materialize this summer or during the lame-duck session, as indicated by discussions between House leadership and Senate Majority Leader Schumer. Both Punchbowl News and Politico report that Schumer met with House Financial Services Chair McHenry and ranking Democrat Waters to discuss the House-led stablecoin bill. Lawmakers considered attaching the bill to the FAA reauthorization, but could potentially be included in other year-end bills or during the lame-duck session.

Stablecoin Legislation Advances in Congress, Attachment to FAA Reauthorization Possible

Legislative efforts to establish a regulatory framework for stablecoins gained momentum recently following discussions between top House and Senate leaders. Investment bank TD Cowen reported that House Financial Services Chair Patrick McHenry (R-N.C.) and ranking Democrat Maxine Waters (D-Calif.) met with Senate Majority Leader Chuck Schumer (D-N.Y.) last week to deliberate on the House-led stablecoin legislation.

According to Punchbowl News and Politico, the lawmakers explored the possibility of attaching the bill to the upcoming Federal Aviation Administration (FAA) reauthorization, which may also include cannabis banking legislation. The FAA reauthorization expires on May 10, but the urgency to address Iran's attack on Israel could afford lawmakers more time, TD Cowen noted on Monday. Stablecoin legislation could also be incorporated into end-of-year bills such as the National Defense Authorization Act.

"There is a path for stable coin legislation," said the TD Cowen Washington Research Group in a note. "It would require the backing of Team Biden and the inclusion of AML/BSA crypto controls. It also could be paired with a Democratic priority."

The House and Senate have passed their respective versions of FAA reauthorization bills and are reconciling differences, with safety issues taking precedence, according to Ron Hammond, director of government relations at the Blockchain Association.

Hammond highlighted the necessity of passing the FAA reauthorization bill but cautioned about potential last-minute drama. He expressed concerns that including a stablecoin bill in the FAA reauthorization could encourage other lawmakers to add their own bills as the year-end approaches, potentially jeopardizing the passage of the legislation.

Current Status of Legislation

Representatives Waters and McHenry have been collaborating on a regulatory framework for stablecoins, although industry sources indicate that discussions regarding the primary regulator for stablecoin issuers have stalled. The bill passed through their committee over the summer, but it was met with partisan opposition. Congressional Republicans attributed the resistance to the White House. Waters criticized the bill as "deeply problematic" because it allows state regulators to approve stablecoin issuances without Federal Reserve oversight.

In the Senate, Senators Cynthia Lummis (R-Wyo.) and Kirsten Gillibrand (D-N.Y.) announced their plans to introduce a stablecoin bill aimed at defining stablecoins and safeguarding consumers.

Potential Compromise and Challenges

Reports suggest a potential compromise to secure the passage of a stablecoin bill. Senate Democrats advocate for a marijuana banking bill, the Secure and Fair Enforcement Regulation Banking Act, which could be traded off against a stablecoin bill. The banking bill would permit financial institutions to provide services to the marijuana industry.

Should the Senate reach a compromise, it would still face obstacles in the House, where Speaker Mike Johnson (R-La.) has consistently opposed the marijuana banking bill, according to several news outlets.

Despite these challenges, Hammond remains optimistic about the prospects of stablecoin legislation passing this year. He stated that if the bill is not attached to the FAA reauthorization, it has opportunities through the NDAA, an aid bill, or during the lame-duck session after the elections.