Hope remains for a stablecoin bill this year despite headwinds, says TD Cowen

Quick Take

  • There is a “growing sense of optimism” that Congress will enact a regulatory framework for stablecoins by the end of the year, TD Cowen Washington Research Group, led by Jaret Seiberg, wrote in a note on Monday. 

Lawmakers could get a bill to regulate stablecoins to the finish line, but it could face headwinds from Democrats who may have other priorities, according to investment bank TD Cowen.

There is a "growing sense of optimism" that Congress will enact a regulatory framework for stablecoins by the end of the year, TD Cowen Washington Research Group, led by Jaret Seiberg, wrote in a note on Monday. 

"House Financial Services Chair Patrick McHenry and Rep. Maxine Waters have been close for months over the legislative package," the TD Cowen analyst said. "In addition, McHenry appears willing to compromise as he is retiring and would like enactment of stable coin legislation to be the capstone to his chairmanship. In addition, Team Biden also appears to want a stable coin bill."

Stablecoin legislation, led by Rep. McHenry R-N.C., was advanced out of the House Financial Services Committee in July 2023 but hit a snag with blame put on the White House's opposition to the bill. At the time, Rep. Waters, D-Calif., said the bill was "deeply problematic" due to a provision allowing state regulators to approve stablecoin issuances without Federal Reserve input. Since, Waters has been working with McHenry and told Politico last month that they were "very, very close" to a deal. 

On the Senate side, Sens. Kirsten Gillibrand, D-N.Y., and Cynthia Lummis, R-Wyo., are also working on a stablecoin bill. Axios first reported that news last week. 

“Senators Lummis and Gillibrand have been working for several months on a bill that provides regulatory clarity around stablecoins while protecting consumers from bad actors," spokespeople for Lummis and Gillibrand said in an emailed statement to The Block. "They have been encouraged by the feedback they have received from several stakeholders and are hopeful to have an announcement soon.”

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The headwinds

TD Cowen noted that Senate Banking Committee Chair Sherrod Brown, D-Ohio., is not a fan of crypto and has not shown much interest in a stablecoin bill. Brown holds the purse strings for future crypto legislation, and also faces re-election later this year. The crypto industry and large crypto PACs, including Fairshake, have spent millions targeting key races, including Brown's, according to multiple media reports. 

 "Our expectation is he would relent under pressure from Team Biden, but Brown could be a roadblock," TD Cowen said in its Monday note. "He is up for re-election in what is expected to be a close contest. If he loses, he may decide he doesn't want his final bill to involve crypto. And if he wins, he may feel immune from pressure to agree to the House package."

Crypto is also not a priority for Waters, TD Cowen noted. 

"Her priority is not crypto. It is housing legislation," TD Cowen said. "President Biden in his State of the Union address endorsed many of her ideas including first-generation homebuyer down payment assistance. We do not see the GOP advancing any of these housing ideas, which could leave Waters less likely to do a deal."


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About Author

Sarah is a reporter at The Block covering policy, regulation and legal happenings. Before, Sarah was a reporter with CQ Legal writing about securities regulation, which is where she first started reporting on crypto. Sarah has also written for The Bond Buyer and American Banker, among other finance-related publications. She graduated from the University of Missouri and earned a degree in print and digital journalism. Sarah is based in Washington D.C., and is an avid coffee lover. You can follow her on Twitter @ForTheWynn.

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