Top Republicans in Congress are worried that the Fed’s stablecoin guidance would scare off investors.
Conservative members of the House Financial Services Committee have voiced concern that the Federal Reserve Board’s (Fed) new advice on stablecoins might discourage banks from entering the digital asset ecosystem.
The legislators sent a letter to Federal Reserve Chairman Jerome Powell expressing their displeasure with the guideline, which they say undermines the Committee’s work by making it impossible for banks that fall under the Fed’s authority to issue payment stablecoins or participate in the payment stablecoin ecosystem.
Lawmakers said that the Federal Reserve’s “supervisory no-objection process,” which is portrayed as permitted activity advice, is really meant to prevent any operations linked to public, permissionless blockchains.
The legislators are particularly concerned about the Novel Activities Supervision Program created under SR 23-7, which they perceive as adding unnecessary regulatory requirements for financial institutions that want to deal in cryptocurrencies.
A de facto ban on banks participating in the digital asset ecosystem was predicted if this strategy was implemented in conjunction with past regulatory declarations and actions.
Both SR 23-7 and SR 23-8 were issued without following the notice and comment procedure mandated by the Administrative Procedure Act, as the letter further noted. Legislators claimed that it is inappropriate for the Fed to provide such instructions without explaining its actions to the public and market players.
The rising friction between Congress and the Federal Reserve over the regulation of stablecoins and the larger digital asset market is highlighted by the concerns made by these key Republican committee members.
Whether or if these concerns raised by Republican legislators will prompt additional discussion and, ultimately, changes to the Federal Reserve’s oversight and regulatory policies remains to be seen.
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