Stablecoin bill advances in the House after years of waiting

by Steven T. Dennis

Stablecoin advocates achieved another legislative victory on Wednesday night, adding fresh momentum to one of the few issues with bipartisan accord in a deeply divided Washington. 

The legislation, which had languished in Congress for years, took on new urgency after the crypto industry’s heavy spending in the 2024 election and enthusiastic support from President Donald Trump. The bill was approved by the House Financial Services Committee on a 32-17 vote. A handful of Democrats joined Republicans in sending the measure to the House floor for consideration in the coming months. 

Representative Maxine Waters, the top-ranking Democrat on the House Financial Services Committee, left, and Representative French Hill, the Republican chairman of the committee, during a hearing in February.

The bill, a top priority for the burgeoning cryptocurrency industry, drew support across party lines despite the committee’s rejection of provisions sought by the panel’s top-ranking Democrat that would prohibit Trump as well as technology companies from issuing their own payment tokens.

The committee also rejected a Democratic-backed amendment to bar taxpayer bailouts of stablecoins that fail.

Stablecoins, which are crypto tokens typically designed to be pegged to the value of the US dollar or another traditional currency, are a lucrative business because issuers are able to invest reserves backing stablecoins in short-term US Treasuries and keep the yields. Mainstream players such as Visa Inc., PayPal Holdings Inc., Stripe Inc. and others are making investments in projects involving stablecoins.

Under the bill, privately issued stablecoins would have to be backed one-to-one with reserves in either American dollars or assets like short-term government debt or similar products overseen by state or federal regulators. Stablecoin companies profit off of the interest on those reserves.

Republicans and some Democratic supporters said stablecoins present an opportunity for global transactions that are far cheaper and faster than existing bank-based systems. The bill’s advocates said they need a federal regulatory framework to protect consumers without hampering the growth of the industry or sending it overseas.

“Innovation needs guardrails, not roadblocks,” Chairman French Hill of Arkansas said at the start of the House committee’s meeting to consider the legislation. 

Trump has urged Congress to pass stablecoin legislation by August, and the Senate Banking Committee backed its version last month. The House and Senate must eventually agree on and pass a single bill to send it to Trump’s desk.

The House and Senate bills are substantially similar but have differences on some of the particulars governing state regulation, permitting at the federal level and restrictions on so-called algorithmic stablecoins, which aren’t based on the dollar or another traditional currency.

Top Democrat Maxine Waters of California complained that Hill and other Republicans refused to support her demands that Trump and his family be barred from owning a stablecoin business, and said without that protection against conflicts of interest she could not support the bill.

Trump, she said, had “leveraged the power of the presidency to establish multiple crypto schemes to enrich himself and his family.”

She pointed out that that a family crypto company World Liberty Financial announced plans to launch its own stablecoin, and urged against a bill “that legitimizes what is blatant greed and corruption.”

But Gregory Meeks of New York, a senior Democrat on the committee, said he would support the bill to give the industry “certainty” and rules despite his concerns about the Trump family’s crypto plans.

Waters and other Democrats also expressed concerns that other Trump allies, including Elon Musk and Commerce Secretary Howard Lutnick, could profit from the stablecoin legislation, as well as tech companies and other giant firms like Amazon, Meta or Walmart, by engaging in financial services previously the province of banks. 

Some bank groups have worried stablecoins could drain deposits from the banking system and reduce access to credit, while a big retailer lobby has supported stablecoin legislation as a potential competitor for more costly payment systems like credit cards.