HFSC Begins Political Taxonomy of Crypto-Asset Policy

As anticipated, today’s HFSC hearing was a marathon session at which industry witnesses defended their business model, Republicans liked it fine, and Democrats worried about a wide array of policy challenges.  While both sides of the aisle agreed that cryptoassets might well enhance financial inclusion, partisan battle lines formed over issues such as the extent to which stablecoins are fully reserved, covered by the securities laws, and if a single regulator for this sector is either desirable or feasible.  Industry witnesses strongly rejected the PWG’s stablecoin conclusions (see Client Report CRYPTO21), suggesting for example that stablecoins are safer than bank deposits because they are fully – not fractionally – reserved.  Although Chairwoman Waters (D-CA) made it clear that this hearing is the start of committee action without indicating its direction, we expect HFSC to proceed to hearing from academics and then from regulators before deciding which legislation – if any – to bring to mark-up.