Leaders of the House Financial Services Committee have sent a formal letter to Jerome Powell, Chairman of the Federal Reserve Board, voicing their objections against the Fed's recent supervision and regulatory letters concerning the digital asset ecosystem.
"We are concerned that these actions are being taken to subvert progress made by Congress to establish a payment stablecoin regulatory regime. Moreover, if these letters are left in place, they will undoubtedly deter financial institutions from participating in the digital asset ecosystem," the leaders of the committee stated in the letter.
The letter was signed by Patrick McHenry (NC-10), Chairman of the House Financial Services Committee, French Hill (AR-02), Vice Chairman of the Financial Services Committee and Chairman of the Digital Assets, Financial Technology and Inclusion Subcommittee, and Bill Huizenga (MI-04), Chairman of the Oversight and Investigations Subcommittee on August 23.
The letter specifically criticized the Fed's two recent supervision and regulatory letters, "Creation of Novel Activities Supervision Program" (SR 23-7) and "Supervisory Nonobjection Process for State Member Banks Seeking to Engage in Certain Activities Involving Dollar Tokens" (SR 23-8), both issued on August 8, 2023.
The Committee leaders accused the Fed of undermining Congressional efforts to create a regulatory framework for payment stablecoins, referring to the "Clarity for Payment Stablecoins Act," a bill favorably reported by the House Committee on Financial Services on a bipartisan basis. The lawmakers claim that the Fed's actions deter financial institutions from participating in the digital asset ecosystem, essentially serving as a de facto prohibition.
The lawmakers also called into question the methods used to issue these regulatory directives. They pointed out that the letters were not subjected to the notice and comment process required by the Administrative Procedure Act. "This guidance represents an effort by the Fed to set policy without being held accountable to market participants and the public, which is unacceptable," the letter read.
In the letter, the lawmakers posed a series of questions to the Fed, asking for clarification on various aspects of these regulatory moves, including how the Fed intends to implement a "fair and consistent process" for determining which banking organizations will be subject to new supervision.
The letter concludes by setting a deadline of 5:00 p.m. on September 29, 2023, for the Fed to provide written answers to the questions. The Committee on Financial Services emphasized its jurisdiction to oversee the activities of the Board of Governors of the Federal Reserve System pursuant to Rule X of the Rules of the House of Representatives.