▶ 0:28:40Without objection, the committee will come to order. Without objection, the chair is authorized to declare a recess of the committee at any time. Without objection, all members shall have five legislative days within which to submit additional materials to the chair for inclusion in the record. A quorum being present, we'll now proceed to today's business.
▶ 0:29:02Uh we're going since we don't have votes today, we're going to just as expeditiously as possible uh work to complete our our debate and uh if we need to, we'll we can recess briefly along the way and we'll reconvene for recorded votes. But we'll proceed until we finish today's work. Let me recognize myself for an opening statement. Good morning.
▶ 0:29:28Since we kicked off the 119th Congress, our members have been hard at work crafting legislative solutions to difficult problems. Today, we will consider several bills to promote financial innovation and expand access to financial services.
▶ 0:29:42Three of these bills are part of our ongoing effort to promote financial innovation through sound digital asset policy, while the other two seek to enhance access to credit by removing compliance burdens and fostering greater competition through new bank formations. Payment stable coins present a new and flexible payment innovation. This largely frictionless finance will simplify the ability to move money around the world in an instant.
▶ 0:30:13But as with all new technologies, new and difficult risks can emerge. In this committee, we have openly discussed the potential risks surrounding digital assets. Members in this room on both sides of the aisle have now spent years collaborating on stable coin legislation, including leadership under ranking member Waters uh both as ranking member and as chair.
▶ 0:30:40We've all come to the important conclusion innovation needs guard rails, not roadblocks. The stable act championed by subcommittee chair Brian Style is just that. To date, state regulation has allowed stable coin ecosystem to develop in the United States. But for payment stable coins to reach their full potential, a clear federal framework must be an option.
▶ 0:31:05Moreover, several foreign jurisdictions have established or are developing regulatory frameworks for payment stable coins, making the enactment of a US framework essential for our global Blockchain technology continues to transform the way money moves. The fact is policymakers, regulators, and law enforcement must keep up with these changes.
▶ 0:31:30Representatives Nun and Heim's leadership on the Financial Technology Protection Act will ensure that government is informed, equipped, and coordinated on emerging financial technologies. The working group established under the bill will bring law enforcement and firms in the digital asset ecosystem together to come up with ideas to improve anti-moneyaundering, counterterrorism, and countering other illicit financing efforts. Committee Republicans have been clear.
▶ 0:31:58Digital asset policies must promote private sector innovation and foster competition to ensure the United States remains the world's leader in global payments. The Federal Reserve cannot issue a digital currency without congressional authority. Majority Whip Emmer's Anti-CBDC Surveillance Act represents years of work and ensures that Americans financial privacy by prohibiting the Federal Reserve from issuing a CBDC without explicit authorization.
▶ 0:32:28In this committee, we are committed to increasing access to financial services for small businesses, consumers, and households. Small Business Committee Chair Roger Williams 1071 repeal to protect small business lending act is crucial to ensure that small businesses have access to competitive cost-effective credit from their local financial institutions.
▶ 0:32:51Importantly, financial institutions subcommittee chair Andy Bars promoting new bank formation act creates a phasein period for denovo financial institutions to meet capital standards, helping to promote in a credential manner new entrance to serve growing communities. The reality is that small financial institutions have struggled mightily under an increasingly heavy regulatory burden since the 1990s.
▶ 0:33:17Allowing new bank entrepreneurs time and flexibility to open their doors will boost competition and expand access to credit for the financially vulnerable Americans and our communities. I look forward to the discussion today. I thank members on both sides of the aisle for their work on these important pieces of legislation and I yield back. I now recognize the ranking member for an opening statement. Uh thank you very much, Mr. Chairman.
▶ 0:33:46When I was chair of this committee, I launched uh the congressional effort to create a federal framework around stable coins. I wanted robust contections, especially in the wake of major crypto scams that robbed investors of their life savings. After years of hard work, former Mckenry and I came to a bipartisan agreement. while not perfect was a great step in that direction.
▶ 0:34:16And Mr. Chairman, I think you worked also uh with Mr. Mckenry uh to come to uh where we had decided uh we could agree on a number of things. But things have changed since last Congress.
▶ 0:34:32President Trump has come into office and leveraged the power of the presidency to establish multiple crypto schemes to enrich himself and his family from a fraudulent meme coin which collectively lost his investors $2 billion while him and his family pocketed $350 million to a crypto reserve that boosts
▶ 0:35:02the price of crypto held by him and his cabinet to most recently launching in the middle of our negotiation his own stable coin through World Liberty Financial. It's a display of greed. So, Mr.
▶ 0:35:21Chairman, I I I attempted to talk to you last week and what I really wanted was that we could agree uh that we not pass a bill that legitimizes what is a blatant greed and corruption.
▶ 0:35:37and I wanted you to work with me and I wanted inserted language into the bill uh that we could move uh but would prevent the president from using this legislation to unjustly himself. We could not come to an agreement on that with this stable coin bill.
▶ 0:36:00This committee is setting an unacceptable and dangerous president, validating the president and his insiders efforts to write rules of the road that will enrich themselves at the expense of everyone else. And I understand that you were heard at some point to say uh that Trump's entanglement uh make this work quite uh more difficult. But Mr. chairman.
▶ 0:36:28That is hands down the understatement of the year. Trump likely wants the entire government to use stable coins from payments made by the Department of Housing and Urban Development to Social Security payments to paying taxes. And which coin do you think Trump would replace the dollar with? His own, of course.
▶ 0:36:51But Trump, despite the fact that absolutely harms this bill, there are some other things that I don't really agree with. And I was hoping that we may be able to work out some of these things with amendments.
▶ 0:37:08But if we go forward with this bill knowing the president of the United States of America and his wife have already created their meme coins and now in the middle of the work that we're trying to do where you and Mr. Mc Henry and I have put forth such an effort.
▶ 0:37:30Uh if he's in not blocked from owning a stable corn bill, I cannot go any further with any amendments to try and agree on some of the other things uh that I have some problems with.
▶ 0:37:45But because of the work that we have done for so long, uh I'm trying and I've tried very hard to come to some agreements and I thought maybe with some amendments for those things I still worry about uh we could uh come to some agreements.
▶ 0:38:03But if there is no effort to block the president of the United States of America from owning his stable coin business just as he owns crypto, which is his largest asset now, I will never be able to agree uh on uh supporting this bill. And I would ask other members not to be enablers allowing the president of the United States to get away with this. I yield back.
▶ 0:38:33The gentleoman yields back. Pursuant to notice, I call up HR 2392, the stable coin transparency and accountability for a better ledger economy, the stable act of 2025, introduced by the gentleman from Wisconsin, Mr. Style. The clerk will report the bill, copies of which were distributed in advance. HR 2392, to provide the regulation of payment stable coins and for other purposes. Without objection, the bill is considered read and open to amendment at any point.
▶ 0:39:03For what purpose does the gentleman from Wisconsin seek recognition? Mr. Chairman, I have an amendment in the nature of a substitute at the desk. The gentleman has an amendment in the nature of substitute, copies of which have been distributed in advance. The clerk will report this amendment. An amendment in the nature of a substitute to HR 2392, offered by Mr. Style of Wisconsin. Without objection, the amendment in the nature of a substitute is considered read and will serve as the base text for purposes of amendment.
▶ 0:39:31The gentleman from Wisconsin is recognized for five minutes in support of his amendment. Thank you very much, Mr. Chairman. Thank you for holding today's markup. I'm proud to support my bill, the Stable Act, which will shape the future of digital asset regulation and protect the integrity of our financial system. The bill establishes a comprehensive framework for the issuance and operation of dollar denominated payment stable coins in the United States.
▶ 0:39:59We're living in the golden age of digital assets. The rise of blockchain technology and cryptocurrencies has revolutionized our approach to financial systems, payments, investments, and the internet. Stable coins, digital currencies pegged to stable assets like the US dollar are already giving rise to innovation across industries, cementing the US dollar as the world's reserve currency.
▶ 0:40:23They allow American manufacturers to export products abroad easily and receive payments backed by the US dollar. Allow contractors at home to send payments faster and cheaper. Encourage entrepreneurs and other nations to conduct business with the backing of the US dollar. their positive developments making money movement fast, inexpensive and secure. However, with innovation comes responsibility.
▶ 0:40:48We must ensure that as we embrace these advancements, we also establish the necessary safeguards to protect consumers, maintain trust, and ensure the integrity of our financial systems. The stable act provides the oversight needed to foster innovation, giving businesses the regulatory clarity they need to continue developing secure and effective digital payment solutions.
▶ 0:41:13This legislation is a foundational step towards securing the future of financial payments in the United States and solidifying the dollar's continued dominance as a world reserve currency. The stable act is the result of extensive collaboration between members of this committee, financial sector stakeholders, and the administration, crafting legislation that is forward thinking, pragmatic, and designed to protect consumers while fostering innovation.
▶ 0:41:42The absence of consistent federal regulation for stable coins is led to uncertainty and risk for both consumers and businesses. Issuers currently face a fragmented regulatory environment, making compliance difficult. The Stable Act creates a clear regulatory framework for stable coins with strict requirements for reserves, transparency, and compliance with anti-money laundering laws.
▶ 0:42:08It ensures that issuers are licensed, supervised, and held to robust standards of enforcement while creating a nationwide framework. The bill also preserves the important role of state oversight, balancing both state and federal authority. As digital payments and stable coins continue to grow, the stable act provides businesses, consumers, and investors with the certainty that they need to engage with emerging technologies.
▶ 0:42:37It ensures the US financial system remains secure, competitive, and adaptable and a rapidly changing global landscape. I urge my colleagues to support this legislation as we work to empower innovators and protect consumers in today's rapidly evolving digital economy. Thank you, Mr. Chairman, and I yield back. The gentleman yields back.
▶ 0:42:57Is there one seeking recognition to speak on this amendment and the nature of a Um he's not here. Uh gentleman from uh Nebraska is Mr. Flood. Thank you, Mr. Chairman. My interest in stable coins in the committee uh from the beginning has largely focused on protecting the state pathway.
▶ 0:43:23In 2021, I wrote and passed legislation that allow state chartered banks to custody digital assets and creates a pathway for those institutions to issue stable coins. The Nebraska Department of Banking and Finance immediately got to work implementing the bill and drawing up regulations. And this year, we have our state's first preliminary approval for a digital asset depository institution. Our state has done the work on this issue, and I suspect we'll see other states follow the lead of states like Nebraska and Wyoming.
▶ 0:43:51States are often described as laboratories of democracy, but they are laboratories of innovation as well. State regulators want to build an understanding of the entities in their jurisdiction and have an interest in regulating them appropriately based upon their unique characteristics. State banking regulators are already doing this work. They supervise state chartered banks across the country with billions in assets.
▶ 0:44:15I have been working closely with the chairman and his staff to ensure that Nebraska through the Nebraska digital asset depository institutions would receive an opportunity to engage in stable coin activities. This bill includes language giving Nebraska state charters a fighting chance.
▶ 0:44:31As long as the state regulatory regime meets the robust federal floor set out by legislation, this bill gives state chartered banks a state pathway that would allow them part to participate in the stable coin market and issue stable coins wherever their customers are without the need for another set of licenses for issuance.
▶ 0:44:50That change is extremely important both to Nebraska and any other state that sets up a state regulatory regime for stable coins and I'm very grateful to the chairman and his staff for working with us on that change. There are some details of how the state pathway would operate in practice that still need to be worked out and I look forward to continuing to work with the chairman and the subcommittee chairman style on those items as we move towards the floor and final passage. That being said, I'm happy to support this bill and continue the committee's work to advance stable coin legislation.
▶ 0:45:21Stable coins have the ability to greatly increase the speed of payments and settlements and to make our economic system even more efficient. Stable coins will also support the advancement of the US dollar around the globe. If we allow other countries to fill the void before the United States is able to put together a robust stable coin regime, we will regret it when the transactions around the world are done with currencies from geopolitical adversaries like China.
▶ 0:45:47Passage of a stable coins bill is critical for both innovation in this country and to preserve and protect dollar dominance across the globe. With that, I urge my colleagues to support the stable act and I yield back. Gentleman yields back who seeks recognition. Chair recognized the ranking member for five minutes. I move to strike the last word. Gentle woman's recognized.
▶ 0:46:07On March 25th, 2025, World Liberty Financial publicly launched a dollar peg stablecoin at the DC blockchain summit. Donald Trump Jr. was connected to the summit via video to cheerlead the launch of the stablecoin, which is called USD1.
▶ 0:46:30I'm deeply concerned that the president launched his own stable coin exactly a week prior to this markup. I negotiated with my colleagues across the aisle for the past three years to create a safe regulatory framework for stable coins.
▶ 0:46:49Now, we are pushing legislation through as quickly as possible without considering some of the key issues that will impact American investors and consumers. First, there is a very pressing or very pressing conflicts of interest issue here.
▶ 0:47:10World Liberty Financial is backed by the Trump family and Eric Trump is a manager on the board of managers of World Liberty Financial, a holding LLC. the entity that holds the only member interest in the world liberty financial.
▶ 0:47:30President Trump's picture is also prominently featured prominently featured on the world liberty financial Additionally, commerce secretary Ludnik is the former chairman and CEO of Caner Fitzgerald, the primary custodian of Tether. While Lutnik stepped down, his son Brandon Lutnik is now chairman.
▶ 0:48:00There are just clear conflicts of interest here, which should be concerning to members on both sides of the aisle. There is also no separation of banking and commerce in the current bill. Without that separation, commercial companies like Walmart, Amazon, Facebook could all could all launch their own stable coin.
▶ 0:48:24Our very co-president, your very own co-president, Elon Musk, could also launch his own stable coin on X under this bill. Additionally, the bill does not adequately address national security concerns.
▶ 0:48:42I recognize there is an 18month prohibition on custodial intermediaries offering or selling payment stable coins in the United States unless the payment stable coin is issued by a permitted payment stable coin issuer. This is a step toward addressing our tether concerns, but practically will not be effective.
▶ 0:49:06That is because there are no criminal penalties or enforcement mechanisms to hold violators accountable. To make matters worse, this bill lacks many of the consumer protections that Chair Mckenry and I worked on to ensure customers could hold payment st stable coins confidentially. The bill does not include any oversight or consequences to entities that harm consumers.
▶ 0:49:34However, the Federal Reserve does not have any authority over state regulated digital wallets that consumers use to hold their stable coins. This leaves American consumers who use those wallets vulnerable. And what if a stable coin issuer fails? The bill does nothing to set up a resolution regime to protect consumers in that event. If we want to preserve the power of the US dollar, this is not the way to do so.
▶ 0:50:03There will be serious consequences to the American economy if in fact stable coin issuer fails and the bill does nothing to stop taxpayer dollars from being used for a stable coin bailout. We need the proper guardrails to protect the American people. Without those guard wells, we expose our economy to a potential crypto collapse while Trump's billionaire cabinet remains unaffected.
▶ 0:50:30Moreover, there's nothing stopping President Trump from forcing the American people to use his own stable coin, USD1. USD1 could be the way Americans receive their tax returns and their social security checks if they receive them all at all. USD1 could be used for housing grants, forcing local governments and suppliers to use a token for their critical housing projects.
▶ 0:50:57It is not a coincidence that Russia elites have used digital assets, particularly US dollars, back stable coins to evade US and international sanctions. This evasion enriches themselves and Putin. Does that sound familiar? We must first address these issues before we can move forward with stable coin legislation. Mr.
▶ 0:51:19Chairman, I still think we can work out some of the issues that could get my support and other support, but not with the ownership of the president and his cabinet with stable coin. I think the gentleoman she's back. The chair recognizes the vice chairman of the full committee, Mr. Hzang, for five minutes. Uh thank you, Chairman Hill, and congratulations uh to you and gentleman from Wisconsin, Mr. Style, and the work that's put in been put in on this particular issue.
▶ 0:51:47But I also want to recognize the contributions of our former chair uh of this committee, Patrick Mckenry, and the work that he did to get us here uh frankly cannot be overstated. and having been a part of the leadership table under now three different chairs um you know the work that everyone at that leadership table uh Ms. Wagner Mr. Bar Mr. Davidson others throughout that time and Mr. Hill, you've been a part of it.
▶ 0:52:12We've had robust and active conversations about this particular issue uh stretching back nearly a decade. And uh that is uh that's so important that we're here today as we debate the stable act. And I think it's important to take a step back and acknowledge how we as a committee got here today in the more more recent history. In the in the 119th, I'm sorry, in the 117th Congress, Republicans established a firstofits-kind digital asset working group.
▶ 0:52:41This was birthed out of the uh the capital markets subcommittee uh that I was chairing and the initial group set parameters. We debated about uh what some guiding principles should be and can uh and and must be included and those parameters for what stable coin legislation could and eventually would look like. Uh the working group acknowledged that stable coins could address inefficiencies in the US payment system that we've seen.
▶ 0:53:11It it acknowledged that maintaining the US dollar as the world's reserve uh currency should always be at the forefront of any discussion. It acknowledged that the private sector the private sector must lead the way fostering innovation and competition. And finally, it acknowledged a clear regulatory framework work would be needed to usher in this modern technology. So, how does today's stable act uh stack up against those initial guiding principles?
▶ 0:53:40Well, first and foremost, it establishes clear definitions and regulatory classifications for payment stable coins, something that is desperately needed. Uh, second, it recognizes several regulatory pathways for approving and regulating stable coin issuers, specifically preserving a state option that offers a lighter touch at times.
▶ 0:54:01This quote race to the top allows states to compete uh to implement more stringent regulatory frameworks signaling that their jurisdiction can offer the safest and most consumerfriendly regime. Uh third, it sets requirements for issuers of payment stable coins in incomparable jurisdictions abroad.
▶ 0:54:21While several foreign uh jurisdictions including the European Union have established or are in the process of developing frameworks for stable coins, uh a US federal framework is essential for maintaining global competitiveness.
▶ 0:54:34And lastly, and frankly probably most importantly, it provides vital consumer protections, including a prohibition on co-mingling of consumer funds by custodians, prioritizing payment stable coin customers over issuers and creditors, and subjecting payment stable coin issuers to bank secrecy act obligations. So, Mr.
▶ 0:54:56Chairman, Congress and regulators should recognize the unique nature of these innovations and establish a regulatory framework that targets the activity and not the technology. And for the detractors, uh, this issue is and should not be partisan regardless, frankly, of who is president of the United States.
▶ 0:55:16Nearly four years ago in testimony before this committee, Treasury Under Secretary for Domestic Finance Nelly Lang rightfully noted, quote, "We hurt both innovation and we increase risks if legislation is not passed." So, Mr. Chairman, not doing something actually has greater conflicts and pitfalls than passing this bill today. So, where does that leave us?
▶ 0:55:40Today, there are more than 200 different types of stable coins with a collective capital marketization capitalization worldwide that exceeds 221 billion US. But after years of inaction, we have an administration that is ready to embrace these products, and the time is now. So, let me close with a few observations.
▶ 0:56:01Applying a one-sizefits-all regulatory framework to stable coin issuers will prevent smaller startup stable coin issuers from being able to comply with the larger, more established players that can afford the cost of compliance with the federal banking regime. Limiting stable coin issuance to federally chartered banks would stifle innovation and would limit the ability of both federal and state authorities to tailor regulations to the specific risks of stable coins.
▶ 0:56:25Stable coins have the potential to bring benefits to the existing payment system by supporting faster and more efficient payments with one study estimating that stable coins could reduce remittance costs by as much as 80% which would save individuals nearly $30 billion per year. Not all stable coins are created equal. Uh we uh with the proper safeguards to protect reserves and maintain liquidity, the risk of being a catalyst in the downfall of the financial system is minimal.
▶ 0:56:53Straightforward rules based on preventing fraud and promoting transparency will ensure that innovation is nurtured within the United States and not overseas. Digital asset related crime remains a small part of the overall digital asset comp economy. It's comparatively smaller than the share of illicit funds involved in traditional finance. So, Mr. Chairman, I know you know this, we're at an inflection point.
▶ 0:57:16it comes to digital assets and it's this is the first step in a long journey uh but it's a crucial one and I look forward to the debate today and I yield back. Thank the gentleman from Michigan and also for serving as our distinguished vice chair and such a big help to the committee's work. Chair now recognizes the ranking member of the foreign affairs committee our distinguished member from New York Mr. Meeks for five minutes. Thank you Mr. Chairman.
▶ 0:57:43I have long believed that clear and consistent rules of the road are essential for a well functioning financial system. They protect consumers, help prevent illicit financing, and are crucial to maintaining our global competitiveness. And since 2015, the New York Department of Financial Services has set the gold standard for regulating virtual currency businesses in the United States.
▶ 0:58:08I don't think we'd be here today without New York's innovative approach and steadfast leadership. And so with that, I'd like to thank Chairman Hill and Chairman Style for their willingness to work with me to improve the Stable Act and a few key respects. This bill provides authority for a state license issuer to offer stable coins in another state called a host state with some important guard rails.
▶ 0:58:34In addition to notifying the host state, the outofstate issuer must comply with all requirements of the home and host state's regulatory regimes when conducting business in the host state, including consumer protection laws. My understanding is that the intent of the drafters was for the issuer to remain subject to certain supervision, examination, and enforcement authority of state payment stable coin regulator of such host state. I yield uh to Mr.
▶ 0:59:03down just to ask him uh would I be correct in that assessment? You you Yes, Mr. Mates. Thank you. And the ability to supervise, examine, and enforce is critical is critical to ensuring that strong states like New York with robust supervision aren't undercut by a lighter touch regimes.
▶ 0:59:25But I am concerned that the current language is not sufficiently clear that strong states like New York would retain these critical authorities. So Mr. Styles, I'm going again ask you, will you commit to work with me as this bill makes its way to the floor to clarify this language? Mr. Mick, yes. I I think we have a a great opportunity to continue to work uh with you uh in the clarification of this point. Thank you.
▶ 0:59:52I've also appreciated the opportunity to work with the drafters to strengthen the AML BSA section of this bill and limitations uh on offshore issuers among other things. But let me just also say this.
▶ 1:00:09I want to thank Ranking Member Waters because she was working hard in a bipartisan way to make this bill a bipartisan bill and to work together to make sure it protects all. And she's correct. It is completely inappropriate for the president's family to announce their intention to launch a stable coin while he is still in office.
▶ 1:00:38The Trump family has repeatedly ignored conflicts of interest and this is just a prime example of that. The only thing that the president seems to have achieved with his recent announcement is undermining bipartisan negotiations that are taking place here in Congress.
▶ 1:01:01He is and has continually moved to enrich himself and his billionaire friends. However, I looked at this and I said, stable coins are here to stay. And as I've said before, it's our responsibility to establish clear rules with a high regulatory standard for issuers to meet. I talk to individuals in my district who look to invest in stable coins.
▶ 1:01:31They need that clear certainty. Uh in my role as the ranking member on the House Foreign Affairs Committee, I've talked to some of our allies who are developing on the continent of Africa in Central and South America. They too are using stable coins. So there needs to be some clear rules and regulations and certainty. Certainty is important unlike the president's tariff policy.
▶ 1:02:01I believe certainty is crucial so companies know exactly what the rules they need to follow and can plan accordingly. And so though the president's actions have caused me to pause the certainty issue and to make sure that we have the clear rules of the game, I am going to support the stable act. And with that, I yield back the balance of my time.
▶ 1:02:32Gentleman yields back, seeks recognition. The gentleoman from California, Miss Kim, is recognized to strike the last word. Thank you, Chairman Hill, for recognized me to speak on this very important piece of legislation. I'm proud to be an original co-sponsor of the bipartisan stable act and I believe that it builds upon our longstanding principle of fostering innovation in America and sharing it with the world.
▶ 1:03:03This principle has endured for decades across Republican and Democratic administrations and it has repeatedly been reaffirmed in bills passed by Congress. As I have met with industry experts and consumers, I am always left with one takeaway. Blockchain technology is the key to promoting social good here at home and internationally.
▶ 1:03:30Over the last two years, we have heard examples of stable coins that reduce crossber transaction fees by over 14 times. As a result, US aid can be delivered more efficiently and we can better uphold American values and interests around the world. Domestically, President Trump has made it clear that he wants to see the federal government take advantage of digital payments.
▶ 1:03:59Stable coins could enable us to deploy aid to wildfire afflicted communities in Southern California faster and with transparency. There are benefits of stable coins for our country that we have not even begun to explore.
▶ 1:04:16That is why I was pleased to see the inclusion of an impact study in the amendment in the nature of a substitute offered The report that will be produced from the impact study will provide key findings on domestic and crossber payments, benefits that stable coins could bring to the global south and how to reinforce the role of the US dollar as the world's reserve currency.
▶ 1:04:43At the end of the day, the stable act is focused on answering the question of how to build jobs and investment in America and spread American values across the world. Mr. Chairman, let me add one other point. The story of this country is the innovation sparked in garages and classrooms.
▶ 1:05:10Those of us in California have witnessed that firsthand with all the innovative companies that call our state home. The state charter pathway that is included in this bill would preserve that innovation by giving small companies access to a regulator tailored to their risk and size. I know some may fear the preparedness of state regulators to handle the stable coin industry.
▶ 1:05:38However, these state regulators will work in lock step with the Treasury Department to ensure that their regulatory frameworks are certified as consistent with those at the federal level. This dual pathway will be critical to fostering the type of innovation that has come to define our country. Mr. Chairman, I want to thank you and Mr. Style for the hard work that you have both done on this legislation.
▶ 1:06:07I urge my colleagues to support this measure and I yield back the balance of my time. The gentleoman yields back, seeks recognition. Okay. The gentleman from Georgia, the distinguished longtime member of our committee, Mr. Scott, you're recognized for five minutes.
▶ 1:06:26Thank you very much uh chairman and uh may I say you're doing a great job and enjoy your partnership on this measure but this bill has is full of problems. First, the bill lacks clear enforcable requirements for stable coin users uh issuers to maintain sufficient and verifiable reserves.
▶ 1:06:56And consumers must be certain that every digital dollar they hold is backed by tangible assets, basic finance. Unfortunately, without strict and transparent reserved audits, issuers could engage in risky financial practices, putting everyday users at risk of losing their firms in the event of a
▶ 1:07:27collapse. And the bill strips the Federal Reserve of any authority over state regulated digital wallets that consumers use to hold their stable coins. Additionally, the bill fails to provide strong recourse mechanism. The bill also fails to establish clear refund issues requirement.
▶ 1:07:54And we all know in traditional banking our deposits are insured. Why should stable coins which millions may rely on for everyday transactions be any different?
▶ 1:08:11And worst of all, the fact that this bill does not address the massive conflicts of interest with President Trump, Elon Musk, and this administration.
▶ 1:08:27As ranking member Waters explained, the bill in its current form allows the president and his family to gain millions more from the assurance of stable coins once he signs this bill into law. Now, I respect the president.
▶ 1:08:53We both uh attended the Wharton School of Finance at the same time. Spent many hours in Lipot Library. I assure you the Wharton School is tough. So I respect this president.
▶ 1:09:11unless we clear these concerns that Miss Waters has brought up, there's no need for this man to have this stench on his family, on himself. It's already clear. And I just urge the president and the White House, let's come together.
▶ 1:09:41Let's remove any doubt that this is unfair to us as American citizens. that it puts the president of the United States in the face of having a black unless we move as a Congress to make sure that there is no black mark
▶ 1:10:12on this president. But I assure you, if we wash this under the table, this mark without erasing these concerns that Miss Waters has raised and not only Miss Waters, but there are people in the nation around the world who are watching us.
▶ 1:10:39Let us clean up this mess. I want our president to be clear and good and decent for he is a good man and we want to make sure that that rings true.
▶ 1:11:04Let us make sure that it is the duty of this committee to not stain this president. And unless we remove these charges against him and his family, it will be a disgrace on us all. I yield back. Gentleman yields back. Our majority whip, Mr.
▶ 1:11:35Emmer of Minnesota, the vice chair of the digital assets, financial technology, and artificial intelligence committee is recognized to strike the last word. I thank you, uh, Mr. Chairman. I'd like to start by commending you, former chairman Mckenry and Congressman Style, as well as your teams for your amazing work on this stable coin bill over the past three congresses. I'm honored to be an original co-sponsor of this legislation.
▶ 1:12:00Fundamentally, any stable coin bill is about national security and preserving and extending the dollar's dominance on the as the world's reserve currency. Around the world, people want US dollars because we have the strongest and most reliable economy and government in the world. It's the currency the world counts on to do business, and the United States global position relies on that status.
▶ 1:12:25This is a nonpartisan issue and I'm humbled by this committee's efforts to lead intellectually and legislatively on the issue. Crafting what we have today, the stable act. This bill is a globally competitive regulatory framework for dollarback stable coins. One that encourages domestic innovation and brings transaction volume back into the United States visibility and control. I want to thank the committee for incorporating my feedback in this new text.
▶ 1:12:54The uh stable act eliminates the previous role of the fed over non-bank issuers and it scales back federal involvement in the state pathway. Importantly, the stable act provides a pathway for global reciprocity so we can export export dollars to the fullest extent possible and it allows for in invention and innovation in the payment stable coin space such as the creation of privacy stable coins which would function similar to privacy
▶ 1:13:24coins. Today, a vast majority of crypto activity uh settles in stable coins. And with the passage of this legislation, our entire global digital economy can settle in dollarbacked stable coins that are safe and reliable. It's not a perfect bill, but it's a perfect bill for this moment. President Trump directed Congress to pass this legislation and have it on his desk before the August rearch recess. Uh today, Mr. Chairman, is a big step in doing just that.
▶ 1:13:54This is a tremendous opportunity for the United States financial leadership and I'm honored to have been a a deep part of this legislating process and I encourage all my friends on this committee to unreserveably vote yes on this bill today. And with that, Mr. Chairman, I yield back. Gentleman yields back. Thank you for your work on this legislation. Gentleman recognizes uh the gentleman from Illinois, Mr. Cassid, you're recognized. That's right. The last word. Uh thank you, Mr. Chair.
▶ 1:14:23Um, I want to raise a constitutional question and I want to associate myself with the ranking members concerns about the Trump stable coin. Um, we all take an oath to defend the constitution. I'd like to remind you all of article 1, section 9. No person holding any office of profit or trust under them shall without the consent of the Congress except any present emolement office or title of any kind whatever from any king, prince or foreign sla state.
▶ 1:14:53The ranking member had mentioned Justin Sun. Let's review the details of this. Mr. Sun runs the Tron blockchain. It's a network that's favored by drug traffickers and terrorist groups. Mr. Sun was also recently named as the deputy leader in blockchain research at the Central Party School, which trains future leaders of the Chinese Communist Party. Uh Mr. Sun put $30 million into World Liberty Financial, uh which triggered a release that allowed Mr. Trump to claim 75% of the net revenue under the terms of their agreement.
▶ 1:15:24Mr. Tron then put another $45 million into World Liberty Financial. Now, we want I want to stress Mr. Sun received absolutely no value for that. These tokens are non-transferable and they are indefinitely locked. This was just a transfer of money to the Trump family. Um, we also know the recent Trump memecoin, not a stable coin, but bear with me. The saw a surge, as we discussed on this committee, saw a surge of purchases from Chinese entities. We do not know who those Chinese entities are.
▶ 1:15:54If we cared about our constitutional responsibility, we would be asking questions about it. But we know that those transfers allowed the Trump family to earn over hund00 million in brokerage fees for something that is completely valueless. As everybody on this committee agreed when we were discussing those those kooky meme coins, um Congress has not consented to that violation of the imolments clause of the constitution which puts the president in direct constitutional violation.
▶ 1:16:22Now we could you all are in the majority. If you think that's a good thing for the president to be taking money from Chinese nationals, princes, what have you, you could bring a vote to the floor. You could give congressional consent. Um, I don't think you'd get any Democratic support. Maybe you'd pass it, but if you haven't done that, this is a constitutional violation. And so, if this bill doesn't address the issues that the ranking member raises, then we are complicit in violating our oath to the constitution.
▶ 1:16:53Moreover, and I want to come back to the memecoins. We sat here yesterday talking with chain analysis about the fact that our ability to track illegal transactions on the blockchain are a function of those transactions being onchain and that in fact a lot of the ways that the illegal activity happens is to take one form of crypto, move it into an exchange, use that to buy a stable coin. That's all an off-chain transaction and you can't see it.
▶ 1:17:19So, if you wanted to do all sorts of nefarious things from North Korean nukes to drug trafficking and all sorts of other crimes and use crypto to get away with it, things like the Trump memecoin connected to a with a stable nexus, it's a great way to do it. which means that it's not only addressing the existing constitutional violations, but working to close the barn door to not make it easier to commit those violations and harder for regulators to prosecute them.
▶ 1:17:49That does not mean that we cannot have stable coins. It doesn't mean that we can't have robust stable coin regulation. But we have got to close the barn door. And I hope that in the course of this markup today, we can make those changes to address our own constitutional oath to make sure that these emolements cannot continue and to do so in a way that we can get to some bipartisan consensus. But my god, it should not be partisan to defend the constitution. Thank you.
▶ 1:18:16And I yield Gentlemen, gentleman yields back who seeks recognition. Gentleman from uh Indiana, Mr. Stsman's recognized to strike the last word. Thank you, Mr. Mr. Chairman, uh, today I urge my colleagues to support the stable act.
▶ 1:18:32Within the first week of his presidency, President Trump signed an executive order to establish United States leadership in digital financial technology, noting specifically that the US should take actions to promote the development and growth of lawful and legitimate dollarbacked stable coins worldwide.
▶ 1:18:52This committee has taken seriously the issue of how digital assets will be integrated into the US financial ecosystem and it's an honor to return to this committee and take part of this historic moment. Fostering an environment for economic growth and prosperity requires regulatory certainty and a clear understanding of the landscape.
▶ 1:19:13The Stable Act does just that by providing both a federal and state pathway for payment stable coin issuers, mirroring the dual banking regulatory system that has utilized the strengths of both state and financial regulators. Several states, including my home state of Indiana, have incorporated digital assets and stable coin into their money transmission laws to allow individuals to exchange digital currencies.
▶ 1:19:40The stable act will increase innovation and create more options for both stable coin payment stable coin issuers and consumers by empowering the US to become a leader in the digital payment ecosystem. The use of stable coins strengthens the US dollar by expanding the use of dollarbacked assets in digital markets worldwide, underpinning the United States dollar as the global reserve currency.
▶ 1:20:07I applaud the leadership of Chairman Hill and digital asset subcommittee chairman style and again would urge my colleague colleagues to support this piece of critical legislation. With that, Mr. Chairman, I'll yield back. Gentleman yields back, seeks recognition. Gentleman from Massachusetts, the ranking member of the digital assets, financial technology, and artificial intelligence subcommittee, Mr. Lynch of Massachusetts, recognized strike the last word. Thank you, Mr. Chairman.
▶ 1:20:33Uh this bill, the so-called stable act, is a a misnomer uh in the highest degree. We are not inviting stability into the financial markets by rubber stamping legislation at the request of a president who is now, I believe he's hawking his fourth digital currency to the American public in under a year. Just last week, World Liberty Financial, a trip Trump crypto company, announced that the president will soon be marketing a new stable coin USD1.
▶ 1:21:03According to the company, no games, no gimmicks, just real stability. That's the slogan. The stability they're referring to is the $550 million that the token sales have netted to date with 75% of that going to the Trump family. Elon Musk is no different. You already know he's expressed an interest in rolling out his own stable coin, X Money.
▶ 1:21:25We are not providing stability by rushing through industryfriendly legislation that removes essential consumer protections, impairs regulatory oversight, and will actually facilitate market volatility. That's why the Americans for financial reform, better markets, the consumer federation of America and public citizen and other consumer advocacy organizations have already asked us to oppose this bill.
▶ 1:21:51To make matters worse, President Trump is nominating heads of regulatory agencies that have been handpicked by the crypto industry. The SEC is one by one dropping legitimate cases against crypto companies. These are clear examples of corruption and conflicts of interest in action. Allowing this bill to become law will undoubtedly facilitate another financial disaster.
▶ 1:22:14In addition, we risk derailment of our payment systems and a complete takeover of our overall financial system by big tech companies. When the next crypto crash inevitably comes, we will all be on the record for having allowed this to happen. Time and again, American taxpayers have been left holding the bag as the government rescues poorly regulated industries with zero accountability.
▶ 1:22:38Without an adequate regulatory framework that mirrors traditional financial laws, we increase the likelihood of runs that will trigger systemic crisis. I do agree with most my colleagues that a regulatory regime is needed, but not one that reflects the whims of industry advocates.
▶ 1:22:57This proposal would essentially give stable coin issuers the privileges entitled to depository institutions without having to comply with any of the regul regulations that accompany th those responsibilities. Following numerous financial crises, bank failures, runs, breaches, and more. As a country, we have decided and and created a robust regulatory regime to ensure the integrity of our financial system.
▶ 1:23:26That's that's why America has succeeded greatly in the financial industry because of the trust that our the rule of law has created here for investors from around the world. Rules around capital liquidity, safety and soundness anti-moneyaundering. Those are what make our economy the envy of the world. Why would we allow one industry to circumvent all of our carefully crafted laws and regulations?
▶ 1:23:53In closing, despite industry claims, stable coins have proven to be anything but stable. And over 20 stable coins have collapsed between 2016 and 2022, each of the world's largest stable coins have lost their pegs to the US dollar on multiple occasion, and provisions in this bill to do little to ensure that stability. I plan to expand further on glaring gaps in this bill through my forthcoming amendments. Thank you, Mr. Chairman, and I yield back.
▶ 1:24:22Gentleman yields back, seeks recognition. Gentleman from Iowa, Mr. Nun, the vice chair of the subcommittee on national security, elicit finance and international financial institutions. Sub Mr. Nun, you're recognized to strike the last Thank you, Mr. Chair. Um to both Chairman Hill, to our colleagues on the other side of the aisle, and to our leader on this, Mr. Steel. I'm very proud to be able to support Chairman Styles stable act.
▶ 1:24:50How we manage and provide money is rapidly transforming. We all recognize that stable coins already are offering a powerful opportunity to shape a modern and efficient payment system that candidly will reshape the future of America's financial success. So simply put, Americanbacked stable coins provide a digital money designed to keep a steady value tied to something as stable as the US dollar.
▶ 1:25:18So for folks back home in Iowa and across the country, think of it this way. You could buy a $50 gift card at your local convenience store. This day marks the 40th anniversary of Casey's General Store. Everybody knows it from its breakfast pizza, but also one of the best places to be able to buy a gift card for your family. So whether the price of gas goes up or the price of gas goes down, the gift card is still 50 bucks. Think of it this way.
▶ 1:25:44With stable coin, the economy may fluctuate, but with stable coin, unlike other cryptocurrencies that fluctuate in value, they remain consistent because they're able to buy back the real value of a US back dollar. American backstable coins can authorize, clear, and settle payments almost instantly.
▶ 1:26:06This is the ability to reduce the friction, the transaction time, lower consumer fees for the ultimate uh American who's using it, and help manage volatility, addressing many of the concerns that may have been raised earlier with stablecoin. With stable coin market now valued at over 234 billion with a B dollars, this market signals that it has a clear potential and makes stable coins one of the best payment options.
▶ 1:26:32I would offer however if we continue to lack leadership in this space, we risk seeding growth and abandoning our leadership on the world stage. While the United States has hesitated, other countries have acted decisively. Mr. Chair, Japan, Singapore, folks in London, the EU, all have created clear, effective regulatory frameworks for stable coin.
▶ 1:26:59And with it comes the attraction of capital, the attraction of talent, and the leadership in innovation. The United States should not be left behind or afford not only our friends but also our adversaries to take lead in this role. If we can effectively regulate these assets, they will have the capacity to modernize our payment system, and as I noted, lower our transaction costs, help crack down on elicit financing schemes, and improve the stable coin ecosystem.
▶ 1:27:27As a former counter intelligence officer, I understand how critically important it is to get AMLS, BSA protections, and the stable coin act right. Section 4 treats stable coin issuers as a financial institution under the banking secrecy act and requires the secretary of treasury to issue regulatory applying tailored BSA obligations for payment of stable coin issuers. These obligations will require issuers to do the following.
▶ 1:27:54One, establish and maintain anti-money laundering and counterterrorism financing programs. Two, retain appropriate records of transaction. three, monitor and report suspicious activity, and four, maintain an effective consumer identification program. In addition, the bill clarifies that permitted payment stable coin issuers must comply with US sanctions laws. This is a good move.
▶ 1:28:21We need this legislation to ensure that stable coins are not only safe, secure, and properly regulated, but the stakes are too high to turn our back on it. our economic competitiveness, our national security, and the dollar's role in the world as a reserve currency. They're all on the line. We must lead in the way that building the next generation of financial technology starts with not only being made in America by Americans, but has a future for America on the world stage. With that, I'm proud to co-sponsor this bill.
▶ 1:28:48I'm proud of Representative Styles leadership and this committee taking the first step forward. Together, we have the opportunity to not only vote in favor of it, as I urge my colleagues to do, but take a leadership role for the entire world. With that, Mr. Chair, I'd yield back my time. Gentleman yields back. The chair uh recognizes the gentleoman from New York, our ranking member of the Small Business Committee, Miss Vasquez, to strike the last word. Thank you, Mr. Chairman.
▶ 1:29:12I would like to thank you and ranking members uh ranking member Waters for tackling this issue of digital assets and stable coins head on and attempting to craft a bipartisan compromise that could bring everyone to vote yes.
▶ 1:29:28I also want to thank ranking member Waters for her leadership and trying to craft bipartisan legislation that maintains strong oversight, consumer protection and enforcement while also promoting financial inclusion and supporting innovation. I believe these priorities can and should work together. From the beginning, I have said that developing stable coin legislation should be a committee priority and I have had hope to be able to support this bill.
▶ 1:29:58While I'll be offering amendments later to raise specific concerns with the text, I want to start by addressing a more fundamental concern about the environment we find ourselves in this morning. Mr. Chairman, we do not legislate in a vacuum.
▶ 1:30:16As we consider the merits of stable coin legislation, we cannot ignore the actions of President Trump, Elon Musk, and other members of the administration, their connection to the cryptocurrency industry, and their broader attempts to destroy our government to meet their ends. The Trump administration displayed the conflicts of interest and profitering, particularly among those connected to crypto.
▶ 1:30:44President Trump's and co-president Elon Musk Doge is itself a reference to a meme coin that Mus has long promoted on social media. His activity has repeatedly driven up the coin's value and sparked lawsuits alleging price manipulation. Three days before his second term started, President Trump launched his own Trump Money meme coin and promoted it on his social media platform.
▶ 1:31:15Melania Trump issued her own meme coin the day before the inauguration. When the price of the coin crashed, Trump insiders sold their holdings and it was ultimately the investors that were left holding the bag, suffering more than $2 billion in losses, while Trump and his insiders made more than $350 million collectively.
▶ 1:31:39Separately, Secretary of Commerce Howard Lutnik has deep involvement and connection to the cryptocurrency terror, a digital assets widely known for its role in facilitating illicit activity.
▶ 1:31:55His close connection with the scandal breaden coin raises serious conflict of interest concerns and questions about his ability to put the interests of the federal government and the American people before his own. Meanwhile, according to media reports, Elon Musk is working to turn X.com into a virtual wallet and payment platform with plans to launch his own stable coin.
▶ 1:32:23Adding to this, World Liberty Financial, a crypto firm launched by Donald Trump and his sons, recently announc announced plans to release a stable coin coin called USD1.
▶ 1:32:37Despite all these red flags, this legislation doesn't include any language prohibiting senior members of the executive branch, including the president and cabinet officials, from having ties to or profiting from the issuance of a payment stable coin. To those who say that I and other Democrats are unfairly criticizing Trump and his administration, my response is simple.
▶ 1:33:04This kind of language is basic and should be included whether a Republican or Democrat is in the White House, but I cannot overlook the broader conflicts of interest tied to this administration and the lack of any language in the bill to address them. I urge my colleagues not to lose sight of that big bigger picture either. I yield back, Mr. Chairman. Gentleoman yields back.
▶ 1:33:32Chair recognizes the vice chair of our oversight and investigation subcommittee, gentleman from North Carolina, Mr. Moore, to strike the last word. Thank you, Mr. Chairman. You know, for nearly a century, the US dollar has been the world's currency. Uh that's because of financial innovation, the free market system, and a dynamic economy that led to that dollar's global supremacy. Stable coins are a key to ensuring that the US dollar remains the world's reserve currency. Stable coins expand the dollar's reach.
▶ 1:34:02They don't replace it. Additionally, stable coins hold the promise of being a potential cornerstone of the modern payment system. In fact, that promise is already being demonstrated throughout the world. The US could not sit on the sidelines allowing competitors to pass us by. Earlier this year, President Trump made a commitment to strengthen United States leadership in digital financial technology. The Stable Act is in line with that commitment.
▶ 1:34:26It provides regulatory clarity for stable coin issuers that protect consumers and protect and uh and promote innovation. It's a common sense solution that provides both state and federal pathways for payment stable coin user issuers. This reflects the dual banking system uh that underpins US financial regulation. By passing the stable act, we are fostering a safer, more reliable digital economy.
▶ 1:34:52I'm proud to be a co-sponsor and I want to thank Chairman Hill and subcommittee chair Style for their work on this bill. Uh and uh Mr. Chairman, I yield the balance of my time to the gentleman from New Jersey, Mr. Gothimer. Thank you, Mr. Moore. Uh I appreciate that. Since 2019, I have urged financial regulators and my colleagues on this committee to create smart, clear guard rails for digital assets to protect consumers and ensure America's competitiveness.
▶ 1:35:16In the 117th, Congress had drafted the stable coin innovation and protection act to create standards for stable coins, distinguishing them from other types of cryptocurrencies and providing guidance for firms issuing stable coins. The stable act, like my bill, provides a pathway for bank and non-bank issuers of qualified stable coins. Establishes important consumer protections and requires issuers to back stable coins onetoone with US currencies or equivalents. That way, if a consumer has $100 of a qualified stable coin, they can be certain that $100 US are available to them when they decide to cash out.
▶ 1:35:46I want to thank Chairman Hill and Chairman Style for their work on this legislation and for engaging with me and my staff in recent weeks to address several outstanding issues and help advance this bill on a bipartisan basis. We've seen what happens when stable coins do not have appropriate guards rails. Teral Luna collapsed when the algorithm that supported the so-called stable coin was unable to deal with the run on the stable coin leading to a loss of $60 billion of value in a matter of days. That's why this bill is critical.
▶ 1:36:10It will protect consumers, create a foundation for the future of digital payments, implement safe and smart guard rails for stable coins, and keep innovation where it belongs in the United States of America. I support this bill like I strongly supported FIT 21 and the Clarity for Payment Stable Coins Act last year, last Congress, because we can't afford another Terral Luna or another FTX. We need regulatory clarity and certainty for digital assets. It's critically important. I again want to thank the chairman uh Mr. Chairman, thank you for working across the aisle on this legislation.
▶ 1:36:39I'd also like to thank Ranking Member Waters for her longtime engagement on this issue. I strongly urge my colleagues to support this important bill. Thank you. And I yield the balance of my time back to the gentleman from North Carolina. I yield. Gentleman from North Carolina yields. Who seeks recognition? The chair recognizes the distinguished gentleman from Illinois, Dr. Foster, the ranking member of our subcommittee on financial institutions. You're recognized to strike the last word. Uh, thank you, Mr. Chairman.
▶ 1:37:10Um, I will be introducing four amendments to this. I I do not support the bill in its current form, but if these four amendments are accepted, I intend to support it. Uh, so I'll just go through them rapidly. Uh, firstly, um, the legislation is silent on the issue of taxpayer bailouts of failed stable coins. Uh, the one of the lessons of the 2008 financial crisis is ambiguity about taxpayer backs stops is the worst of all worlds.
▶ 1:37:36when you looked at the failure of Layman Brothers and then uh one day later the the bailout of AIG which resulted in chaos in the markets and um lawsuits that went years later. So we have to be clear many of you have emphasized the value of clarity of regulation. Nothing is more important as as making it clear does the government and does the taxpayer stand behind a failed stable coin or not?
▶ 1:38:03And if so, is it the is it the taxpayer of Wyoming or the taxpayer of the federal government or the Federal Reserve? We need clarity. The amendment I'll be offering is simply to say there will be no bailout period. Uh specifically about the 133 uh powers of the Federal Reserve, which is the big big dog in this. Um so that that is the first one.
▶ 1:38:24The second one is uh Republican witnesses in recent hearings have emphasized the value of the freeze and seize capability that the issuer maintains to reverse fraudulent or mistaken transactions. The Senate recognized this and the Senate included freeze and seize uh conditions as a necessary uh necessary thing that issuers should put in. I will my amendment essentially inserts the Senate language on that. Uh the third one is a rather small ball.
▶ 1:38:52simply to establish an infants send a digital ID officer. Countries around the world are going to digital ID systems. The EU will have every EU citizen will have a digital ID. Most countries of the world already have this. Um we will be interacting with those systems and Fininsen is the point of interaction. Having a single point of contact has been very valuable and this would um simply you know codify the existence of that very important role.
▶ 1:39:17Uh the the last one has to do with um optional wallet verification in KYC. And this I think is crucial. This bill that we're that we're marking up here provides a potentially vast uh payments highway where the where all of the the automobiles on that highway and all the drivers have no licenses.
▶ 1:39:39So this would simply uh provide the uh stable coin issuers with the option if they want of issuing coins into a highway where all of the participants have are KYCed. All of the part all of the drivers have driver's license, all of the cars have license plates and there are reasons why the market might prefer those.
▶ 1:39:59A simple example, let's say that you're you're um you know working in in crypto markets and you want to keep a lot of your net worth sitting in a stable coin and you and if you get hacked with a current system uh you transfer it into an an the hacker transfers it into an anonymous wallet and you're you're dead. All right.
▶ 1:40:16However, if you're storing your your stable coins in a system where only KYC participants can exist, the only thing you can transfer that that hack crypto into is to another wallet that's been KYCed. So, at least for the first step, you can find out where that stolen money went. Same thing applies to ransomware. So, this I think would be, you know, as I say, these four these four amendments if they get adopted would be bring me to a yes on this bill because this would be a big improvement. And with that, I yield back.
▶ 1:40:47Dr. Foster yields back, seeks recognition. Gentleman from Pennsylvania, Mr. Muser, the chair of the subcommittee on oversight investigations, recognized to strike the last word. Move to strike the last word, Mr. Chairman. Thank you. Uh, I urge my colleagues to support HR2392, the stable act, introduced by Representative Style and Chairman Hill, of which I am an original co-sponsor. I do want to acknowledge all the work the Trump administration and cryptozar David Saxs has done to undo the very anti-crypto policies of the Biden administration.
▶ 1:41:18This legislation accomplishes three critical goals that serve both our national interest and the everyday needs of the American consumer. First, the stable act reinforces the US dollar's status as the world's reserve currency by ensuring stable coins are issued under a dollarbacked robust framework in America. This legislation ensures the US continues to lead in global finance.
▶ 1:41:41The reality is that stable coins are already in widespread use, moving billions of dollars every day, and we have a unique opportunity to shape that market in a manner that strengthens American business and our currency. Second, this bill provides a private sector alternative to a central bank digital currency. I share the concerns of many of my colleagues about the risks risks of a government-run digital dollar, risk to privacy, to free enterprise, and to the proper role of the Federal Reserve.
▶ 1:42:09Stable coins offer a market-driven solution that enhances consumer choice without opening the door to excessive government surveillance or financial centralization. This the kind of innovation we should be encouraging. Third, the stable act will help modernize our payment system, reducing cost, speeding up transactions and improving access to banking services. Stable coins are already being used to streamline commercial transactions and increase financial access, especially for underserved communities.
▶ 1:42:40With the right regulatory clarity, these benefits can reach more Americans. This is a smart, measured, and forward-looking bill. It provides necessary guard rails without stifling innovation. It keeps America competitive and it safeguards the foundational values like free enterprise and individual privacy that should define our financial system. I again commend Chairman Hill and Mr. Style of work to advance this legislation.
▶ 1:43:06I look forward to continuing to deliver on President Trump's promise to make America the crypto capital of the world. I yield back. Gentleman yields back. Who seeks recognition? Uh the gentleman from Montana, Mr. Downing, is recognized to strike the last word for. Uh thank you, Mr. Chairman, and uh thank you for the good work that uh you and subcommittee chairman Style have done on this.
▶ 1:43:31Uh I got to tell you, I'm very excited about this uh and happy and proud to be a co-sponsor of HR22392, the stable act. uh being the former securities commissioner of the state of Montana, you know, I've seen firsthand what uh regulatory ambiguity has done to, you know, offshore innovation and created problems uh including having not having reasonable sideboards. So, I've seen that.
▶ 1:44:00So, I'm having uh having regulatory clarity to be innovative in the United States of America, I think, is incredibly important. And I think that this bill accomplishes that. Also, being a former, you know, uh, business owner have created small businesses. Having the United States remaining to remaining the hot bed of innovation, I think, is incredible, incredibly important, and I'm really excited about that as well.
▶ 1:44:24U, we've met with lots of stakeholders on this, making sure that we've really heard about concerns as we put this together, and I I I really believe we've created a strong and refined product here that we have before us today. I also want to thank my uh Democratic colleagues on this committee for co-sponsoring this legislation. You know, this legislation will allow for innovation to continue to thrive in the US while maintaining important consumer protections.
▶ 1:44:49You know, the stable act mirrors the successful dual banking system by allowing stable coin issuers to pursue both state and federal regulatory pathways, which I I think that is incredibly important. And the stable act creates a federal floor to ensure that all lawful payment stable coins are backed onetoone by highquality liquid assets. All stable coin issuers will be treated as financial institutions under the bank secrecy act.
▶ 1:45:13Uh all of this comes to really create you know a strong piece of legislation here that I think uh really uh gives clarity and allows us to continue to innovate in this space. You know the my other colleagues have all already mentioned this but I think it's important to note that the stable act will enhance US dollar dominance worldwide.
▶ 1:45:33This is something that I'm concerned about and and I'm really happy to see that this will expand the use of dollar denominated assets which I think is great for the United States uh financial institutions for our financial well-being for our security number of things. And lastly, uh, I do not think we would be where we are today with this legislation if not for the overwhelming victory of President Trump, who ran on making sure the United States is the place where digital asset companies want to be and to create these jobs.
▶ 1:46:04Uh, on that, Mr. Chair, I I yield my time. Gentleman yields back. Is there anyone else seeking recognition to speak on Mr. Styles amendment, the nature of a Hearing none, I recognize myself for five minutes. I urge my colleagues to support the stable act and the good work of Mr.
▶ 1:46:21Style and our subcommittee and the uh marvelous work of our uh Democratic original co-sponsors that have tried to make this a strong and effective and crucial piece of legislation that creates a clear regulatory framework for payment stable coins. This bill is a necessary step towards providing regulatory certainty and ensuring the United States remains at the forefront of digital asset development.
▶ 1:46:49The need for a payment stable coin framework has never been more urgent. In response to the November 2021 president's working group on financial markets, it highlighted the benefits and risks of payment stable coins. And this committee began crafting bipartisan legislation in the 118th Congress to foster just that, the best part of it, the innovative part, while mitigating the risk. And I thank again former chairman Patrick Mckenry and our current ranking member, Mrs.
▶ 1:47:19Waters for that uh initial strong work. That bill and the incredible efforts of the members in this room are foundational to how Congress on digital assets works together. Our discussion today will be passionate, but I can assure the folks at home that because we care so much about getting this right, the need for clear regulatory guard rails could not be more apparent. Just a month into the 119th Congress, President Trump issued an executive order prioritizing uh stable coin regulation.
▶ 1:47:49In alignment with this effort, our committee, the Senate Banking Committee, and the White House artificial intelligence and crypto advisor, David Saxs, held a press conference emphasizing the importance of stable coin legislation as well as market structure legislation along with our friends on both the House and Senate Agriculture Committees. This collaboration has led to the introduction of the stable act by our subcommittee chair, Mr. Style.
▶ 1:48:16The bill reflects on the extensive feedback from stakeholders including state and federal regulators, financial institutions of all sizes, existing stable coin issuers, and the broad broader digital asset ecosystem. Republicans firmly believe that properly regulated payment stable coins can play a pivotal role in modernizing the US payment system. However, the absence of a federal framework has led to the only option being a state-by-state regulatory landscape.
▶ 1:48:46The stable act addresses this challenge by establishing a unified regulatory structure while preserving the critical role of state oversight. The bill provides clear definitions and classifications for payment stable coins, offering both state and federal pathways for issuers. It also sets standards for stable coin issuers operating in comparable foreign jurisdictions.
▶ 1:49:10Importantly, the legislation mandates that stable coins be backed one to one by highquality liquid assets establishing clear redemption procedures and requires monthly disclosure disclosures on reserves and insurance. Most critically, the stable act incorporates robust consumer protection measures and tailored capital liquidity and risk management requirements.
▶ 1:49:37The stable act strikes the right balance supporting innovation while safeguarding consumers and reinforcing United States global leadership in digital assets. I'm a proud co-sponsor of Mr. Styles work. I support this bill. I'm thankful for the Republican members that work diligently on this legislation as well as my Democratic colleagues who remain strong partners in continuing to re review and craft our legislative text.
▶ 1:50:06Today, I urge my colleagues to support this vital legislation as we work to build a regulatory framework that aligns with the realities of today's digital economy. Chair recognizes the ranking member to strike the last word. I have an amendment. Oh. Oh, let's see at the desk. Have you already did? She has. Okay. Is anyone else who seeks anyone else who seeks to be recognized on the ANS hearing? None. We'll move to amendments.
▶ 1:50:35Does anyone wish to offer an amendment in to uh to the ANS? I have the ranking member has an amendment at the desk and we'll pause while that amendment is distributed. Mr. Chair, I reserve a point of order.
▶ 1:50:56Gentleman uh has reserved a point of The
▶ 1:51:36clerk will report the amendment. An amendment to the amendment in the nature of a substitute to HR 2392 offered by Miss Waters of California. Without objection, the amendment is considered read. And I now recognize the gentleoman from California to be recognized on her amendment. Thank you very much uh Mr. Chairman. This amendment would be an important protection against conflicts of interest in the stable coin ecosystem.
▶ 1:52:02The amendment would ensure that entities controlled by the president, vice president, heads of executive departments, members of Congress, and their spouses, children, sons, and daughters-in-law would could not review proposed or final rule text before that text is made available to the public. Why is this important?
▶ 1:52:26This is this is important because um when we pass legislation, this legislation ends up uh in the hands of the department that's going to put the rules together uh that make sure uh that the legislation is consistent with the intent of uh uh that was um announced uh in the production
▶ 1:52:56of the bill. Now what happens now is the president of the United States said instead of continuing to operate so the rule is uh done by the so-called independent agencies and get the public involved. No, you send it over here to me uh to the White House so that we can do whatever we need to do to ensure uh that we are not interfered with in the way that we want uh to control this legislation.
▶ 1:53:27And so the bill um under President Trump's administration, the concept of independent agencies is no more.
▶ 1:53:40That means that all of the agencies that once issued rules separately from the political influence of the White House now avoid all the independent agencies who traditionally dealt with the rules. Uh they must have their rules set directly to the office of the president.
▶ 1:54:03At the same time, President's uh Trump's World Liberty Financial, of which 60% is owned by Trump's family, just recently announced its plans to issue a stable coin. This amendment would ensure that the Trump administration could not pass the rules under this law to his companies before they available to the public.
▶ 1:54:28Without this amendment, there could be a revolving door of corruption where Trumpbacked enterprises have a hand in writing rules before they're ever seen by the public and then also make changes to their businesses based on the rules they know before anyone else. Without this amendment, other serious stable coin issuers would be put at great disadvantage to Trump's own companies.
▶ 1:54:55We must stop the crypto grift happening at the highest office of this company. One thing that is absolutely clear about this president, he wants control. And what he has done is he has intimidated members of Congress. He has certainly chosen those who would serve in the most important agencies in his cabinet.
▶ 1:55:24do what they're told and not do what the Constitution would ensure they must be doing. And so he goes a step further. He's in our face. And what he's done, for example, uh with um the Justice Department, he told us he was going to put people at the Justice Department that would help him get revenge on any of those lawyers who had a hand in investigating him, etc., et, etc.
▶ 1:55:54He goes further with this. I'm trying to tell you that what he's saying about traditionally the way that rules are developed and the public gets involved. He's getting rid of that. You pass the bill, you send it to me. I can tamper with it. I can fix it. I can do what I think protects me and that's the end of it. Forget about this rule being handled by independent agencies that involve the public. This is a absolutely ridiculous.
▶ 1:56:24It goes even further than those who will not protect against him being able to further enrich himself and his family by the ownership of a stable co uh stable coin company. He's saying do not do anything in the legislation that would prevent me from owning.
▶ 1:56:45And further, once you pass the legislation, if I win, I'll take care of it and I make sure it fits what I wanted to have done and not even what the legislation intended. With that, I rule back. I rule back out. General yields back. Roll back. I yield back. I wish I could roll back. Does the gentleman from Wisconsin insist on his point of order?
▶ 1:57:13Is there any more debate on this amendment? The gentleman from Wisconsin's recognized the strike. The last word. Thank you, Mr. Chairman. Uh I rise in opposition to the amendment. Uh I view it as unnecessary. I think it's important to note uh that the underlying bill places universal requirements on issuers of all stripes. Uh issuers under the stable act must comply with strong risk management requirements, capital standards, and disclosure requirements.
▶ 1:57:38Uh if you cons if you support consumer protection and innovation uh you should vote for the underlying bill. I yield Gentleman yields back. Any other comments? Recognize myself for five minutes to strike the last word. Uh the ranking member, thank you for your amendment.
▶ 1:58:00Um my view is that uh the best way to uh share concerns about uh the review of any proposed regulations that's pursuant to the stable act is to make sure that we enact the stable act and that we can do that on a bicamal basis in the Senate and have it turned into law because that will reinforce Congress's view on directing precisely how to oversee a federal pathway and uh state federal
▶ 1:58:30relationship on issuing stable coins in country. And this law applies to every potential issuer. Same obligations to all issuers and the same protection to all consumers. If you want safeguards and guard rails and a level playing field for all issuers, then you should support the underlying uh ANS offered by Mr. Style.
▶ 1:58:54If you want safe and secure highly liquid assets backing all stable coins under a strong minimum floor set by the federal government, you ought to back the stable act. We don't discriminate against entrepreneurs based on who they are or where they come from when it comes to federal legislation. This bill does not pick winners and losers, but creates a pathway for all issuers subject to very strict standards.
▶ 1:59:19Our regulatory agencies are are subject to leaders confirmed uh by the United States Senate. The House and the Senate have the power of the purse and the power of oversight over those agencies and how they conduct themselves in implementing this law. So for those reasons, I don't believe uh that I can lend support to it. I urge members to reject the amendment by Mrs. Waters and I yield back the balance of my time. Is there any other debate on Mrs.
▶ 1:59:47Waters amendment to the ANS. If there's no further debate, the question now occurs on the amendment offered by Mrs. Waters of California. All those in favor of the amendment so say I. I. Those opposed should say no. No. In the opinion of the chair, the nays have it. The naysay have it and the amendment is not adopted. Vote is recorded. Ranking member ask ranking member ask for a recorded vote. All those in favor recorded vote, please raise your hand.
▶ 2:00:17A sufficient number of hands being raised. Recorded vote is ordered pursuant to subsection C5 of rule three of the committee rules. Further proceeding on the amendment are postponed. Is there further amendment to Mr. Styles ANS? Mr. Licardo of California recognized. Thank you, Mr. Chair. I have an amendment at the desk titled uh Lard. Uh the gentleman has an amendment at the desk.
▶ 2:00:46Let's pause while the amendment is Mr. Style, Mr. Chair, I reserve a point of order. Point of order has been reserved.
▶ 2:02:14Clerk will report the amendment. An amendment to the amendment in the nature of a substitute to HR2392 offered by Mr. Licardo of Without objection, the amendment is considered read. The gentleman from California is recognized for five minutes in support of his amendment. Uh thank you, Mr. Chair. I move to strike the last word. Um I want to thank uh chairman and u styles for their collaborative approach uh with regard to this legislation.
▶ 2:02:42Uh I'm a co-sponsor because I believe there this is a long overdue uh first step to sensible federal regulation of of stable coin and for that matter of cryptocurrency. Um, I uh I didn't say it was perfect though and I don't think there's any such thing as perfect legislation and I very much share uh Ranking Member Waters very serious concerns uh particularly in light of the very recent news that this president and u his family are apparently engaging in this
▶ 2:03:12very industry that we are seeking to have the federal government regulate today. Obviously, this comes on the heels of the issuance of a Trump meme coin uh only weeks ago. Uh I am introducing amendment to prohibit federal officials uh including president, the vice president, members of Congress and other senior federal officials uh from sponsoring, issuing, promoting or licensing payment stable coin.
▶ 2:03:39Uh one would think this would be a fairly self-evident and obvious proposition. We want to avoid the inevitable conflicts of interest that arise where the president's appointees such as secretary treasury are regulating the very product that provides uh unique and exclusive financial benefit to the president and his family.
▶ 2:04:00Uh secondly, uh we should expect substantial use of stable coin as is today in international payments and we should want to prevent corrupt foreign influence that could foreseeably result uh where foreign governments and business entities uh might seek to curry favor with this president or other federal officials through the use of the stable coin. uh one could imagine for example if we had um a member of the executive branch who owned a hotel chain and how that might get abused.
▶ 2:04:30Um third I think we want to avoid enabling anyone's kptocratic uh instincts and whether regardless of who uh it might be that's involved in this business. Uh let's all agree this is not sensible business for elected federal officials or senior federal officials to be involved in. Uh for that reason uh I have offered this amendment.
▶ 2:04:53It's obviously part of a separate uh bill that I have already introduced that would prohibit federal officials including members of Congress from getting in the business of sponsoring or issuing uh any financial instrument whether security commodity uh or digital asset. I yield back. Gentleman from California yields back. Mr. Mr. Style, do you still insist on your point of order? I withdraw my point of order. And Mr. Style, you're recognized for five minutes. I move to strike the last word.
▶ 2:05:21Um I I appreciate uh my colleagues uh engagement on the underlying bill uh and his co-sponsorship of the underlying bill. Uh but I do rise in opposition to uh the amendment uh is offered. I don't think it's necessary uh in line with the previous amendment offered. Um as noted previously, the bill places universal requirements on issuers of all stripes. And so if you support consumer innovation, you should vote for the underlying bill, although this amendment is unnecessary.
▶ 2:05:52Mr. I yield back. Gentleman yields back. Is there further comment on Mr. Licardo's uh amendment? The ranking member is recognized to strike the last word. I move to strike the last word. Uh this amendment would provide important ethics boundaries for the president, vice president and other public officials in the stablecoin uh ecosystem.
▶ 2:06:16We have seen unprecedented conflicts of interest in the current administration and their crypto ventures. Now ladies and gentlemen, not only are we making those of us who believe that the president, his cabinet, members of Congress, others should not be owning crypto, they go even further uh with conflicts of interest within his Um, for example,
▶ 2:06:47David Saxs, the President Trump's crypto and artificial intelligence ZAR, is linked to a venture firm that has ties to the largest crypto index fund providers uh with significant amounts of cryptoc currencies. Trump listed in a truth social post tied to a crypto strategic reserve.
▶ 2:07:14In other words, Sachs stands to make a lot of money with a crypto reserve. Sachs claimed to have sold his personal and direct holdings, but uh mentioned nothing about his indirect holdings. So, this amendment is a good step towards tackling the conflicts of interest. present here as this would prevent any administration insiders from pro professing off this bill.
▶ 2:07:43Ladies and gentlemen, why am I so focused on these conflicts of interest headed by the president of the United States of America? We're in a very very critical period of time in governance in this country with changes that are being led in significant ways by the president of the United States of America.
▶ 2:08:08He is for example decided uh that he was going to fire thousands of federal employees whose only income is what they earn working for the government. At the same time, he's enriching himself and his family.
▶ 2:08:27He has just about moved to make it almost impossible for social security uh owners to be able to get their social security checks because he's destroying the infrastructure of social security. So, telephone calls will not be answered. those who are attempting uh to apply for their social security uh cannot be uh taken care of.
▶ 2:08:53He's talking about getting rid of and HUD section 8 programs uh that is a program that helps people to have a decent rental opportunity because they don't earn enough money uh to pay for the high cost of rents. It goes on and on and on.
▶ 2:09:14Destroying the Consumer Financial Protection Bureau where people have a chance to um give their complaints to someone, get them investigated, and for all of the ripoffs that are going on uh that they get taken care of and not be harmed and become victims of those ripoffs uh that and fraud uh that we know uh is throughout our society.
▶ 2:09:40So it is not only that it is outrageous for the president of the United States and his family to own these cryptocurrencies. It is outrageous for others that are not even mentioned here in his cabinet that are involved to own and be a part of the crypto uh industry as they are.
▶ 2:10:06While people have started to suffer already losing their jobs, I want to tell you when Elon Musk went into some of these departments, he said, "Get out by 5:00." And so, we're depending on the courts to give us a little help now. We have some temporary decisions that are being made uh by some judges uh have not gone into the final hearings yet.
▶ 2:10:29But people are suffering not knowing even when we look at the stock markets the uncertainty is causing us all kind of problems and the stock market is losing and going down. What are we thinking about here?
▶ 2:10:44Why is it we want to protect the president and others in the cabinet for being able to enrich themselves on the backs of the American public while they're destroying the opportunity for people to have decent careers and a job uh that they have invested in many for many many years. This is outrageous.
▶ 2:11:05I support the amendment and I still insist that if this committee wanted to exclude the government, I mean the government and exclude the president and the members of Congress all from being involved in this way of ownership of stable coins of crypto. We could do it. Why not? Thank you. I yield back. Gentleoman yields back. Is there further debate on the chair recognizes uh himself.
▶ 2:11:35Oh, sorry. I didn't see Mr. Mr. Lynch. You're recognized to strike the last word. Thank you, Mr. Chairman. Uh I fully support uh Mr. Licardo's amendment. I think it's it's a common sense amendment. Let's think about this. So, uh we we have seen a pattern of of collapse of these stable coins.
▶ 2:11:57It's been a steady march of these collapses and then the government comes in uh you know 2023 we saw the situation with uh Silicon Valley Bank Circle was involved in that. They had $3.3 billion in uninsured deposits at Silicon Valley Bank. Uh so the FDI had to come in and rescue that.
▶ 2:12:22uh but there there have been 60 other cases where these so-called stable coins have have uh have become unpegged to their underlying uh uh reference whether that's the dollar or or or some other combination. So so we know we know for certain this isn't like scientific theory.
▶ 2:12:45scientific theory usually if something fails the next iteration will improve on that on that vulnerability and and and would correct that uh so it doesn't fail again. But here here we have stable coins that have failed and now we we have a whole new bunch that are uh are going to fail and now we're connecting them directly to the overall financial system.
▶ 2:13:10So, we know we know we sitting here it is a certainty because of all the history we've had and nothing's changed that these these stable coins are going to dep and they're going to require a bailout and and now you have a president who's issuing his own uh you stable coins and meme coins and those are going to fail. And you got members of Congress that that you know have become the darlings of the crypto industry.
▶ 2:13:40And and so the American taxpayer is going to be the ultimate loser here because you know you know that members of Congress will vote for the bailout that happened back in in in uh 2008. We saw that happen. I voted against all the bailouts, by the way, uh because none of the guilty parties uh had to take a haircut and some of them made made a ton of money uh after they took down the the economy.
▶ 2:14:09Um but in in this case, uh the president is going to sign off at the end on the bailout for his company. So So that's why Mr. Licardo's uh amendment is so important uh because there's a built-in conflict here. Look at look at Liberty World Financial. That's that's the that's the Trump family uh you know crypto company.
▶ 2:14:36And so the president will be put in a position unless you adopt this amendment. The president will be put in a position where he will have to well he will have the opportunity. he'll probably happy to do it. Uh but but he'll sign off on a bailout for his own company at the cost of the American people, at the cost of the American taxpayer. So um I know that uh Mr. Foster and myself, a number of us have uh have uh talked about the bailout aspect of this, Mr. Casten as well.
▶ 2:15:05There's some amendments that that uh also try to get at that, but uh I think Mr. Licardo's amendment is a good one and and we should support it. and I yield back the balance of my time. Gentleman yields back. Is there further dis uh debate on the amendment? Seeing none, I'll recognize myself for five minutes. I want to thank first Mr. Licardo for being an outstanding new member of the committee.
▶ 2:15:30Thank you for being so engaged on the work of the committee and thank you for co-sponsoring the underlying bill and trying to be constructive in improving the text of the stable act. I know Mr. Style has enjoyed working with you.
▶ 2:15:44I appreciate uh you're offering the amendment, but as I said in regard to the ranking members amendment, if we really believe in having rules of the transparency uh and assert the right way to do uh digital assets in this country that I would invite members on both sides of the aisle to support the stable act and its vigorous, strong, transparent regulatory structure supporting both a state and a federal framework.
▶ 2:16:13work as well as I have to say also help us successfully introduce a market structure framework where the rules of the road, the oversight, the responsibilities, the legal ramifications of digital assets are made transparent and clear across the the country. Also, I appreciate the ranking members remarks about the importance of article one uh and article three. uh we have a constitution that works together with the separation of powers.
▶ 2:16:43I think they're all very apparent uh in working in the regulatory space uh and the space of uh recent weeks. So with that, I think this amendment is unnecessary. I urge my members on both sides of the aisle to reject it and I yield back the balance of my time. If there's no further debate on this amendment, the question will now occur on the amendment offered by the gentleman from California.
▶ 2:17:12All those in favor of the amendment, please say I. I. Those opposed, please say nay. Nay. In the opin opinion of the chair, the nays have it. Is requested. The gentleoman from California requests a recorded vote. All those in favor recorded vote, raise your hands. A sufficient number having raised their hand, a recorded vote is so ordered. Pursuant to subsection C5 of rule three of the committee rules, further proceedings on this amendment postponed.
▶ 2:17:42Is there further amendment uh to Mr. Styles amendment in nature of substitute? Gentleoman from California. Not to his further amendment. Have another a different amendment. All right. Thank you. uh for additional amendments. The gentleoman from California is recognized. I have an amendment at the desk. We'll pause while it's distributed. Mr. Chair, I reserve a point of order. Mr. Style reserves a point of order.
▶ 2:18:15This amendment wouldn't pass.
▶ 2:18:52Clerk will report the amendment. An amendment to the amendment in the nature of a substitute to HR2392 offered by Miss Waters of California. The without objection amendment is considered read and now I now recognize the ranking member of the full committee Miss Waters to speak on her amendment for five minutes. Uh thank you very much Mr. Chairman. I have another amendment here uh at the desk.
▶ 2:19:15This amendment would ensure that the Trump administration cannot require the use of a stable coin to enter into transactions with the government if the stable coin issuer is affiliated with the president, vice president, members of Congress, or any other officer or employee of the United States and their families.
▶ 2:19:41Yes, this would also cover special government employees like co-president Elon Musk. We have already seen very concerning reports that the Department of Housing and Urban Development is looking into stable coins for their grants.
▶ 2:20:00We have also seen experts caution that Trump executive orders would allow alternatives to the dollar for taxes and other payments to the government including digital wallets.
▶ 2:20:15Now Trump has his own stable coin through his world liberty financial project and Elon Musk could s could be behind without any limitations on the separation of banking and commerce in this bill.
▶ 2:20:33We could see a world where the Trump administration starts to require the use of his and Musk's stable coins in order to pay taxes or other or enter into other arrangements with the government. This would be just another in a string of egregious conflicts of interest with the Trump administration and Musk's Dodge have taken so far.
▶ 2:21:03So, we must pass this amendment in order to stop this form, this from becoming a reality. I urge members to support this amendment and I yield back uh Doge, I'm sorry. Let me just say this that um there are so many ways that ownership of cryptocurrency starting with stable coins uh can be utilized by the president uh and others in his cabinet
▶ 2:21:34to uh basically increase uh their own what their their profit their what um they're investing in. Uh this is so outrageous. It escapes me why members of Congress would not want to protect uh the public. And listen to what Mr.
▶ 2:21:56Lynch just said about failures that would even co could cause a bailout where the president would be in a position uh to fund his own bailout if in fact uh it fails.
▶ 2:22:10And so I would plead with the members of Congress of this committee to recognize the harm that is now being caused to our citizens and the ways that those who are being fired as government employees. Do not know what the future holds for them. That our social security recipients are frightened to death about whether or not they're going to get their social security checks.
▶ 2:22:39the section eight. People who have been holding vouchers and those who are utilizing vouchers do not know whether or not uh they will have the rent uh to pay for decent and safe housing. And it goes on and on and on uh with an attempt to destroy the Consumer Financial Protection Bureau where they could file a complaint.
▶ 2:23:04What is it about what we are doing here today that does not recognize the harm uh that could be caused by the president and the cabinet and members of Congress from ownership of crypto period and stable coins that we're discussing here today. I want you to know that town halls are being met being made all over the country and mostly by Democrats where people are asking questions.
▶ 2:23:33Some of the Republicans are refusing uh to participate in town halls because they cannot answer some of the questions in a way that would satisfy the public that somehow they are not absolutely being interfered with and intimidated by the president of the United States and afraid that they're going to be primar uh that they will lose their opportunity to serve. Give me a break. The people sent us here to represent them.
▶ 2:24:03And yes, we may lose our positions in Congress if in fact we don't do the right thing, but that should be what happens. I yield back the balance of my time. Gentlemen yields back. Does the gentleman from Wisconsin insist on his point of order? I withdraw my point of order. Gentleman withdraws his point of order. The gentleman seek recognition. Seek recognition. You strike the last word. You are recognized for five minutes. Thank you, Mr. Chairman. As I was reviewing this amendment, I actually had to check the date on the calendar.
▶ 2:24:33It felt like uh Groundhog's Day. It's not February 2nd, it's April 2nd. Uh but here we are again. Um uh this amendment uh is unnecessary as were the previous two. Uh as noted, uh the bill places universal requirements on issuers of all stripes. So, if you do support uh protection of innovation, but also protection of consumer protections um and support consumer protections, you should be voting uh for the underlying bill.
▶ 2:25:02I think we actually continue to hear arguments in support of the underlying bill uh as these amendments come forward. The amendment itself though is unnecessary. I do not support it and Mr. Chair, I yield back. Will the gentleman yield? Gentleman yields back. Who else seeks recognition on Mrs. water. Mr. Lynch, you're recognized to strike the last word. You're recognized for five minutes. Thank you very much.
▶ 2:25:28Uh I enthusiastically support uh Miss Waters's amendment. Um and and the sponsor of the bill is correct. It it it it does set a the bill does set a framework for issuers of all stripes, but this issuer is the president of the United States and is in a position of trust and he is invested in his, you know, he's got his family's business and and they're going to be issuers.
▶ 2:25:57So, so it's it's the position of trust that the president is in. He is unlike any other issuer because he's the president of the United States. He's going to sign off on the bailouts and he's going to take he's going to take US money to assist his family business when it gets in trouble.
▶ 2:26:22That's that's why that's why the ranking members amendment it makes such good sense. What we're creating here is a a situation where we're authorizing the president to selfdeing. So in this case the president and the president's family will be on both sides of the transaction.
▶ 2:26:53Uh so they will be actually in this case they'll be they'll be on both ends of the transaction and in the middle because they'll be they'll be in their official capacity the president will be supporting uh the industry. He'll be on the other end of the transaction because he'll gain the benefit of the deal and he'll be in the middle because the issuer collects fees.
▶ 2:27:22So he'll be on both sides of the transaction. The very description of of selfdealing. Uh he'll be violating his his position of trust with respect to the American people. Uh and uh he he'll you know he'll have the benefit of uh of being on both both sides of the transaction. So this is not unnecessary. This is this is of the importance.
▶ 2:27:51And and I I think it's fair to say that if this was a Democratic president that was trying to do this, the Republicans's hair would be on fire. And rightly so. Rightly so. But um look, this should not be happening. This should not be happening.
▶ 2:28:14The the guard rails that that the sponsor and and the chairman has talked about are are very limited. They're loose. They're not tight guardrails. Um we've got huge gaps in this.
▶ 2:28:29Uh when we look at the the um market structure on this, uh my my friends uh on both sides of the aisle have have taken all the power away from SEC. They've they've gutted that agency and taken away much of its responsibilities. they've pushed all the responsibilities over to the CFTC which doesn't have the ability to police it.
▶ 2:28:55So, you're creating a a a lawless situation and you've also handcuffed the police so that they can't come to our rescue. It, you know, this is all at the the beck and call of the the crypto industry because they've spent so much money up here on the hill, you know. Um that's just that's just the truth of it. Uh so so I guess for our side all I can do is try to limit the damage to the American taxpayer.
▶ 2:29:26That's that's what our goal is here and limit the opportunities for um the violation of the trust that the president and his family uh if they're in official positions owe owe to the American people. So um with that u I would yield back my last 48 seconds to the ranking member if she'd like to to use them. Well, I thank you very much for uh yielding the last 48 seconds.
▶ 2:29:51I simply uh will continue uh to expose uh what is happening in our own government where this president of the United States and his co-president are issuing executive orders in so many ways to take over our independent agencies. and I'm going to have another list that I'm going to expose where he moves to take over the Kennedy Center and on and on and on. What's happening here?
▶ 2:30:22Uh is this uh you know a democracy or are we recognizing the relationship with Putin and wanting to be like him? Gentlemen, gentleoman yields back. Is further debate on the amendment? Mrs. amendment. Does the gentleman from Wisconsin have any Let's see. He's been called on.
▶ 2:30:49So I guess any hearing none, I'll recognize myself for five minutes. So once again, uh, I want to urge my colleagues to not support this, uh, amendment from the ranking member in California for the reasons I've outlined before, which is that if you want a strong, transparent, uh, set of guard rails and framework for digital assets and certainly for stable coins, you should
▶ 2:31:19support the stable act. Uh it is not uh a weak bill. It is a strong bill. It has strong consumer protections in it. Strong AML, BSA, cyber requirements in it, strong capital requirements, strong requirements for both bank and non-bank issuers to be fully uh vetted and fully supported under a a high standard of a federal minimum floor of requirements.
▶ 2:31:47And I just would remind my my colleagues, we we live in a democracy. We're not picking winners and losers here. If you don't want to use a payment stable coin, don't use one. We have article one authority that governs how our agencies uh interact and issue regulations and how they interact with each other as it relates to whether they would use a payment stable coin or not. I believe strongly in article one and the oversight responsibilities of Congress.
▶ 2:32:13I don't believe this amendment is necessary and I urge my colleagues to reject it. Y I will yield back. Is there any further debate? The question not the question now occurs on the amendment offered by the gentleoman from California. Those in favor please say I. I. Those no please say no. No. In the opinion of the chair the nays have it and the amendment is not adopted. I require a recorded vote.
▶ 2:32:42The gentleoman from California requests a recorded vote. All those in favor recorded vote raise your hands. Sufficient number of hands being raised. A record vote is so ordered pursuant to subsection C5 of rule three of the committee rules. Further proceeding on the amendment are postponed. Is there further amendments? Gentleoman from California. You're recognized. I have an amendment at the desk. We'll pause for the amendment to be distributed.
▶ 2:33:51clerk will report the amendment. I reserve a point of order. An amendment to the amendment in the nature of a substitute to HR2392 offered by Miss Waters of The amendment will be considered as read. The gentleman from Wisconsin has reserved a point of order. The gentleoman from California is recognized to support her amendment. Thank you very much, Mr. Chairman. Uh first of all, I want to thank Mr.
▶ 2:34:20Lynch uh for co-sponsoring this amendment and all the work that he's done and the expertise that he's developed on crypto and the way that he has been explaining and talking about uh what is going on here today and why it is absolutely ridiculous for us uh not to exclude the president and his cabinet and members of Congress from ownership of stable coins. Thank you so very much, Mr. Lynch.
▶ 2:34:48This important amendment would prohibit non-financial commercial companies from having their own stable coins and maintain our country's vital separation of banking and commerce. The separation of banking and commerce has been in place to ensure that no firm in the United States gains too much power in the economy.
▶ 2:35:11After the Great Depression, Congress passed the Banking Act of 1933, which established the separation of banking and commerce to prevent the risks arising from banking and commercial conglomerates.
▶ 2:35:26The dangers of not separating banking and commerce include excessive concentrations of financial and economic power and political influence, conflicts of interest that would compromise the ability of banks to act as objective providers of credit and other financial services and finally heighten risk of contagion between the financial and commercial sectors of our economy.
▶ 2:35:54This would increase the likelihood of systemic crisis that could require a federal government bailout to avoid the devastating consequences. Under this bill, the lack of separation between banking and commerce means that Elon Musk can launch his own exstable car. Other commercial companies like Walmart, Facebook, Amazon could also launch their own stable coins.
▶ 2:36:22I've worked with my Republican colleagues to negotiate stable coin legislation that would prevent wealthy oligarchs like Elon Musk and Mark Zuckerberg from profiting off of crypto schemes to defraud Americans out of millions of their hard-earned dollars.
▶ 2:36:39Elon Musk has long said he wants to transform X into a much larger platform and even praise WeChat chat, a Chinese mega app that combines chat, payments, and social media. He has very clearly stated that he wants to create something close to that with X where people have to conduct their entire financial world on the app.
▶ 2:37:05However, experts have stated that apps like WeChat have been used by the Chinese government to violate users data privacy. On top of that, big tech companies are already using AI to become even more powerful. Now, we're allowing them to get into the business of banking as well. Meanwhile, the Republicans are attempting to overturn the Consumer Financial Protection Bureau's big tech rule.
▶ 2:37:35If they're successful, the CFPB will no longer be able to supervise big tech companies to ensure American consumers are protected from fraud, scams, and illegal data collection when they use these apps to make payments. Thankfully, the Republican rule aiming to overturn CFPB's failed yesterday. Thank God for the courts and what they're helping us do right now. Let me be clear.
▶ 2:38:02I'm for financial innovation if the everyday American is adequately protected from frauds and scams. So, we need to make sure there are safeguards to protect consumers and their personal data. This importance of a clear line between banking and commerce is one of power in the economy.
▶ 2:38:22The Trump The Trump administration wants to keep his billionaire cabinet wealthy while he takes away social security checks from Americans, continue to order mass layoffs of federal employees across the country and imposes tax on consumer goods. Preventing one firm or a group of oligarchs from gaining too much power has been a long-standing principle in the United States.
▶ 2:38:49The risk are too disastrous for Americans who are already struggling to make ends meet in this economy. I cannot stress enough, we need to protect American consumers and investors in order to keep bolstering responsibility and innovation in our economy. So I urge members to support this amendment. And let me just close by saying you saw the billionaires with the president at his inauguration.
▶ 2:39:17The big boys, the billionaires club have decided that they're going to take over this government. Be damned the constitution and democracy. The big boys have aligned themselves. The billionaires, do they care about all these people who are losing their jobs? I don't think so. Do they care about the social security recipients? I don't think so. I yield back. Gentleoman yields back. Does the gentleman from Wisconsin insist on his point of order? I withdraw my point of order. He withdraws the point of order.
▶ 2:39:46gentleman seek to be recognized. Seek five minutes to strike the last word. Gentleman's recognized the right to last word. Thank you very much, Mr. Chairman. The bill we're considering today uh sets strong standards for payment coin or stable coin issuance in the United States regardless uh of who is issuing the stable coin. Uh we're always looking for innovation and development. Uh and it's always been really at the heart of financial services from the ATM to online brokerages to peer-to-peer money transfers. Uh technology is always improving.
▶ 2:40:16um the financial services space and the separation of commerce and banking is an important uh consideration consideration in the banking context. Uh the payment ecosystem is dynamic and ever evolving and so to place uh the exact restrictions of the bank holding company act um on those who can or can't issue stable coins um that are not really a fit for the risk that exist. Uh and I'm concerned concerned Mr. Mr.
▶ 2:40:44Chairman, that'll really lead to a stifling uh of innovation. That being said, the concerns about companies acting in an anti-competitive manner uh can be addressed and I'm happy to work with my colleagues uh to mitigate uh this concern uh but in a more nuanced manner. Uh so I'd urge my colleagues to oppose this amendment uh and Mr. Chairman, I will Will the gentleman yield? I yield back. Gentleman yields Mr. Chairman, uh Mr. Lynch. Yeah. Recognizes strike the last word. Thank you. Thank you, Mr. Chairman.
▶ 2:41:14I'm actually a a co-sponsor of this uh this measure. So, I want to thank the ranking member uh for working with me on this. Uh this this bill basically destroys uh the separation between banking and and commerce that has been a wise uh construct in our financial system uh from its inception.
▶ 2:41:40and uh the the the the breaking down of that barrier uh introduces a whole new set of risks. Um think about this, especially with respect to these big tech companies. Uh what we're going to do in this bill, we're going to allow Meta to start issuing stable coins.
▶ 2:42:04Meta right now has 3.35 billion daily users every single day. 3.35 billion. So if you're if you don't think there's some competitive risks here, they they are remember they were trying to do this before Zuckerberg was trying to do uh uh Libra back in the day and we we squashed that because uh we knew that he would overpower all the competition
▶ 2:42:34out there because of the look at the vast amount of information that he has already on every single American. 3.35 billion people. He knows, you know, their their purchasing habits. He he knows a whole lot about individual families because and individual citizens because he's been vacuuming up all their data for for years.
▶ 2:43:02and and now you're going to let him issue his own currency and and he's going to be able to, you know, use that that database that that collection of of daily users, 3.35 billion people. I bet there are a lot of banks and and and some of these small startups that are worried about that and and and so these are the people that that you're you know that you're supposed to be representing.
▶ 2:43:29these these are other people in this competitive market that you're trying to create. Um you're creating, you know, a couple of real giants. You know, X has about a billion people uh big a billion people um each and every day regular users. Uh Amazon has about 300 million. They're they're small in in in comparison. So these big tech firms are now going to be able to operate as banks.
▶ 2:43:55you and without any of the any of the restrictions and and responsibilities that you've you've put put on regular banks in terms of how they they deal with this. Um how they how they deal with the with the public. Um you know what what constrictions are on their um their their conduct.
▶ 2:44:16uh you're creating a a wild west with with uh two or three huge huge players that are going to be able to dominate this field. So, uh I just I I don't see I don't see the strong safeguards here. Uh, as I said before in your market structure bill, um, the, uh, FIT 21 act, you basically castrate the SEC.
▶ 2:44:46They can do nothing. Uh, you you don't add considerably to the ability of the CFTC to to uh to deal with, especially players of this size. they're just going to steamroll the regulator, especially after you've you've you've taken all their power away. And then u there's the state aspect of this.
▶ 2:45:11You know, what do you what do you think the matchup is going to be when uh when Meta with 3.35 billion daily customers and a and a barrel of money goes up against the state of Wyoming with 60,000 600,000 people, less than I have in my congressional district, one state, I think they're going to be overpowered.
▶ 2:45:32and and and uh I think I think there's a real question out there when when we need to bail out these companies when we need to bail out the the when the stable coins lose their peg. Uh is it going to be the people of Wyoming that are going to pay that or is it going to be spread across the United States for all all 50 states? They're going to have to step up as well. um that that situation still has to be addressed.
▶ 2:46:02Um with that, uh Mr. Chairman, I feel I'm repeating myself because some of these things are so uh so common to to different aspects of the bill, but I I yield back. Gentleman back. Is there further amendment on Mrs. Waters amendment? So, I'll recognize myself for five minutes. I I recognize certainly the element of repeating oneself here this morning. I appreciate Mr.
▶ 2:46:32Styles constructive comments on this discussion about separation of banking and commerce. And I I thank Mrs. Waters and Mr. Lynch for raising this issue today. I want to just take a minute and elaborate on why placing the bank holding company act restriction on stable coin issuers uh and some other aspects of the language in their amendment I don't believe is fit for purpose to address uh this issue and I want to I just don't think it fully addresses
▶ 2:47:03my colleagues concern that they've expressed first the list of financial activities in the bank holding act holding company act which was passed back in 1956 was updated in the 1990s by Leachch. The current list of financial activities does not contemplate any kind of digital asset activities which I think we would all on both sides of the aisle agree are are financial in nature.
▶ 2:47:29In our market structure bill from last Congress FIT 21, we exactly defined market participants and activities that we all agreed were financial in nature in a digital asset context. And I think that is a good illustration of how I think we can work together on this topic as the bill progresses. It's my intent today to move the stable act as we have it today.
▶ 2:47:56And as I've noted many times publicly, I want to make sure that we move a market structure bill uh in conjunction with it as we make progress here in the House. Moving both allows us to contemplate this issue in its full manner and would allow us to address a whole host of other issues that arise if we only focus on one bill, the stable act versus a companion market structure bill. So I look forward to working with Mr.
▶ 2:48:26Style, Mr. Lynch, and Miss Waters and other colleagues to provide a thoughtful solution in this topic uh on uh separation of commerce and banking. I'll make certainly a personally a good faith e effort to do that. But I do urge my colleagues to reject this amendment in its current form. Uh and yield back the balance of my time.
▶ 2:48:51If there's no further debate, the question now occurs on the amendment offered by the gentleoman from California, Mrs. Waters. All those in favor, please say I. I. All those opposed, she'll signify by saying no. No. In the opinion of the chair, the nos have it. The nos have it and the amendment is not agreed to. Recorded vote requested. The gentleoman has requested a recorded vote. All those in favor of recorded vote, please raise your hands. A sufficient number having raised their hands, a recorded vote is so ordered.
▶ 2:49:20Pursuant to subsection C5 of rule three of the committee rules, further proceedings on this amendment postponed. Is there further amendment on Mr. Styles? Mr. Chairman, I have a few amendments at the desk. Fantastic news. I know that would surprise you. I I'm not shocked. I'm thrilled to death. Mr.
▶ 2:49:49Sherman has amendment at the desk. We'll pause while it's distributed. Mr. Chairman, which do you have your amendments noted? I believe staff has arranged for this to be the amendment uh regarding certain governmental officials with over 10 million dollars of crypto assets. Okay. Well, we will pause for that amendment to be distributed. Mr. Chairman, I reserve a point of order. A point of order by the gentleman from Wisconsin has been reserved.
▶ 2:50:26Does it have the word 10 million in it? Yes. Is that the one? Yes. Have you laid these out? You have you have one a in case this one gets point. Okay.
▶ 2:50:51Well, clerk will report an amendment to the amendment in the nature of a substitute HR2392 offered by Mr. Sherman of California designated as 31.
▶ 2:51:19I thank the clerk and now I recognize the gentleman from California, the ranking member of our capital market subcommittee, Mr. Sherman recognized to support his amendment. Um, Mr. Chairman, I will have a number of amendments to this bill. I have uh no illusions. I've been in this town for a long time and I've always seen that when all the money, power, slogans, astroturf, and uh extremely high-priced consultants are on one side and there's nothing on the other.
▶ 2:51:50Uh that the side with the money, the power, the lobbyists normally Uh that being said, I will point out to my colleagues that there is one of these amendments because you'll have a tendency to just want to oppose them all that you may want to think very hard about opposing. Not this one. You'll probably my Republican friends will probably happily vote against this one, but uh the next one that I have on no bailouts is one that you're going to want to think a a lot about.
▶ 2:52:18As to this uh there is no part of the financial world that has been more subject to fraud, Ponzi schemes, uh wrongful actions of all sorts than the crypto world. And there is no disinfectant than sunlight.
▶ 2:52:42Now, we are all members of Congress and we'd like to think we're important and that therefore it's appropriate that we make sure that all of our decisions are made without a conflict of interest that uh that is not disclosed. And that's why we all with some great joy fill out our financial disclosure statements and at least let the world know of every one of our transactions. And the world needs to know because we believe we are important.
▶ 2:53:10But I've got news for most people in this room. You're not as important to uh governmental decisions these days as uh President Trump or Elon Musk. And so if we're going to have disinfectant in this area, we need to know what conflicts Trump, Musk, and other members of the uh cabinet have.
▶ 2:53:34This bill applies only to those who have over $10 million invested in stable coin and other crypto assets. We know that the president fits into that category and there's substantial reason to believe that Mr. Musk fits in that category. Uh we Donald Trump has four coins. Now uh we've already seen Elon Musk's situation.
▶ 2:54:03You see, the day President Trump was elected, Musk knew that there'd be an important organization that he would head that would uh be very cool in the eyes of the Republican party. But only he knew that it would be named after a memecoin. So for one week, he had that knowledge. God knows who else had it. The election of Donald Trump called caused all cryptos to go up. Bitcoin went up 22%.
▶ 2:54:33Dogecoin went up six times as fast. Some $ 37 billion dollar was earned by persons unnamed who knew for one week between the election of the president and the announcement of the name that this coin would be more valuable. So let us bring the disinfectant of sunlight.
▶ 2:54:57Let us uh require that we know as much about the investments of Elon Musk in crypto as the world knows about any of our investments in crypto, everything disclosed. And if a cabinet member has only modest investments in crypto, they're exempt from this bill.
▶ 2:55:20Otherwise we will have to wonder what are uh the motivations who is gaining. So who wants to speak disclosure? Who wants to say that conflicts of interest should be unknown?
▶ 2:55:39Who wants to say that those who claim to be in public service are free in an undisclosed manner, hiding under the table to profit from their decisions. Let us at least bring the attention of the public to these investments. And with that, uh, I yield to the ranking member. Thank you very much. Uh, and I appreciate it and I certainly support the amendment. I want to ask you something.
▶ 2:56:08I just had an amendment earlier uh that was about uh the independent agencies now being excluded uh from the rule of development and that the president has said you know all rules come to me uh so that I can see them and deal with them whatever whatever would your disclosure help us at all with that. Well the disclosure would apply to the special government employee and all the cabinet members and the president and I think those are the people making the decisions.
▶ 2:56:37Gentleman yields back. Uh I withdraw my previously made point of order. Is there further debate on the amendment? Seeing no further debate, I recognize myself for five minutes uh to strike the last word. Um I appreciate uh Mr. Sherman's interest in the space. Uh but this amendment uh is outside the scope of the bill. Uh as the amendment applies broadly to all digital assets, not just payment uh stable coins.
▶ 2:57:01asked Congress uh the majority worked closely to address uh concerns from some of our Democratic members about members of Congress owning digital assets uh for example uh in our own market structure bill would be a more appropriate forum uh for that conversation. Note that members of the cabinet are subject to a robust confirmation process uh in the United States Senate through which uh financial disclosure forms are filed and so I would urge my colleagues uh to oppose this amendment and I yield back.
▶ 2:57:27If there's no further debate, uh the question now occurs in the amendment offered uh by the gentleman uh Mr. Sherman from California. All those in favor signify by saying I. I. I. All those opposed, nay. An opinion of the chair, the nays have it. The naysay have it. And the recorded vote requested. A recorded vote has been requested. All those who uh favor recorded vote, please uh raise your hand. A sufficient number uh having raised their hand.
▶ 2:57:54recorded vote is order pursuant to se subsection C5 of rule three. Uh the committee rules further proceedings on the amendment are postponed. Uh is there Mr. Chairman? I have another amendment at the desk that's very similar to to this amendment but addresses your issues. So I'll bring that up. Uh there's an amendment at the desk that we will pause while this is I guess Sherman amendment 1A very similar to the last one except it deals only with stable coin and not with other crypto assets.
▶ 2:58:22We'll pause while the amendment is distributed. I reserve a point of order.
▶ 3:00:06The clerk will report the amendment. Amendment to the amendment in the nature of a substitute to HR2392. Without objection, the amendment is considered read. Uh the gentleman is recognized on his amendment for 5 minutes. This is the same amendment as the last one except it deals with the uh the acting chairman's uh uh concerns. He thought that uh an amendment of this type should only deal with stable coin and not deal with other crypto assets. This amendment deals only with stable coin and not with other crypto assets.
▶ 3:00:37Um the opportunity for corruption is in in this space is is is enormous. All a cabinet officer has to do, all a special employee has to do, all the president has to do to accept unlimited undisclosed gifts is create a coin and then see who buys it.
▶ 3:01:03and uh you buy the coin, the money goes right into the creator's pocket. In return, you get some uh code uh a quote digital asset, nothing more than a non fungeable token and uh the president has your US dollars or the cabinet member has your US dollars.
▶ 3:01:27Uh we uh saw a tiny we may have seen a tiny portion of this when uh Hunter Biden was selling his artwork, but at least he wasn't a governmental official and at least there was a physical item of art.
▶ 3:01:42But here, why do we even have all this disclosure stuff that you and I and cabinet members uh uh fill out if we don't disclose the easiest way to bribe a uh important governmental decision maker and that is to have them make a coin and out of thin air uh and say and and and and we've seen this.
▶ 3:02:11We saw this uh uh you know you I I've charted mongoose coin in this room a couple of years ago. I said there wasn't a mongoose coin. People created a mongoose coin and for a while it was worth millions of dollars. They owned it all. Uh they said it was worth millions of dollars. There were a few transactions involved with it.
▶ 3:02:36Uh, and if you wanted to enrich the creators of Mongoosecoin, all you had to do is buy Mongoosecoin and your name was not disclosed and the creators of Mongoosecoin had US dollars in return for Monguscoin, which they had just created a few hours ago. So if we want unlimited bribes, totally undisclosed, available to the most important decision makers in government, then we must defeat this amendment.
▶ 3:03:06Uh with that, I would yield to any of my colleagues that would like to speak. And seeing none, I yield back. The gentleman yields back. Is there further debate on the amendment? Seeing none, I recognize myself for five minutes uh to strike the last word.
▶ 3:03:22Appreciate the adjustment that my colleague from California made per my previous uh concerns of the previous amendment, but uh this also uh is unnecessary also um is best addressed inside the market structure aspect of our twopart bill uh or two bills that will ultimately come before the committee. Um it is a distraction the underlying text. I would urge my colleagues to oppose the amendment uh and I yield back.
▶ 3:03:48If there's no further debate, the question now occurs in the amendment offered by the gentleman from California. All those in favor signify by saying I. I. Those opposed, nay. In the opinion of the chairs, the nays have it. The nays have it. And the amendment is the gentleoman has requested a recorded vote. All those in favor recorded vote, please raise your hand. A sufficient number having raised her hand. Record and vote is order. Pursuant to section C5 of rule three of the committee rules, further proceedings on the amendment are postponed.
▶ 3:04:17Is there an additional amendment? Mr. Chairman, I think I have a I believe I have an amendment at the desk. The gentleman has an amendment at the desk. We'll pause while it's distributed. is a great amendment. Does Mr. Downing, the gentleman from Montana, reserve a point of order? Uh, Mr.
▶ 3:04:48Chair, I do receive uh uh I reserve a point of order. The gentleman reserves a point of order. Thank you, sir.
▶ 3:05:19The clerk will report the amendment. An amendment to the amendment in the nature of a substitute to H. Without objection, the amendment is considered. The amendment is considered as read. Uh and the gentleman is recognized for five minutes for his amendment. Thank you, Mr. Chairman. Mr. Chairman, uh my amendment would limit the activities. So, what what I'm trying to do here is because we've had such a a a long and strong history of of these stable coins collapsing. Um they they are not stable.
▶ 3:05:48That's a that's a misnomer. uh and because we've had a steady drum beat of of uh bailouts to to to restabilize those coins uh where the FDI either FDIC has come in as in the situation with Silicon Valley Um, what I'm trying to do here with this amendment is create a firewall since we we have seen I think 60 of these
▶ 3:06:19stable coins fail. They collapsed. They had to be rescued. What I'm trying to do here is to create a firewall around the the American taxpayer so that they don't get stuck with the bill um on the on the stable coins that you are now that that the bill is now authorizing.
▶ 3:06:41So this amendment would limit the activities of stable coin issuers to those that are directly related to the essential functions of issuing a stable coin. Specifically, this includes activities such as issuing or repurchasing or transferring stable coins or acquiring and managing the reserves that are supposed to back up uh those those stable coins.
▶ 3:07:08Uh they can also provide custody services and any other activities that are necessary to carry out the core functions of a stable coin issuer. Uh what this tries to get at is is the the fundamental separation between banking and and commerce.
▶ 3:07:27uh you know in the bank bank holding company act uh congress made a very wise decision and said you know uh it would if we allowed banks to get into commercial activity it would create such a uh a huge risk of uh major uh contagion across our economy that it's a danger that we will not abide and so they require that separation this this
▶ 3:07:58would follow in line with that thinking u especially with respect to commercial activities that are speculative or high-risk ventures that we've seen time and time again lead to catastrophic results that happened back in 2008 um and I'll talk about that in a minute.
▶ 3:08:17What what I'm concerned about is the language that would allow stable coin issuers in this bill to undertake such non-payment stable coin activities that are allowed by the primary federal payment stable coin regulator. Close quote. So, this opens a door to unchecked activity and creates issuance, excuse me, creates issues for regulators at both the state and federal level by creating a dangerous loophole.
▶ 3:08:41It would allow issuers, stable coin issuers, uh, to engage in activities such as lending or other high-risisk investments that have directly contributed to financial stability in the past. I point to the 1980s. We had the savings and loan crisis compounded by lack capital requirements that taught us the hard way that allowing companies to engage in speculative and high-risisk activities has long-term damaging effects on our economy. And similarly, the authorization of subprime mortgages.
▶ 3:09:11remember we did that uh by the OC and the Federal Reserve that led to the subprime mortgage crisis. Uh I think it $787 billion of taxpayer money to bail that one out which triggered the 2008 financial collapse. So we can't afford to repeat those mistakes. By adopting this amendment, we can protect our financial system from the hazards of excessive risktaking. We will limit stable coin issu issuers to activities that are directly related.
▶ 3:09:40So this allows some of your bill to go forward. It allows stable coin issuers uh that to to to maintain those those uh activities directly related to their core function of issuing a stable coin. This is a sensible and precautionary step to ensure that we do not expose our economy and our taxpayers to unnecessary highstake gambling with taxpayer dollars or the stability of our financial system.
▶ 3:10:08So I urge my colleagues to support this amendment and uh unless there are other members that need 30 seconds, I will yield back the balance of my time. Thank you, Mr. Chairman. The gentleman from Massachusetts yields back. Uh does the gentleman from Montana insist on his point of order? Mr. Chair, I withdraw my point of order. The member withdraws his point of order. Is there further debate on the amendment? The the ranking member of the full committee, Miss Waters, recognized for five minutes to strike the last word. I move strike the last word.
▶ 3:10:34This important amendment would ensure that payment stable coin issuers are limited to certain activities. Republicans have added in a glaring loophole that would allow issuers to undertake non-payment stable coin activities that are allowed by their regulator. This extremely broad provision could mean that issuers could perform tasks like lending and could have significant impact on our financial system.
▶ 3:11:05For example, the Conference of State Bank Supervisors or that is CSBS sent a letter highlighting a number of concerns with the bill and pointed out that not having proper limitations on activities for issuers in concert with preeemption of state authority would mean states would no longer be able to quote protect consumers in their state by licensing, regulating ating and
▶ 3:11:35supervising money transmitters, payday lenders, consumer lenders, mortgage lenders, and other non-banks that are connected to a stable coin issuer. CSBS also wrote that the bill would quote effectively centralize power over a nassent industry in a single federal agency and quote create an unsafe environment where the OC can pick winners and
▶ 3:12:05losers across the financial services industry substituting a single agency lenders judgment for that of the states in Congress relative to consumer protection and safety and soundness.
▶ 3:12:22And members, as I have pointed out uh the conflicts of interest and uh urged my members to ensure uh that the president of the United States, his cabinet and even members of Congress could not own stable coins or crypto.
▶ 3:12:43There are other concerns uh with this bill and I have been working for a long time uh with the former chair and with Mr. Hill on trying to work out uh these issues and come to some agreements. We've not been able to do that with all of the concerns, but I even offered even today that if amendments could take care of some of these concerns.
▶ 3:13:11Well, the opposite side of the aisle have been less cooperative on everything that has been offered to make this a good sound bill that did not in any way allow for the conflicts of interest that are obvious in the bill. And so, uh, I expect, uh, that they will not, uh, support this amendment.
▶ 3:13:38But this is evidence that not only the huge issues that we have that are concerned with this bill are not even recognized or cared about at all as we're going through this difficult time in the history of this country. Again, I will repeat where there are recipients of the support of their government that are being yanked out from under them.
▶ 3:14:07At a recent meeting that I had about Medicaid and I asked all of the people in the room if they uh were ones that uh participated in Medicaid or their family, almost 100% of the hands went up in the room.
▶ 3:14:24And while we're trying to protect all of the recipients of government assistance, at the same time, we are helping the president of the United States and his cabinet and others become owners, where they will enrich themselves, where they will increase uh their access uh to these opportunities.
▶ 3:14:49And so I'll keep mentioning this because it's outrageous for the opposite side of the aisle to not have anything that they care about as it relates to whether or not there's a conflict of interest or whether or not the public is being harmed or whether or not the people working for the government are being fired and told to get out of their offices by 5:00 or whether senior citizens are going to get their checks or where Medicaid is going to help people who cannot cannot afford,
▶ 3:15:19you know, proper medical care to be able to stay alive. This is outrageous. Uh, but I will keep mentioning it over and over and over again. I yield back the balance of my time. Gentleoman yields back. Is there further debate on the amendment? Seeing none, I recognize myself for five minutes to strike the last word. I appreciate the intention uh of my colleague from Massachusetts uh in regards to uh this amendment.
▶ 3:15:47Um I note that the underlying restrictions of activities uh in the bill in section 4 uh a paragraph 8 um is actually pretty robust in the amendment as offered would would effectively strike subsection G undertake such non-payment stable coin activities are allowed by the primary federal payment stable coin regulator.
▶ 3:16:08uh and my concern is that by doing that we would be restricting options for market participants um to engage in uh innovative uh and helpful activity and so I think uh the amendment therefore um does not move us in the right direction. I think the underlying text is uh is best as drafted. Uh and I will oppose the amendment but appreciate uh the efforts of my colleague from Massachusetts.
▶ 3:16:33Uh if there's no further amendment, if there's no further debate, uh the question now occurs in the amendment offered by the gentleman from Massachusetts. All those in favor signify by saying I. I. All those opposed, no. No. In the opinion of the chairs, the naysay have it. The naysay have it and the amendment is not adopted. Requested roll call. A recorded vote has been requested. All those in favor recorded vote, raise your hand. A sufficient number having raised their hand. A recorded vote is ordered.
▶ 3:17:00Pursuant to subsection C5 of rule three, the committee rules further proceedings on the amendment are postponed. Is there an additional amendment? The gentleoman from Texas, Miss Garcia, has an amendment at the desk. Very good.
▶ 3:17:26We'll pause while the amendment is Does
▶ 3:18:04the gentleman from Montana, Mr. Downing, reserve a point of order? Mr. Chairman, I reserve a point of order. The gentleman reserves a point of order. The clerk will please report the amendment. An amendment to the amendment in the nature of a substitute. The amendment is considered read. The gentleoman from Texas, Miss Garcia, is recognized for five minutes on the amendment. Thank you, Mr. Chair. Uh my amendment is very simple and short. It protects consumers by making sure we don't let stable cone issuers buy people's favor.
▶ 3:18:33Since we've been talking a bit about history today, so let's look a little a little at history in banking. One of the key flaws that led to the Great Depression was that banks didn't hold enough in reserves. But as credit markets expanded in the early 1900s, another problem emerged. Banks started using credit as leverage, not just financially, but competitively. Businesses and families needed loans to grow to buy homes to keep things running.
▶ 3:19:04And banks realize they could use that need to push other incentives like a toaster. Or maybe soon you can get a free ride for a week on a Tesla or maybe a free weekend stay at Mara Lago. They sweetened the deal with a little perk. And perks do get people's attentions. One that might have been too good to refuse. You all know it. You walk into a bank and they try to upsell you.
▶ 3:19:32Choose our bank over the one across the street and we'll give you a toaster. But there's always a catch. You only get the toaster if you open their premium account, which is going to cost you more. Or you open another line of credit and you can't buy the toaster from us. The toaster wasn't really free. It was bait. A reward for locking in with that bank and locking out the competition. Now, fast forward to today.
▶ 3:20:01Again, we could get a free ride on a Tesla for a week or maybe a weekend stay at Mara Lago. So, if we're embarking on building a new financial system or a stable coins, let's be clear, there's no such thing as a free lunch, no free toaster, no free use of a Tesla for a week or a weekend stay at Mara Lago, and definitely no free stable coin.
▶ 3:20:26If we don't put limits in place, we're going to see the same old tricks wrapped in some new new paper. Wave your fees if you use our coin. That's not innovation. That's coercion. That's an anti-co competitive. Congress has regulated this kind of behavior for decades. There are clear rules and clear exemptions. Stable coins cannot be one of them.
▶ 3:20:52This is why my amendment would make sure they don't get special treatment just because they are the new shiny financial product hiding behind a wall of innovation. and make sure they play by the same rules that our traditional banks use. And Mr. Chairman, this this amendment is very necessary to ensure that our consumers are protected. Thank you, and I urge the adoption of my amendment. The gentleoman yields back.
▶ 3:21:21Does the gentleman from Montana insist on his point of order? Uh, Mr. Chairman, I withdraw my point. The member withdraws his point of order. Is there further debate on the Seeing no further uh debate, I recognize myself for five minutes. Uh while I appreciate the intentions of my colleague from Texas, um as the previous amendment I noted, I would I share the same concern uh that this amendment would uh stifle innovation and competition.
▶ 3:21:45Uh and the amendment could actually, I think, be counterproductive and limit uh the variety of products uh that are available to consumers uh denying them the choice to take advantage of benefits that they see. And so while I appreciate the intention in which it is offered, I recommend a no vote on the amendment. Uh if there's no further debate, the question now occurs in the amendment offered by the gentleoman from Texas. All those in favor signify by saying I. All those opposed, no. The nos have it. And the amendment is not agreed to.
▶ 3:22:19We ask for a recorded vote. We'll call that timely. A recorded vote has been requested. Uh all those in favor of a recorded vote, please raise your hand. A sufficient number having raised their hand, a recorded vote is ordered. Pursuant to subsection C5 of rule three, the committee rules uh further proceedings of the amendment are postponed. Uh is there an additional amendment? Miss Tib is reg has an amendment at the desk. We'll pause while the amendment is distributed.
▶ 3:22:49Mr. Chairman, I reserve a point of order. Gentlemen reserves a point of The clerk will report the amendment in a moment. An amendment to the amendment in the nature of a substitute 239. Miss read.
▶ 3:23:19The gentleoman from Texas is recognized for five minutes on her amendment from Michigan, but it's okay. I apologize for the record. The gentleoman from Michigan, uh, Miss Talib is recognized for five minutes. I apologize. Thank you, Mr. Chair. Um, you know, I just want to read directly from it.
▶ 3:23:34It's a very simple amendment, but it says, "A special government employee may not have any ownership interest in a payment stable coin issuer." This is important because I'm really incredibly troubled um by the massive conflicts of interest which this bill fails to address. I'm actually really looking forward to Representative uh Sherman's amendment uh for no bailout uh especially if we can't have these protections in place.
▶ 3:24:02We all know the president of the United States issued an executive order requiring all regulatory agency rules uh must be approved by the office of information and regulatory affairs within the office of uh management and budget. Uh this means for folks that are listening this means the president and those in the administration can press for changes to agency rules like again which is a conflict uh having them oversee their own conflict.
▶ 3:24:31Uh in the present contest Trump everybody knows this Trump and his family have strong financial interest in stable coins right now through their stake in the world liberty financial. We also know that Elon Musk and a special government employee wants to issue his own stable coin with his new payments app.
▶ 3:24:50We know that the president and those in the administration like Elon Musk um right now should not at all because of their conflicts be able to change agency rules overseeing and regulating those activities. So that's the motivation of this amendment. Uh many of our constituents can come together and say look we can't have corruption within government. They already have a high increase of distrust for many of us here serving in Congress.
▶ 3:25:16And it's because we do not stand up against corporate greed and conflicts of interest. They think we're here again rigging the system, which it is, and not fixing it again to make sure that we have some sort of oversight and again accountability. It this amendment, Mr. Chair, would ban special government employees like Elon Musk again from owning a stable coin issuer. This is a simple amendment to blatantly push back against any blatant again conflict of interest.
▶ 3:25:45And so I hope my colleagues would support uh this amendment. It's incredibly important. Again, I don't want us continuing to bail out those that are driven by corporate greed. And the conflict of interest is right in our face and we again um must again have these protections in place. Uh with that, Mr. uh chair, I I reserve my time, but uh yield back. The gentleoman yields back. Does the gentleman from Montana insist on his point of order? Mr. Chairman, I withdraw my point of order. The gentleman withdraws his point of order.
▶ 3:26:13Is there further debate on the Seeing none, I recognize myself for five minutes uh to strike the last word. Uh appreciate uh my colleague uh from Michigan bringing forward her amendment. Um I'd note our underlying bill uh sets forward common univers universal applicable standards to prevent fraud uh and ensure stable coin reliability. every issuer has to meet the same high bar.
▶ 3:26:39Uh and similar to the other amendments uh that were raised uh and bringing up similar issues, this bill, it's not about singling out of individuals. It's about universally applicable rules of the road and universal protections uh for American consumers. We have to protect American consumers with substantive payment stable coin legislation that ensures these products are supported by safe and secure assets. uh that American consumers can have confidence in stable coin uh circulation.
▶ 3:27:07Um and so with that um I encourage my colleagues to oppose uh this amendment um there being no further debate on the amendment. Uh the question now occurs in the amendment offered by the gentleoman from Michigan, Miss Tib. All those in favor signify by saying I. I. All those opposed, no. In the opinion of the chairs, the naysay have it. The nays have it and the amendment is not adopted. Mr. Chair, can I request a record vote? The gentleoman from Michigan requests a recorded vote.
▶ 3:27:36All those in favor of a recorded vote, please raise your hand. A sufficient number having raised their hand. A recorded vote is ordered. Pursuant to subsection C5 of rule three, the committee rules. Further proceedings on the amendment are postponed. Is there an additional amendment? Uh Mr. Sherman is Yes, I have an amendment at the desk. This one dealing with no bailouts. The gentleman has an amendment at the desk. and pause while the amendment is Mr. Chairman, I reserve a point of order.
▶ 3:28:05The gentleman reserves a point of The the clerk will please
▶ 3:28:35report the amendment. An amendment to the amendment in the nature of a substitute to HR2392 offered by Mr. Sherman of California. Designate objection. The amendment is read. Uh the gentleman is recognized on his amendment. I know my Republican colleagues are primed to vote against all amendments, but this one you're going to want to think about. Take advice from a guy who's lost his hair in the service of his country. I was here in 2008.
▶ 3:29:03You do not want to go home and tell people that you are pro- bailout. In particular, when we did a bailout in 2008, we were bailing out the biggest banks in the country. At least that had some relevance to our constituents. Most of our constituents work for companies that do business with the big banks.
▶ 3:29:30Most of our constituents have accounts themselves in the big banks. And even then, the bailout of the big banks was the least popular thing Congress has done this century. Well, now we have a situation where it is just a few billionaires and maybe one or two% of the population that is actively involved in crypto. Fewer will be involved in in coin.
▶ 3:30:00And yet they expect a bailout if their fraud, if their bad business practices, if their high risk causes them to need one. So you need to draw a line here.
▶ 3:30:17The chairman when he was here told us, "If you don't want to use crypto or you don't want to use stable coin, don't do it." Well, that's fine until they use your taxpayer dollar to bail out a stable coin you chose not to invest in. So, what would it mean if this in a amendment is voted down?
▶ 3:30:43It would be a s symbol a statement to the entire crypto industry. Congress is ready to bail you out. The Republicans voted to allow Congress to to allow institutions to bail you out. The Fed might bail you out. The FDIC may bail you out.
▶ 3:31:02And when Congress had its one vote against bailing out stable coin, they said, "Bail them out." Do you want to go home and explain that? Go right ahead. Some of your colleagues from 2008 didn't come back and what they were bailing out has far more relevance to the vast majority of Americans. Now I know how powerful the crypto industry is.
▶ 3:31:31I know they've got all the money. They've got all the power. They've got the lobbyists. They've got the astroturf. They've got the most expensive consultants cryptocurrency can buy. No, they don't pay them in cryptocurrency. those lobbyists and are too smart to accept payment in cryptocurrency. They've got the best consultants US dollars can buy and they want you to vote for them on everything.
▶ 3:31:57But they especially want you to vote a against this amendment because they want to create an image that they are the same as the banks that they are pillars of the economy and if they get in trouble they will be bailed out and therefore your money is safe even when Sam Bankman Freed's cousin takes the assets to Brazil or the Bahamas.
▶ 3:32:26So, let's see if you can simply vote against. Now, I will say the bill contains language that says uh that stable coins are not backed by the full faith and credit of the United States. That is obviously not sufficient to bailouts.
▶ 3:32:45CDs at the Bank of America do not have the full faith and credit of the United States, but we bailed them bank accounts at City Bank do not have the full faith and credit of the United States, but they were eligible for a bailout. Do you want to go home and say, "I was so dependent on the crypto industry that I casted a vote facilitating a bailout of stable coin." If you do, go right ahead.
▶ 3:33:16Uh but when you do, you will be sending a message that will be embraced by all of the Twitter sphere, all of the folks that are trying to promote stable coin and other crypto and say, "Don't worry, you don't we don't need audits. We've got a bailout." They voted to bail us out if we need a bailout.
▶ 3:33:43And voting against this amendment is voting to send a s symbol, a signal that you're ready to vote to bail them out or to let the Fed bail them out without a vote if you can figure out how to do that. And the smartest lawyers in the country will try. So, um, you probably want to vote against all my other amendments. You're going to want to vote for this one. I will yield to any member who wishes to speak. And seeing none, I yield back to the chair. The gentleman yields back.
▶ 3:34:13Is there further debate on amendment? Seeing none, I recognize myself for five minutes to strike the last word. Before I do, does the gentleman from Montana and assist on his point of order. Uh, Mr. Chair, I withdraw my point of order. The gentleman withdraws his point of order. Uh, the chair actually will recognize uh, Miss Garcia for five minutes to strike the last word. Thank you, uh, Mr. Chairman.
▶ 3:34:35I appreciate my colleague, Representative Sherman, for offering this sensible amendment to broadly make sure Congress is not leaving taxpayers on the hook for the risk takingaking of stable coin issuers. I have shared my concerns about how inappropriate it is for Trump and Musk to write the rules of the road for everyone while they profit off of it with their own stable coin issuers.
▶ 3:34:59If Republicans are unwilling to prohibit Trump from enriching himself through the stable coin framework, I would hope they might be open to at least ensuring that taxpayers are not required to bail out stable coin issuers soon to be owned by President Trump and his co-president Elon Musk. Earlier in the debate, the chairman said that if you don't want to use a payment stable coin, they don't have to use one. Okay.
▶ 3:35:25Well, using that same logic, I hope that he would agree that American taxpayers should not be asked to bail out stable coin issuers either. I urge members to support this amendment and I yield back. The gentleoman yields back. Is there further debate on the amendment? Mr. Chairman, the gentleman, Mr. Lynch, is recognized for five minutes to strike the last word. Thank you. First of all, I I wholeheartedly support this amendment. This is really getting at the nub of it.
▶ 3:35:55Uh we're worried about the consequences of this re reckless action uh having dire consequences uh on uh on the American taxpayer. And let's think about this too. Every bailout is is going to increase the national debt. So the the one we did in 2008, I voted against it twice, uh but it passed.
▶ 3:36:21that cost us almost a well $787 billion. So that that that's part of that debt that's overhanging us right now. So each and every one of these failures and there will there will be many because it's the nature of these stable coins to fail, right? We we've seen it over and over again. Even the best even circle broke the broke the buck.
▶ 3:36:45uh and they're supposed to be like the the the the model in the industry and uh they haven't been able to operate without without federal assistance. Um so so what this would do is just take the taxpayer off the hook. That's that's what Mr. Sherman's amendment does.
▶ 3:37:05takes the taxpayer off the hook and and it will stop these these stable coin issuers from coming to you to Congress uh you know for for a bailout. So we can stop this whole process. You can just say to them, you know what, it's against the law. We can't do it. Sorry. And just end it right there.
▶ 3:37:29Um, what I'm afraid of though is that they they've they've spent so much money up here on the hill and uh you know the the president is fully invested in this. You know, he's got four he's he just launched his fourth crypto uh uh currency in in the matter of a year. His family has just opened a a whole new line of business on crypto.
▶ 3:37:55So, uh, I I think that whole fact has introduced a level of recklessness in the industry. All these crypto bros, they're like, "This is great. This is great. We're going to take private risk, uh, private gain, and then any losses we can just we could just push on to the American taxpayer. It's it's perfect. It's the same thing that Goldman Sachs did back in 2008. They made a barrel of money, $9 billion.
▶ 3:38:25We we bailed out AIG and that money went directly to Goldman Sachs. They didn't even take a haircut. Um, so, so that's the plan here is is to take advantage of the American taxpayer through their representative and through their president and to to to take great risks with these uh with these stable coins
▶ 3:38:55and then be insulated from the consequences when they when they fail. uh that way they they sort of they socialize the cost to the American taxpayer and they privatize the gains right because we don't have any uh in place right now I'll introduce one but we don't have any clawbacks so these these company executives will be able to keep their profits
▶ 3:39:26and then when business goes south they'll be able to export their losses uh to the American taxpayer. That's the game here. That's that's the whole game. That's what this is all about. Uh these stable coins have failed over and over and over again. You know, this this shouldn't be the stable act. They should be calling this the Titanic because it's going down. It's going down. We we just know that because we've been watching this game for a long time now.
▶ 3:39:53you know, even the even the quote best of the stable coins have broke the buck and needed needed a bailout and nothing's changed except they spent a ton of money up here on the hill and now they've they've got, you know, they've got members on both sides bamboozled into thinking that this is something that they should support. So, um, it's a it's a sad commentary, um, I think on the way our political system works, but that's a whole other issue.
▶ 3:40:23So, uh, unless my colleagues need additional time, I'll yield back. Thank you. Gentleman yields back. Is there further debate on the amendment? Seeing none, I recognize myself for five minutes to strike the last word. Um, I I would agree with my colleague, uh, Mr. chairman uh on our joint goal of making sure that taxpayer money is not used to bail out uh stable coin issuers.
▶ 3:40:44And I would note for the record uh the stable act explicitly states uh that stable coins are not backed by the full faith and credit of the United States government are not subject to FDIC or NCUA insurance and requires a disclosure of this information on every issuers's uh website. Uh furthermore, uh we create a strong risk management framework uh in this bill to make sure that we address the concern uh that you just brought up.
▶ 3:41:10Um however, uh without adequate time to review the the text before us, I'm going to urge my colleagues to oppose the amendment. Uh but I would be happy uh to work with you and all of my colleagues on this committee uh as we move forward uh towards the House floor uh to make sure that your concerns are addressed.
▶ 3:41:28Um, I think it's important to note that the underlying structure of this bill um actually puts forward a a robust framework for stable coin issuers in the United States to lessen the risk uh that you um identified uh in your remarks regarding uh your amendment and so I appreciate the intent. Will will the gentleman yield? I I will yield. Robust framework that means that they hopefully won't go bust. But of course the biggest banks, they have a robust framework.
▶ 3:41:58They needed a bailout. And now we have a major member of Congress telling all the crypto investors, you can rely on this. No, I'm going to reclaim my time. I'm going to reclaim my time because that's that's that that is a well, you can rely on a I reclaim my time. The time is mine. Um I would I would note I think that's a misleading um statement um of what is being said.
▶ 3:42:21I think we're we're actually saying is explicitly in the bill that these are not backed by the full faith and credit of the United States government, that they're not subject to FDIC or NC UA insurance and requires disclosure of that fact. We're putting forward a robust framework to make sure that these stable coins are backed uh by the US dollar in cash and cash like equivalents.
▶ 3:42:45Um, I I respect the concern that my colleague brings uh and truly am open uh to working uh with you or with others who share that concern uh as we work to refine this bill prior to passage on the House floor. I'll note uh that I did not receive this amendment uh substantively in advance, a limited time to review, so I'm urging my colleagues uh to vote no, but uh I truly do appreciate uh the spirit and intent uh in which the amendment was given. Uh is there further debate? Green from Texas. Mr.
▶ 3:43:14Green is recognized for five minutes to strike the last word. Thank you, Mr. Chairman. I'd like to associate myself with the comments made earlier by the ranking member and um I too will not sign on to capitulation legislation because that's where we are. Either we capitulate and agree to what you have or we don't sign on. I will not sign on and I would yield my time to Mr.
▶ 3:43:43Sherman, let us compare the situation that we're setting up for the future to where we were in 2008. Will the website say that it's not FDIC insured? Yes. And every big bank for accounts over quarter million dollars said not FDIC insured right there in every in the physical branches and on the website. Will this industry have a government created structure or framework?
▶ 3:44:13Yes. And in fact, our Republican colleagues have done their best to create or at least asserting to the public that they've created done their best to create a framework just as Congress did its best to create a robust framework for the for the big banks. Uh, is it enough to say, "Well, we're not going to bail them out because we have in the language that it's not full faith in credit." Well, let's look at the big banks. No.
▶ 3:44:42Bank of America certificates of deposit were not full faith in credit. Everybody knew that. So, you go down the list and you're back in 2008. But it's worse because when you say this stable coin reflects full compliance with the best framework Congress could develop, then you're saying and we'll probably bail you out because if it fails, it's on
▶ 3:45:12us. Then you get ordinary Americans, we're not doing this stable coin here for an industry that doesn't want to grow. They expect the average American to own stable coin or a lot of them.
▶ 3:45:27At least there'll be a few stories of people who have their whole de life savings who are going to go hungry unless we bail them out and they're going to be in Congress saying you got to bail out this coin or that coin because otherwise our whole industry will look bad. I was here in 2008. You're going there again. and saying that you haven't had a chance to look at this amendment.
▶ 3:45:54Not only is it very short, but it really just says thing. No government agency can bail out a stable coin. Period. One sentence. If you vote against that sentence, if you say this industry was created by Congress creating the strongest framework that they could, or at least that's what they're telling Then you are creating the expectation of bailout
▶ 3:46:24which then leads ordinary Americans to invest which then gives them a moral claim to your vote to vote for a bailout when that happens. So if you want to set if you want to vote now and say I'm you don't have to invest in stable coin but you are being set out to bail out those who do. uh then go right ahead.
▶ 3:46:51But this is a real test of the power of the lobbying machine that the billionaire crypto boys have put together. Uh because uh if you're voting, if you're not willing to vote for a clear statement to the investors that they're not going to be bailed out, you can guarantee that it won't be on their web page, but all over media.
▶ 3:47:19It will say this is a federally approved framework. They had a chance to say, "We won't bail you out." And they said, "We don't want to prohibit bailouts." In 2008, they bailed them out. The proponents of stable coin will tell you will say that we're building something that will be systemically important to the country. So that's you can almost assure yourself of a bailout and then you're going to see the bailout.
▶ 3:47:48So it's your choice. You're either pro bailout or you can't anti-bailout. And don't think you can go back to your constituents and say, "Well, I didn't like the paragraph on line 15 of page one of the amendment." They're not going to listen to that. You're either pro bailout or you're anti-bailout. And I yield back to the gentleman from reclaiming my time.
▶ 3:48:11I support the Sherman amendment and again would indicate that the legislation the underlying legislation is capitulation legislation when you decline to accept amendments that would make it much better than it is. I yield back. The gentleman yields back. Is there further debate on the amendment? Mr. Casten of Illinois is recognized for five minutes to strike the last word. Um so I just make a quick observation here.
▶ 3:48:38Um, it's nice to call them stable coins, but they kind of have to be stable if we're going to call them stable Circle had $3.3 billion of uninsured deposits at SVB, Silicon Valley Bank, not that long ago, the when Silicon Valley Bank collapsed and they didn't have the cash. The money wasn't in the bank because they were in uninsured deposits.
▶ 3:49:04They had $250,000, but not 3.3 USDC collapsed to 88 cents. Not stable. Not stable if a dollar is only worth 88 cents. The only reason we even call that a stable coin today is because the feds overnight rushed money in to bail out the the insur the uninsured depositors, which was appropriate to prevent a run on the bank. Right?
▶ 3:49:31I'm not saying that in crisis like this we should not have people um we shouldn't take you know extreme measures and extreme circumstances but the only reason it's stable is because we bailed them out. So I I guess I'd yield my time back to Mr. Sherman. But I would love to ask if this amendment was in place back when SVB was crashing, would we have saved the taxpayers money because we wouldn't have had to bail out these stable coins?
▶ 3:49:57And would we then not have the fiction before us today that these coins are stable independent of federal subsidy? And I'd welcome you to tell me wherever it goes, but I don't I'm still perplexed why we call them stable when they are unable to stay stable without massive federal bailouts. Mr. Sherman, I yield my time to this evening.
▶ 3:50:14If I was selling an asset where in real life it was associated with fraud, Ponzi scheme, Sam Bankman Freed, I'd call it a gold stable coin. I'd call it a platinum stable coin. I'd call it a god orained stable coin. Whenever you're trying to hide something, you give it a title that is the exact opposite. This is not a stable coin.
▶ 3:50:44Many of them will go under. The pressure will be on government to do the bailouts. And you can tell your constituents that you stood here and said no government bailout or you can tell your constituents the opposite. And um I yield back to the gentleman from Illinois. Yield. Gentleman yields back.
▶ 3:51:08Is there further debate on the Seeing none, uh the question now occurs in the amendment offered uh by the gentleman from California, Mr. Sherman. All those in favor signify by saying I. I. Those opposed, no. No. The opinion of the chair, the nays have it. The amendment is not adopted. The recorded vote is requested. All those in favor recorded vote, please raise your hand. Uh sufficient number having raised their hand, a recorded vote is ordered. Pursuant to subsection C5 of rule three of the committee rules, further proceedings on the amendment are postponed.
▶ 3:51:39Is there an additional amendment? Mr. Foster from Illinois is At the desk, the gentleman has an amendment at the desk. We'll pause while the clerk distributes the amendment.
▶ 3:52:46Mr. Chair, I'd like to reserve a point of order. Gentleman from Michigan reserves a point of order. Clerk will report the amendment. An amendment to the amendment in the nature of a substitute to HR2392 offered by Mr. Foster of Illinois designated as 17. Without objection, the amendment will be considered as read. The gentleman from Illinois is now recognized for five minutes to discuss his amendment. Thank you, Mr. Chair. Um I too was present in this committee in uh 2008.
▶ 3:53:15I I came in under this committee in March of 2008. Um months before Layman Brothers fell and uh basically cratered the economy and then one day later AIG got into trouble and was bailed out. Uh there's a sort of breathtaking description of exactly how that bailout happened where one specific government employee transferred many many billions of dollars to the AIG counterparties.
▶ 3:53:43And um I also this pin here is the 110th Congress pin. So this this pin was on the floor when I voted uh for um for TARP twice after the stock market cratered. this um this pin was present in this committee when we talked about those bailouts. And I in fact lost my seat in Congress in large part with uh with outrage by taxpayers who did not want to see their taxpayer money used to bail out irresponsible entities.
▶ 3:54:14And so in response to that, first off, we said, okay, we're going to establish rules of the road DoddFrank Act that would prevent this from ever happening again. And frankly, I'm very proud that that in fact has been pretty successful. We have not had major crises in the time since we passed DoddFrank. Um, and we also um we also have to understand that and and make darn sure we don't introduce new risks into our system that will cause that to happen again. And that's risk presents us right here.
▶ 3:54:44My amendment here is actually a a sort of restricted uh version of the one that Rep. Sherman just introduced. It's it restricts the prohibition on taxpayer bailouts to the two major vehicles by which you you know the government's likely to make hundred billion dollar bailouts to failed stable coins. Uh the the 133 Federal Reserve authority and the exchange stabilization fund. And so this these are just explicitly banned here.
▶ 3:55:13So that when uh the government officials go begging um go begging please please can the Federal Reserve uh bail out this failed coin the answer will be no we are not allowed by federal law and that's a big difference between uh just requiring that you put on your website something some words about the FDIC or something. U because the truth of the matter is you know when things hit the fan you have to rescue the economy. the bailouts are a political reality and in fact they're good policy.
▶ 3:55:42You know, that's a the tarp vote was probably one of the most painful votes I took because it was it was in large part rewarding irresponsible risktaking. But that's the nature of it because the damage to innocent parties would have been so much higher.
▶ 3:55:58That exact calculation will happen again if we get to the point where a stable coin is such an integral part of our financial system and one of them fails that we'll have the choice of either just letting it fail and the whole system fall apart um or or put some taxpayer money on the line.
▶ 3:56:15Um so I think um you know my guess is in the end what we're going to do if we go down the stable conan route is that we're going to need an explicit uh taxpayer bailout mechanism uh would like the FDIC deposit insurance fund uh with some shared responsibility for the whole stable coin industry to bail out to take responsibility for the failure of any one single stable coin. That's what my guess is where we're going. Nothing like that is in this in this bill. What's in this bill is just taxpayer on the hook.
▶ 3:56:44Once again, the next best thing is my amendment or even better Rep. Sherman's that has a a prohibition on that. Um, also I think I I will close just with a uh a little physics lecture since I'm the one PhD physicist. You got to sit through this from time to time. There's a a concept in physics called stability and a different one called metastability. Meta a stable system is one in its lowest energy state that will stay there forever. You can nudge on it, it will return to that low energy state.
▶ 3:57:12A metastable state is a state which looks like it's stable. You push on it gently. You can think of a bowling a bowling pin. You push on it gently and it seems like it's stable. You push on it a little bit harder and it flops over and it goes to its true lowest energy state and that is the one that where stable coins will live. A stable coin um under mild stress may maintain its peg. Under extreme stress, everyone will become view it as worthless.
▶ 3:57:40it will become worthless and that is the stable state which will last forever. Right? And so these are not in their lowest energy states. They are metastable coins and there will always be the danger that a a stable coin that looks stable will in fact go to its low energy state of becoming worthless. And so this is under those circumstances we cannot put the taxpayers at risk. And so that's the meaning of my amendment and yield back.
▶ 3:58:10Gentleman yields back. Is there further discussion on Dr. Foster's amendment? Yes. The ranking member from California recognized to strike the last word. I move to strike the last word. I appreciate my colleague, Representative Foster, who is ranking member of our financial institution subcommittee that has oversight to financial stability for offering this sensible amendment. If Republicans are not willing to support Mr. Sherman's amendment, I hope they will at least support Mr.
▶ 3:58:38Fosters amendment to prevent the Treasury and Fed to use tools they have used before to bail out reckless financial firms. During the 2008 financial crisis, we saw how poorly regulated money market funds needed to be bailed out by the Treasury Secretary using the Exchange Stabilization Fund or ESF. We also saw how the Fed use its emergency lending authority to provide a bailout for AIG.
▶ 3:59:08I'll never forget that. I served uh on uh the committee that dealt with this issue. This common sense amendment would ensure Treasury and the Fed would be prohibited from putting taxpayers on the hook for bailing out any stable coin issuer if they mismanage their way to failure. I'd like to engage Mr.
▶ 3:59:29Foster for a moment with a little colloquy Without this amendment, would the president's stable coin that he will own as he is moved to own stable coin? Could it be bailed out? Uh yes, it could.
▶ 3:59:48and and you know the president uh is inevitably uh engaged in that decision although it's it's held by the Treasury Secretary who serves you know under the president uh the president will unquestionably had a voice as as had a voice in the bailout of AIG if the president had forbidden it uh it probably would not have happened and so that that you're asking there's just a tremendous conflict of interest being built into this. Thank you, Mr. Foster.
▶ 4:00:19The more we talk about uh this legislation, the more we discover that not only do we have this giant conflict of interest with the president and the cabinet and Elon Musk and all of these people being able to own stable coin. Then we find out uh that they have control of the rule because as a rule is developed by this so-called independent agency.
▶ 4:00:46The president is saying we don't do that anymore. I want that rule to come directly to me so that I can do whatever I think I need I guess to protect myself. uh he's thinking and now in addition to that being able to number one have a stable coin number two uh to interfere with the independent agencies as they developed a rule.
▶ 4:01:13Now you're telling me he would be eligible without this amendment to be bailed out if he failed and had failure. Am I correct in this Mr. Foster? I believe so.
▶ 4:01:27Well, I don't know what to say except I want to draw the attention to all that is happening here today, particularly as it relates to ownership of stable coin by the president of the United States and his cabinet and Elon Musk and all of the others that may be eligible based on the way this uh is moving.
▶ 4:01:51all of the other billionaires uh who are part of the OG that's aligned with the president of the United States. And now as we end up talking about this, we would bail him out if he failed. What are we thinking about here? Now, I know what we're trying to do on the Democratic side. We want to have a stable coin with guard rails, and we've been working so hard uh not only with Mr. Mckenry. But with Mr.
▶ 4:02:22Hill, when Mckenry was here, he was helping him out. He was working. He know that I tried. He know that we all tried. And here we come after doing so much work, after trying so hard with a stable coin that with the bill on stable coins that undermined all of the work that we have been attempting to do. And I still thought even with some that we disagree with, we could still perhaps be working on them.
▶ 4:02:50But not with the president of the United States of America owning stable coin as he owns his meme coin and the way that he has advantaged himself having earned tremendous amount of money where others have failed uh because they were misdirected or didn't understand that the president's stable coin was all about himself.
▶ 4:03:18Well, I can only yield back the balance of my time. I'm warning everybody. This is terrible. You and in fact, you do yield back. Yes. Is there additional debate on Dr. Fosters's amendment? Not seeing any, I will yield myself five minutes to strike the last word. Well, as we've discussed this issue extensively in the last few minutes, and my colleague, Mr. style offered.
▶ 4:03:46We'd be happy to work together on ensuring that there's no government bailout available for stable coin issuers. That's a subject that we agree on. I also want to note to my colleagues, I've heard a lot of uh conversation and debate on these most recent amendments that are arguing that somehow a stable coin are not stable and may warrant a bailout. Well, let me say that there's a patchwork of state laws and issuers now, and there's certainly some international issuers out there where that might argument might stand.
▶ 4:04:17But currently, this bill does not permit that. It sets the high federal floor dollar for dollar, treasury securities, insured bank deposits, cash insuring, dollar for dollar, a stable coin.
▶ 4:04:34All this reference to 2008 is about the banking system leveraged 10 and 20 and in some cases in the case of Lehman Brothers 40 to1 where they made mismatched bets uh some at the direction of the federal government I might add and lost here this is a dollar fordoll treasurybacked stable coin in a payment system and I just don't think the arguments are sound but as they grow in
▶ 4:05:04popularity. This bill that we propose, the stable act, is necessary to ensure that we're in a position that we don't have a bailout. Mr. Style and I are committed to working with our colleagues, that their concerns are addressed, and as a result, like Mr. Style, I urge colleagues to oppose this amendment, and I yield back the balance of my time. If there's any no further debate, the question now occurs. The amendment offered by Dr.
▶ 4:05:32Foster from Illinois. All those in favor of the amendment, please say I. I. All those opposed shall signify by saying nay. Nay. In the opinion of the chair, the naysay have it. The nays have. The amendment is not agreed to. Ranking members has asked for a recorded vote. All those in favor recorded vote, please raise your hands. A sufficient number of hands have been raised. They recorded vote is so ordered. Pursuant to subsection C5, rule three of the committee rules. Further proceeding on this amendment is postponed.
▶ 4:06:03Is there any further amendment? Mr. Lynch was first up. Yeah, it was faster than you were, Mr. Chairman. Mr. Lynch is recognized. Uh, Mr. Chairman, I believe I have an amendment at the desk. There's a member at the desk. We'll wait for it to be Mr. Chairman, I'd like to reserve a point of order. The gentleman from Michigan reserves a point of order.
▶ 4:07:33clerk will report the amendment. An amendment to the amendment in the nature of a substitute to HR2392 offered by Mr. Lynch of Massachusetts designated as 31. Uh with an objection, the amendments considered as read and the gentleman from Massachusetts recognized for five minutes to support his amendment. Thank you, Mr. Chairman. Mr.
▶ 4:07:54Chairman, the reason that there are so many amendments to to try to shield the American taxpayer from bailouts is because we've seen so many of these stable coins. Uh 20 of the big ones in the past, you know, half dozen years have have broken the buck and have have required assistance or have just just gone to zero.
▶ 4:08:16Um, so so we we would have to be blind not to recognize the the likelihood that that these stable coins will fail and will require a government bailout. That's why we're we're all trying to build this firewall to protect uh the American taxpayer from from that U so what this amendment does, it's a it's a different wrinkle on that.
▶ 4:08:45What this does is this amendment ensures that when that crypto or or stable coin issu issuer uh you know needs a bailout um the re and and and we know that there's enough crypto supporters in in the Congress and we definitely know we've got a big crypto uh supporter in the White House when they sign off on giving taxpayer money to the
▶ 4:09:15crypto company or the stable coin issuer when they bail them out with taxpayer money. This so this is looking at after the fact after you do all that. Uh we just want there to be some consequences that after a government bailout or emergency assistance there are consequences for the responsible party.
▶ 4:09:36So, this amendment would ban an issuer from issuing additional stable coins for a period of one year after they get bailed out or until the Treasury conducts a full review of the soundness of the issuer themselves. So, I don't know how you can be against this because this this would require the bailout that this would this would require a failure that you refuse to admit will happen.
▶ 4:10:06So, if you don't think there's any chance of the bailout being necessary, then you you should be eager to vote for this bill because it it makes those different difference. Allowing this bill to become law without the basic protections afforded in this amendment would be inviting the next financial disaster. I served on this committee during the 2008 financial crisis. The similarity there and here is this.
▶ 4:10:32There were new innovative financial products. That's that's the thing. We didn't understand them. They were so complex. you know, CDOS's uh you know, the the different constructs of of of uh secure mortgage securities were were new.
▶ 4:10:58Alan Greenspan and others uh Ben Bernani had always said that uh we've never seen the value of real estate drop in this country and they they they bet on that never happening again until of course it happened and then as I said before we had to bail out AIG and and others to the tune of uh almost $800 billion. These institutions made reckless decisions in the name of so-called innovation.
▶ 4:11:28Not a single bank executive was ever held responsible or faced a meaningful level of accountability. Some companies did not even take a haircut and were bailed out with with a profit. They were rewarded rewarded for for their action and taking down the economy.
▶ 4:11:47So I have serious concerns about the potential for volatility in the global stable coin market because that has been the history here and how closely it is tied to the volatility of crypto assets also very volatile and unpredictable. Stable coins are not isolated and serve as a conduit for buying, selling, borrowing, lending and staking crypto assets.
▶ 4:12:11They're they're volatile by design and this connection only deepens the risk of to our broader financial system. As seen throughout previous financial crisis, uninsured products are highly vulnerable to runs. The government has been forced to bail out money market funds and other short-term funding markets. Most notably in 2023, the government rescued Silicon Valley Bank and 3.3 billion in in circle deposits uninsured.
▶ 4:12:41This bill not only opens the door to more runs, it closely links stable coins and crypto products to our broader financial system. In closing, giving this vulnerable exposure, the government is likely, almost assuredly, to again bail out a failed stable coin company. And if we're willing to provide a basic protection in this bill, such as requiring issuers be FDIC insured, we must at least protect the American taxpayer and hold issuers accountable. So, Mr. Chairman, I yield back.
▶ 4:13:11Gentleman yields back. Who seeks recognition? Mr. Lawler of New York move to strike the last word. I move to strike the last word. Mr. Chairman, this amendment, like the prior two, are uh a solution in search of a problem. There's nothing in this legislation that authorizes a bailout. There's nothing in this legislation that provides a bailout.
▶ 4:13:38Uh and in fact, if in the event that that were even a uh it would require congressional action, it would require Congress to actually pass legislation authorizing a bailout.
▶ 4:13:55So, you're seeking to prevent something that is not even part of the bill, that isn't happening, uh, and seeking to create a solution for a problem that does not exist and is not created by this bill.
▶ 4:14:12uh and ultimately with a onetoone ratio uh in the stable coin backing and providing an actual framework which is what this bill does to make sure that we have a secure stable coin system.
▶ 4:14:29Um, the attempts here, while I'll say generously uh, frankly, are are trying to create a narrative that doesn't exist. If Congress were to even consider such a remedy, uh, it would require congressional action.
▶ 4:14:53So even if you passed these amendments, even if they were part of this legislation and Congress had to act, Congress would not withstand these amendments and act. But that is not what anybody is proposing. And so I don't really understand what the purpose of this amendment is. When in fact, will the gentleman yield? No.
▶ 4:15:20When in fact, I've already heard your explanation and you really didn't provide a rational one. When in fact, uh, if Congress did have to act, it would require legislation to do so. You can shake your head smirking, but the reality is that's what would have to happen. I'm going to remind the gentleman to address his remarks to the chair. So, in the end, there really is no purpose to this amendment. I yield back.
▶ 4:15:49Gentleman yields back. Who seeks recognition? Ranking member, gentleoman from California recognized to strike last. There is great purpose to this amendment. And I yield uh to Mr. Lynch to put him in his place. I mean to uh basically respond. Thank thank you. Thank you ranking member. I appreciate that. So if the gentleman took the mo a moment just to read it. Uh what it does is is is in the event that we do what we did last time.
▶ 4:16:18So when we did the when we did the bailout in 2008, there was also no no provision for a a bailout. It was it was from whole cloth. It was because of the the pressure on the economy. The fact that Circle will have a onetoone reserve uh on their stable coin doesn't change anything.
▶ 4:16:45When we bailed them out back in 2023, they had the same exact model, onetoone reserve with the dollar as the currency. It failed. We haven't changed that dynamic.
▶ 4:17:02So based on all the other stable coins that have failed and needed relief, we know this is going to happen And it yeah it it the bailout the bailout will be required and Congress will support it. Congress will support it because the economy will have crashed. We saw that it's you know it's history. Those of us who were here recognize that danger. You're a newer member.
▶ 4:17:32You didn't go through that. So I don't fault you for that. However, the reality is that because the economy was so badly damaged, members, enough members here, not all, felt that they had to bail out Goldman Sachs and AIG and a bunch of other people who actually caused the problem. So, I don't doubt that that will happen again.
▶ 4:17:51It it'll it'll definitely happen again, especially with the level of support for the for the crypto industry in this body and also because of the president's position and his direct investment. He will absolutely rush to to to sign sign off on that. You know, he'll he'll want to bail out his family's company that's deeply invested in in crypto. So So we know that's going to happen.
▶ 4:18:16What the operative part of this amendment, the operative part of my amendment, if you read it, is that when they get the bailout, there's a one-year period that they can't issue any more stable coins unless Treasury comes in, does an assessment of that stable coin operation, and signs off on the safety and soundness of that operation. That's that's the difference here. That's the difference.
▶ 4:18:42So if if there's a bailout, this goes into effect. It's sort of a penalty for breaking the buck and and it it it provides the only negative consequences to a stable coin company after they after they get the benefit of a taxpayer funded bailout. Reclaiming my time. Okay.
▶ 4:19:08You've done a great job with this and I want to tell you this is a very reasonable amendment. If they cannot vote for this, they won't vote for anything because if it was my amendment, I would say after a bailout, you're out of business for good. You allow them to make corrections and within one year come back. You can't be any more reasonable with that. And let me just say, Mr.
▶ 4:19:36I thank you for doing everything that you can to ensure uh that we understand stable. Well, I'll yield to Mr. Foster who's anxious. Yeah. No, I just a couple of points of clarification. The chair said a few minutes ago that only insured deposits were allowed to back these stable coins. It's my impression that uninsured deposits are actually allowed under this text. Um could Mr. Chair, do you do you know?
▶ 4:20:05Could you just I just I yield to If I could yield to you just to for get confirmation one way or the other. I will yield to the chair. Uh insured deposits, US treasuries 90 days and under. Treasury notes with 93 days or lower in maturity uh and Treasury overnight repos. Insured but not uninsured deposits. Correct. Yeah. My my question involves are uninsured deposits allowable or not? Not not that I'm aware of.
▶ 4:20:35Be happy to check that, but not not get clarification. It's a simple, straightforward way for a a stable coin to lose its peg if they are uninsured deposits and boom. Um, and the other thing just I'd like to clarify is that the three major bailouts or three of the major bailouts, the reserve primary and Fanny and Freddy bailouts went they were presidential decisions. All right? And the AIG one maybe only went through the Treasury Secretary. We're checking on that, but it is um you know the the president will get in.
▶ 4:21:05Gentle woman's time is expired. Is there further discussion on Dr. Foster's amendment or Mr. Lynch's amendment? Sorry. Uh Mr. Sherman's recognized to strike the last word. The proponents of this amendment say the bill doesn't require a bailout. No. But it certainly allows one.
▶ 4:21:27and a vote against this amendment and my amendment and others signals to the market that it will be there that it'll be available. We're told that it would take a vote of the Congress to authorize an amend bailout in the past. That's not what happened with AIG.
▶ 4:21:46And there is substantial uh vagueness in the Federal Reserve Act that would allow for a bailout of of a systemicly important entity or entities. Uh so that is why the crypto industry is fighting so hard to make sure this language is not in the bill. They're smart people. God knows they get paid enough.
▶ 4:22:13They knew they could have put limitations on bailout or prohibitions on bailout. They don't want any of that. Now, we're told that no bailout is needed at the present time. That's correct. If you're building a house of cards, it doesn't fall down when you just put the first few cards there. It's going to be a while before this uh uh be before you need a bailout. So, you don't need a bailout at the present time. Uh not a good argument.
▶ 4:22:42No, the bill doesn't proh uh it doesn't require bailouts. No, but it's but you're fighting hard to make sure the bill allows bailouts. Then we're told that uh there's going to be one to one uh reserves. The money market funds had that. In 2008, several of the money market funds needed a bailout. Now there the amount of cost to the federal government was very very small, but here it could be much larger.
▶ 4:23:10Um, what does it say to this country and what does it say to the industry and what does it say to investors when they see number one this bill allows bailouts, number two current statutes can be read to allow bailouts, number three, the industry is powerful enough to demand and get bailouts. And number four, the industry is powerful enough to prevent the prohibition of bailouts.
▶ 4:23:39And then even with the uh Mr. Lynch's amendment, the industry is powerful enough to make sure that if they take a bailout, they don't even get a one-year slap on the wrist. That is a powerful industry. We have current statutes that allow bailouts. Many Americans will invest believing that there will be bailouts should they be needed. the industry will spend tens of millions of dollars with that as their advertising uh theme.
▶ 4:24:09Ordinary Americans will come to us and say, "I thought this was safe." And then you will say, "Washy, the administration won't bail them out and Congress won't bail them out." And for you to be able to say that, it's because you weren't here in 2008 and you don't understand the pressure that there will be on the administration and on Congress.
▶ 4:24:32So, you want to go back to your constituents and tell them that you voted to make sure that even after they get the bailout, there isn't even a one-year slap on the wrist because you wanted the crypto bros to not even have to endure that after after a bailout, go right ahead.
▶ 4:24:57But it's very hard to say this amendment makes this bill worse in any substantive way unless you believe that there will be a bailout. If there is never a bailout, this amendment never becomes operative. And the cost and and and so its sole cost to our country is the cost of printing it in the congressional record.
▶ 4:25:17Um, the only reason to vote against this this amendment is not because you think there won't be a bailout, but because you think there might be, and you want to make sure that the industry is not even put in a one-year penalty box if there is. So, uh, you can't vote against this amendment just because you think it will never come to pass. And, uh, with that, I look around and see if anybody wants me to yield.
▶ 4:25:46Then I yield back to Oh, I yield to uh the gentle lady from Michigan. Yeah. And I think Mr. Sherman is ex exactly right. I mean, if you don't think it's going to happen, then why not vote for the amendment? If you're that confident that we're not going to bail them out, there's no bailout that's going to be in the future. Then vote and support this bill and protect the American people. They don't need us bailing out folks that are being irresponsible, reckless, uh and uh again uh the number of conflict of interest that we continue to see.
▶ 4:26:16With that, again, I urge my colleagues to please support uh Mr. Sherman's Is anyone else want to speak on Mr. Lynch's amendment? Seeing none, I'll yield myself five minutes. Well, I've never heard more people talk about that they don't support bailouts and talk about bailing out uh stable coins more than my colleagues. And it reminds me that uh I'm sure they all supported Janet Yellen and and the bailout in Silicon Valley under the existing laws.
▶ 4:26:46Let me just simply say that during 2008 2009 10 while you all were here voting on DoddFrank, I was actually in a bank as a CEO during the financial crisis. And I can tell you that government policy incented that financial crisis. I'm blessed to say that our company was not a victim of it. Uh, but I saw a lot of nonsense in and around federal policy that led up to the runup of that that crisis. Some of the comments made here is we need a firewall.
▶ 4:27:16Well, guess what the firewall is? It's the Stable Act. That's the firewall against uh a potential need for a bailout or for a poorly stable coin. Mr. Lynch is right that there have been past stable coins that have quote broken the buck to quote quote him. Guess why? because there's no high federal standard. There's some state standards that are okay. There's some international standards that are terrible.
▶ 4:27:45We're setting the high federal standard to build the firewall that he's arguing. Second point, not after the fact. We're we're arguing in fact that we're building a firewall today. It's the mistakes made of not passing this bill several years ago that has delayed and created consumer risk.
▶ 4:28:06We are the people standing in this committee under your leadership and Mckenry's leadership to ask for a firewall on stable coins and this Congress is going to deliver it. Second point, uh there's a talk about money market funds breaking the bank that they work dollar for dollar. nothing comparable between a money market fund in 2008 and a dollar back stable coin under this Why?
▶ 4:28:34Because the money market fund offering invested in a lot of things that were not immediately liquid. And let me say DoddFrank corrected that. That was a that was a good move. They invested in the commercial paper of Lehman Brothers because it had a high rate overnight. So yeah, they broke the buck and that's why we have in this bill treasuries insured deposits in answer to Dr.
▶ 4:29:00Fosters's question 100% insured deposits and overnight treasury repurchase agreements. So we have addressed exactly the concerns that my colleagues have outlined on building a strong firewall, having high standards, have an outstanding federal regulatory assertion around a stable coin.
▶ 4:29:19And if we had had this in place like we've argued for two to three years, maybe we would have protected consumers and had less uh mischief out in the stable coin arena. And finally, I will conclude by saying Chairman Style uh has offered to work with our friends on the other side of the aisle to share this view. No one here is arguing for a bailout. Quite the contrary. I urge this amendment be rejected and I yield back the balance of my time. Mr. Mr.
▶ 4:29:49Chairman, is there additional debate on the amendment? Mr. Chairman, I move to strike the last word. Miss Williams is recognized for five minutes. Mr. Chairman, as someone who is here to always represent the concerns of my constituents and making sure the voices of consumers and the people back home are represented, I support the amendment to make sure that we are guaranteeing that Congress is always putting the needs of all of our people back home first before the needs of any industry in this country.
▶ 4:30:16And with that, I'd like to yield more time to Mr. Lynch. I thank the gentle again, if we want to if we I I I respect the gentleman's argument about uh the nature of the reserves that will be held.
▶ 4:30:40However, they are held against probably the most volatile financial instrument that we have in the world today, which is crypto. So volatility that volatility and the the uninsured nature of these look if we wanted to if we wanted to adopt one amendment which would be require FDIC insurance on stable coins
▶ 4:31:10a lot of this problem would go away because runs would not occur. there wouldn't be a a rush to ex rush to the exits on any of these financial products because everyone would know, okay, my deposits, my my investments are insured and no matter come hell or high water, I'm going to get my money back. That's not the case when a stable coin breaks the buck.
▶ 4:31:38There's there's a rush for the exits as we saw with Silicon Valley. that money moved so so quickly that we had a a a a weekend to try to auction off uh control of that bank among several suitors. And that that whole exercise was was conducted by the FDIC and and Martin Grunberg.
▶ 4:32:03And it was the the people, it was the banks that had required insurance that bailed out the parties that did not. The idea here is to prevent that from happening again. The idea here is to protect the taxpayer. And again, if you don't think that this as as Mr. noted.
▶ 4:32:26Look, you may think this might be unnecessarily in the end run, but based on what has happened in the past and the number of times that that the taxpayer is on the hook, why don't we just take a minute and just say, okay, how can we protect the American taxpayer on two levels?
▶ 4:32:49one in the short-term rescue of innovative financial product. And secondly, the eventuality of the bailout that might occur as we expand the the prevalence of stable coins throughout our financial system. The bailouts are going to get bigger and bigger and bigger.
▶ 4:33:18So what we're doing here is is trying to have the foresight to to create that firewall. We don't think that the provisions in the bill right now are sufficient to prevent uh to pro this was this bill was heavily influenced by the industry and they're trying to use leverage as much as possible. So provide they're dead set against providing uh deposit insurance uh FDIC type insurance on these stable coins.
▶ 4:33:48because they they know that that that's a cost factor and that and they know that they will be bailed out when push comes to shove because we've done it so many times before.
▶ 4:34:04So I I just maybe this is a belt and suspenders approach if you want to look at it that way that there's a yeah there's there's there's a belt around this to that the the bill in itself embraces but I think it's fair enough to say that we have gone to the federal tax the the American taxpayer so many times in the past that we need some assurances this time that they won't be on the hook again.
▶ 4:34:31And and and so what this bill, what this amendment does is just provides some level of negative consequence for those stable coin companies maybe to take greater care because they know negative consequences will result of them will result from them uh you know breaking buck. And with that, Mr. Chairman, I yield back the balance. Well, I yield my my time. Gentlemen yields back to Mrs. Williams. Mrs. Y Williams yields back to the chair.
▶ 4:35:00Is there any further uh debate on the amendment? Mr. Chair, Miss Garcia of Texas, you're right now the last word. Thank you. Uh you know, I'm just baffled by the position and some of the debate that I have heard and I for one want to associate myself with the um ranking member and Mr.
▶ 4:35:21Lynch and others who have just, you know, the bottom line is, as Miss Talib said earlier, if if you all really think this is that this is never going to happen and that we're just acting, you know, uh not out of order, but unnecessarily, well, then what are you afraid of? Put it in there. And if we'll never use it, we never use it. But it's always good to to have a a a a safety um net in there, especially when we're we we're talking uh today.
▶ 4:35:52Um I think this afternoon or I don't know if the the the White House has made their announcements on the tariffs, but everyone is predicting that I have seen everyone from Moody's and uh Wall Street uh that we're getting closer and closer to a recession. I think the number I saw last week was 30% chance. Moody's has said that it's double the the likelihood and if we may having to be bailing out more than just crypto people.
▶ 4:36:20So I think this is extremely necessary and with that um I plan to vote for this amendment and and I yield the remainder of my time to Mr. Foster. Thank you. Um I just like to return quickly to this issue of insured versus uninsured deposits. I might make sure we're looking at the right the same piece of text here.
▶ 4:36:38uh on the the text that was distributed page 14 section 4 line 16 uh it says uh it includes as among the list of allowed and things to comprise reserves um uh funds held as demand deposits uh at insured depository institutions those are not insured to the extent that they exceed $250,000 and so it's my reading of that language uh 16 line 16 through 19
▶ 4:37:08that in fact uninsured deposits are in fact allowed as reserves under this under this legislation. And I was just wondering if I have clarification of that. Are you yielding? You're yielding? Yeah. Uh it is my time. So yes or you what? The answer is yes. They're allowed. Yes, there are. They're Hang on. Hang on. Yeah. First of all, if you yield, who is who is yielding to me? All right.
▶ 4:37:37I I'm yielding to you. And the question is um will uninsured will deposits at demand at at um at insured depository institutions uh be allowed to the extent that they exceed $250,000 and are thus no not subject to the insurance. funds in a demand deposits at insured depository institutions.
▶ 4:38:08So I I don't anticipate uninsured deposits being Isn't that exactly what happened when if you exceed $250,000 in your in your account then the the everything above $250,000 is not I don't anticipate there being uninsured deposits. So that none of the issuers will be putting more than $250,000 into any uh any I don't Yeah, I don't Well, I'm not going to tell you what people are going to do or not do.
▶ 4:38:38But can they but this thing this would allow them to put arbitrarily large amounts into uninsured effectively uninsured deposits under this I guess I'm still chairman. It it is my time and but yeah no it's Mr. Foster. Are you are you done sir?
▶ 4:38:55What um if if you the the bill calls for the use of insured deposits and insured depository institutions under the limitations set by regulation subject to uh the FDIC and the NCUA respectively to address safety and soundness risk of the insured depository institution. Mr. Chair, I did not see the word insured. You just said as insured demand deposits.
▶ 4:39:22Um, if you'll be willing to insert in on line 16 the word insured, then it would be clear that uh that when you go above $250,000 that you'd actually be insured because as I read it right now um uninsured deposits are arbitrary amount of uninsured deposits. Um I I believe I've been told also there's going to be an amendment to discuss this exact issue. Maybe that's the time to have this. Maybe maybe if you want to get uh into this level of detail, we can discuss that.
▶ 4:39:51But I want to remind everybody it's funds held as demand deposits at insured depository institutions in addition to treasuries. So I hear what you're saying. I know what your question is. I can't answer that directly. I'm happy to work with you on that. Yeah. Well, yeah, Mr. Casten, I believe will be on offering an amendment. So if we could just get staff level clarity on exactly what's involved prior to that. Sure. Of course. I yield back to you. May yield back to Miss Garcia. And your time has expired. Thank you, sir.
▶ 4:40:21I yield back. Yeah. Is there further debate on this If there's no further debate, the question now occurs on the amendment offered by the gentleman from Illinois. All those in favor, please say I. I. Any opposed say no. No. Recorded vote requested. In the opinion, the nays have it. The nays have amendment is not adopted. The ranking member has requested a recorded vote. All those in favor record vote please raise your hands.
▶ 4:40:51A sufficient number having raised their hands record vote is so ordered pursuant to section C5 of rule three of the committee rules uh this uh proceeding voting on this proceeding is postponed. Is there any further amendment to Mr. Styles ANS Mr.
▶ 4:41:17Lech, I believe I have an amendment at the desk. Mr. Uh, you'll pause while we have it distributed. Uh, Mr. Chair, I'd like to reserve a point of order.
▶ 4:44:39Clerical will report the amendment. An amendment to the amendment in the nature of a substitute to HR2392 offered by Mr. Lynch of Massachusetts designated as 22. The uh without objection, the amendment will be considered as read. And Mr. Lynch, you're recognized to speak in support of your amendment for five minutes and no more. Just five minutes. Thank you very much, Mr. Chairman. I appreciate that. Mr.
▶ 4:45:05Chairman, this amendment is trying to get at the uh the underlying bill uh creates a two-track system, a federal and a state system, and we we we we respect that.
▶ 4:45:20However, uh this amendment would would try to improve upon that by establishing a dual state federal regime that that while it respects states rights also promotes financial stability and preventing a race to the bottom sort of approach by by some of these stable coin issuers.
▶ 4:45:42Uh we have deep concerns about allowing stable coin issuers to seek a state pathway for approval without sufficient standards to maintain credential oversight. Uh there there are stable coin issuers who might just simply look for the path of lease resistance and and lease oversight. stable coin issuers would inevitably pick and choose the states with the laxest oversight, creating what I call a race to the bottom.
▶ 4:46:11Uh legislation we think should provide federal regulators with sufficient authority and states must have that ability to regulate issuers active in their states. This bill allows non-banks to issue stable coins without obtaining federal deposit insurance and without complying with the laws governing FDIC insured banks. As we've seen before, state sponsored deposit insurance programs have failed.
▶ 4:46:39During the Great Depression, the absence of federal deposit insurance triggered systemic runs on thousands of banks, federal and state chart chartered depository institutions. And these programs have failed because they were poorly supervised. It did not have sufficient funds. The lack of clarity in this bill between the federal and state oversight leaves room for issuers to take advantage of that gap.
▶ 4:47:03While advocates for this bill argue that the standards for state qualified issuers are sufficient, I have serious doubts. State qualified payment stable coin issuers would not be governed by crucial public interest safeguards contained in credential federal banking laws. Creating a state pathway undermines those federal protections.
▶ 4:47:26And I remind my colleague that the federal standards exist to ensure adequate deposit insurance coverage, supervisory enforcement powers, and safety and soundness protections. Lastly, the collapse of large state issuers might probably require federal bailouts to avoid systemic market failures. This committee should not allow for a state qualified pathway that would undermine those federal protections.
▶ 4:47:55U Mr. Chairman, I I will yield back. Gentleman yields back. Who else seeks recognition? Mr. uh Heising of Michigan. Thank you, Mr. Chairman. I'd like to move strike the last word and um love to actually pick your brain, Mr. Chairman.
▶ 4:48:16I'll direct my uh comments to you because um what I'm reading and seeing in front of me and what I just heard uh exist. U what this legislation does through OC is it sets a floor, a federal floor. This is what I talked about in my opening remarks where there's no race to bottom. There's actually a race to the top.
▶ 4:48:43This is only this is only going to get harder if you choose to go to another state. This we do this at cafe standards, right? I'm from Michigan. I understand the the car industry. We set federal standards and then we let then we let California go nuts, right? And if you want to go sell cars in California, you got to adhere to their their cafe standards. But that doesn't mean it's the national standard. Now, as I understand it, Mr. Chairman, and I'd love for your your input, or Mr.
▶ 4:49:12Style, I I know he was he's been in and out or I'm sorry, he's down over there negotiating something, I think. Uh I'd love for either of you to chime in and and correct me if I'm wrong somehow that this is a federal floor that when if you choose to go to a state regulator, it's only going to get harder, not weaker. Is that accurate? I yield.
▶ 4:49:34I think that's a fair description from my friend which is that we set the definitions in this uh act for what are the minimum standards of prudence uh for the composition of the sten stable coin uh the liquidity and capital standards the cyber and risk management standards the bank secrecy act and AML standards uh we have if you're a bank issuer of a stable coin your primary regulator is your overseer
▶ 4:50:04of uh that stable coin. Uh if you are a non-bank payment stable coin issuer under this federal law, the office of the comproll of the currency is the primary federal regulator. Again, holding both bank and non-bank regulated entities to the same standard and holding the states accountable that they meet that minimum standard.
▶ 4:50:28And this bill uh has uh the federal government's power to exercise and assert uh jurisdiction and actions over any uh laxity on the part of a state, including u cease and desist authorities, judicial proceedings, and the like. Reclaiming my time, I it sounds like you've covered the waterfront there. uh and and I guess I'll ask one more simple question here, Mr.
▶ 4:50:58Chairman, uh to you, which is is this amendment necessary to make uh and is this amendment going to make this bill safer somehow or are we already have this safeguarded in there? I yield. Well, this uh this bill builds on the good work of Mr.
▶ 4:51:18Mckenry and Miss Waters on how do you try to balance uh maintaining a state pathway where you have it in existence such as New York State which which we have determined sorry to interrupt but we've determined is an important part of this. We everybody has said we want the states to have an option. it is. But uh as as has been noted here, we didn't want to race to the bottom.
▶ 4:51:38And so I just would say to my friend from Michigan, that's why we set this high federal standard and set this intervention of federal regulators for both bank and non-bank issuers. Thank you. I I reclaim my time and u I don't know if Mr. Style has been engaged enough on the uh discussion of this, but the uh the simple fact is Mr. Mr.
▶ 4:52:01Chairman, in my view, um this again is a uh this is a solution in search of a problem that has already been addressed andor doesn't exist. So with that, I yield I yield back. The vice chairman yields back. Is there further debate on the amendment? U Mr. Foster of Illinois recognizes strike the last word. Strike the last word and yield to Mr. Lynch. I thank the gentleman from Illinois.
▶ 4:52:27the the the problem that apparently you don't see is that in this bill for for statelicicensed stable coins, these bills bills largely leave both the the genius act over in the Senate and this bill here leave the supervision, the examination and the licensing authority for new stable coin issuers to the state regulators on their own.
▶ 4:52:53The only time that the federal uh regulating gets to intervene is when is under quote exigent circumstances which means uh usually means a disaster is already in progress. So that's the limited that's the flaw you were referring to but uh it it allows a lot to go wrong before the feds can actually say okay we need to intervene.
▶ 4:53:17The other thing is that stable coin issuers would have the incentives once these state laws are are established. The the stable coin issues would have an incentive to choose the state with the most lax oversight and and ones that ignore uh stronger laws that might in exist in other states.
▶ 4:53:39Uh, for example, the the bills this bill hinders federal regulators ability to impose reasonable capital liquidity and risk management requirements for stable coin issues. Those are those are powers that that you know a federal regular would regular reg regulator would normally have and and there in the bill there's really scant criteria for evaluating whether an issuer should be approved and and they don't really include the consideration of financial history and the condition
▶ 4:54:09of applicants their capital structure future earnings the character and fitness of the issuers management. Those are all criteria that that uh is used in the banking world as well as other factors that help guard against risk and instability. And lastly, the bill's provision requiring regulators to further tailor their approach to stable coin oversight suggests that even these modest oversight measures will be paired back even more.
▶ 4:54:37letting letting stable coin issuers secure legitimacy through a bank-like licensing regime without adequate or comparable oversight subjects both the stable coin customer and the financial system to undo risk and instability. Uh with that, Mr. Chairman, I will yield my time back to uh the gentleman from Illinois, Mr. Dr. Foster. I think she's okay and I will yield back. Gentleman yields back.
▶ 4:55:06Is there further debate on the amendment? Uh the gentleoman from California has recognized the strike last word. Ladies and gentlemen, um let me just say uh that chairman Hill uh did allude to uh the fact that we had worked together with Mr. Mckenry.
▶ 4:55:25Um my real issue uh in insisting that the Fed have involvement uh that as we understood all of the uh desire for the states uh to be able to be issuers uh we understood that the central bank should have a significant role and uh we basically agreed on that. Uh but what uh is being done by Mr.
▶ 4:55:53Lynch is putting some big teeth to it and making it mean something that the feds are involved. And so I support the amendment. It further supports the negotiation that we had uh to make sure that the feds were included. And so not only do I support the amendment, I think it makes what we were attempting to do even more viable and stronger. Would the gentleoman yield? Yes, I'll yield. Yeah.
▶ 4:56:22Just on that point, it's such an important point. You know, we originally as we worked on the bill between Mr. Mckenry and and Miss Waters, we were seeking a strong federal regulatory hand. But during the Biden administration, uh certain Biden administration officials refused to let the controll of the currency be considered, which was, you know, our preference. I'm not speaking for you, but that's how the Fed, you know, was imposed in in the work you're doing.
▶ 4:56:52The Fed still plays a role uh in the existing act because state member banks are have the Fed as their primary regulator. So, the Fed is involved in the in the oversight here, but I just yield back to the general. Well, the Yeah, gentle. Yes.
▶ 4:57:07uh the state plays a role but as I remember our negotiations and the kind of role that it played uh the state issuer uh would basically issue and then uh it would have to come to the Fed and the Fed supposedly would say uh we believe that you're in compliance with whatever uh the feds would require and if not they would say to the state uh we do not approve and you have to go back and you have to
▶ 4:57:37strengthen uh the state regs etc etc and so all that I'm saying is that uh I think it's very important for the state uh for the feds to be involved I know there's some on the opposite side of the aisle who do not agree with the central bank's involvement but it would be a race to the bottom if in fact they were not involved and so this strengthens the ability for the states and the feds to work together so that we have the best oversight right possible and
▶ 4:58:07I think the amendment should be wellreceived uh because it furthers what we were attempting to do with our negotiation. Would you would you leave? you. So, another important point and I just would remind my friends on the other aisle in this particular draft that state stable coin uh issuers, the regulatory structure like the superintendent for banking in in Albany or in Sacramento would have to submit their stable coin management plan and examination
▶ 4:58:38to the secretary of the treasury to be proactively approved before, you know, it would be accepted. Just I yield back to the gentleoman. Uh, I asked for an I vote. Uh, is there more debate on the amendment?
▶ 4:59:00This is if there's no further debate on the question now occurs on amendment offered by the gentleman from Massachusetts, Mr. Lynch. All those in favor, please say I. I. Any opposed? Please say nay. Nay. Believe the naysay have it. The nays have it. The amendment is not adopted. Recorded vote. The ranking member from California requests a recorded vote. All those in favor of a record vote, please raise your hands. Sufficient number having raised and hand of vote is so ordered.
▶ 4:59:30Pursuant to section C5 of rule three, the committee rules. Further proceedings on this amendment are postponed. Is there additional amendment to Mr. Styles amendment the nature of substitute? Mr. Lee, the gentleman from Michigan is recognized. Thank you, Mr. Chair. Can I have an amendment at the desk? Uh, you'll pause and we'll let the amendment be distributed. Uh, Mr. Chairman, I'd like to reserve a point of order. The gentleman from Michigan has recognized reserved a point of order.
▶ 5:00:57Uh, the clerk will report an amendment to the amendment in the nature of a substitute to HR2392 offered by Miss Talib of Michigan designated as 33. The amendment will be considered as read and the gentleoman from Michigan is recognized in support of her amendment for five minutes. Thank you so much, Mr. Chair. You know, one of the weaknesses of the stable act is the lack of strong consumer protections for our residents.
▶ 5:01:24Um, this is reflected on the fact that this bill is silent on the authority of the Consumer Financial Protection Bureau, CFPB. The amendment seeks to remedy this omission by explicitly affirming that the authority of the CFPB with respect to stable coin issu issuers and con customers who own stable coins. So stable coin users again many of our residents right deserve the right to dispute charges fight fraud and contest errors.
▶ 5:01:54Our residents deserve the right to rights under the statutes like uh those um uh protections under the electrical electronic fund transfers act. Um and again these are basic consumer protections that many of us I I hope support.
▶ 5:02:10Uh I would also hope that all my colleagues would agree that any regulatory framework uh for stable coin issuers must prioritize robust and effective consumer oversight for our I also hope that you all agree that you know many of the users deserve the same protections um just like we do for any other financial products.
▶ 5:02:31Um I'll also note you know I think this is important that CFPB was established as you all know in 2008 uh during the two uh after the 2008 financial crisis which was facilitated by predatory financial dealings and uh scattershot you know consumer protections uh in the runup to the crisis Mr. chair, you know, one of the regulatory protections, you know, was weakened uh uh in commercial investment banking sectors were allowed to merge.
▶ 5:02:58Um and so the stable act that we have before us will similarly undermine, I believe, uh the separation between banking and commerce by allowing non-financial companies to own stable coin issuers. We have seen this be this this before and while some benefited tremendously, it was a horror story for millions of our families. I urge my colleagues to please stand uh up for consumer protections.
▶ 5:03:24These are basic rights um and that they can prevent again financial disasters both for individuals and for our broader economy. Again, I urge my uh colleagues to support this amendment. With that, Mr. Chair, I yield. The gentleoman from Michigan yields. Is there further uh discussion? Uh I got to do this. Does the gentleman from Michigan consist on his point of order?
▶ 5:03:48I do not Michigan on Michigan violence there just averted. I'm so pleased he he does not insist trying. See if everybody's paying attention. Mr. Chair, the gentleman from the chairman of the subcommittee on national security, Mr. Davidson, is recognized to strike the last word. Uh, thank the chairman. I do move to strike the last word. And I I do oppose this amendment.
▶ 5:04:15Um, and the Consumer Financial Protection Bureau isn't referenced by the the legislation, but frankly, their authority is at least uh clarified when it comes to stable coins. Uh, the the CFPB has not been silent about stable coins. In fact, they just in January on his way out, uh, Director Chopra tried to limit the ability of individuals to own their own uh, cryptocurrency with self-custody.
▶ 5:04:43He literally wanted to have the CFPB become the regulator for uh custody and you know the premise there is that the government somehow gives you the permission to transact and it does not. So he he with no real structured rulemaking process decided that he was going to insert the regulatory authority of the US federal government via the CFPB into everyone's transactions.
▶ 5:05:09Uh so you know the CFPB hasn't been silent about stable coins uh under uh you know the wrong director. They may not stay silent on stable coins and we want to clarify with this legislation uh what exactly the entire federal government is supposed to do with respect to stable coins. Uh that is the point of the bill.
▶ 5:05:30So the idea that you're going to do nothing to limit the ability of the the uh to the extent CFPB continues to function uh the way that it has they they haven't shown restraint even in areas where they're not supposed to go. So we may need to put uh you know further clarification to say this means you CFPB because they seem to be willing to ignore other statutes and uh impose rules where even their underlying authorization says they're not supposed to.
▶ 5:06:00So I don't uh support this amendment. I hope our colleagues will oppose it as well and happy to yield to anyone else if they want to make the similar points that I yield back to the chairman. The gentleman yields back. Who seeks I seek recognition. The ranking member seeks recognition and you are she is she is not. Okay. Strike the last word. I move to strike the last word.
▶ 5:06:29Um I thank Mr. T uh for this amendment. It is so important that we recognize uh consumers have a right to know and understand uh what is happening uh with uh some of the issues that they're confronted with every day like fraud.
▶ 5:06:50uh and they need some place that they can go uh to have their concerns investigated so that we can cure uh some of the fraudulent uh work and efforts by those who uh are attempting to just rip off the consumers. Now, I love the Consumer Financial Protection Bureau. This side of the aisle, the other side hates the Consumer Financial Protection Bureau.
▶ 5:07:18When we crafted it in the DoddFrank reforms, it was done in such a way that they would not have to depend on the appropriations committee of the Congress of the United States in the House of Representatives to say we knew uh that there would come a time when they would be undermined. And so their uh appropriations come directly from the Fed.
▶ 5:07:40uh and the way that it was organized uh would give us some protections against um you know a takeover uh just because a president maybe had the ability to appoint uh all of those who would serve uh on that uh oversight board.
▶ 5:07:58And so uh we have worked very hard over the years and we have fought against attempts attempts to undermine uh attempts to wreck and destroy the consumer financial uh uh bureau. Now here along comes Elon Musk under the direction of the president of the United States.
▶ 5:08:21And they decided because now Trump is the president, he would finally get and wreck and destroy the Consumer Financial Protection Bureau. Elon Musk went in with gangster move and he uh took uh control and g got the access to all of the records told all of the employees to get out. I think they were ones that he said get out by 5:00 maybe it was 3:00.
▶ 5:08:50Uh but they were treated very badly and I think that furniture was removed and of course it was a lease building and I think what they did was uh they tried to pay off the lease so that they could empty the office and put the police sign up. I mean they really went after the consumer financial protection bureau and so uh a a lawsuit was filed by the union.
▶ 5:09:15I think it was the treasuries union and that went before the courts and I want you to know the court looked at this and looked at the history of this and they decided uh that they would replace and return uh the workers to the consumer financial protection bureau.
▶ 5:09:36Now, we know that these decisions for the most part are temporary and that uh these issues that we have where the courts intervene and um you know change what Elon Musk and Trump are doing uh in our agencies are going to have to have further hearings etc.
▶ 5:09:55But for now, the courts looked at the history and all of the comments that have been made over the years and decided uh that they were going to return these workers. We're very pleased about that. And I want you to know that this amendment further supports the idea that consumers should have somewhere to turn when they are being ripped off.
▶ 5:10:22And when I sat on the conference committee of the DoddFrank reforms, this was one of the most significant issues that we were able to put into law. And I'm looking forward to the courts when they have uh the final hearings on this issue will support not only the consumer financial protection bureau as it was envisioned in the uh DoddFrank reform uh but they would do it
▶ 5:10:52in such a way uh that would have Trump and Elon Musk understand you stepped over the line on this. You went too far. they are in law. This is something that you can't do with your executive order. So, thank you, Miss Tib, uh for backing us up uh with this amendment to make sure that the Consumer Financial Protection Bureau is protected. And I yield back the balance of my time. Gentlewoman yields back. Who seeks recognition?
▶ 5:11:22Any further debate on this amendment? Hearing none, I will yield myself five minutes uh to strike the last word. uh first in the in the work that we've done over the last couple of years uh in developing stable coin legislation in the last congress and and in this draft you don't see the CFPB reference and it was not in last congress's draft uh either and that's because uh the direction was that in this state federal approach
▶ 5:11:52to this very narrow specific policy standard that we had we were going to have jointly issued rules s with the federal regulators to cover payment stable coins in consultation with the state regulators and that would build our our very strong federal minimum floor. Secondly, uh we wanted to make sure that the bank and non-bank alike had the same high standards.
▶ 5:12:18So at the federal level that includes the bank's primary federal regulators and for non-banks it's the compro of the currency. The OC for example uh obviously does consumer compliance at some of the largest banks in the in the country. They have a full suite of consumer compliance authorities and and powers. And at the state level, as I noted in the debate on the last amendment, the state regulators have have to have a a regime that is stood up and certified by the US Treasury Department.
▶ 5:12:49There is no lack of consumer protection or regulatory oversight in this bill. And indeed, not only do we have rigorous state enforcement, but we also have, as I say, backup federal enforcement. So, I appreciate uh the gentleoman's uh amendment, but I would urge uh that it's not needed and therefore that it behed. And I yield back. Will the gentleman yield? I'm going to yield Is there further debate on the amendment?
▶ 5:13:19Hearing none, uh, the question now occurs on the amendment offered by the gentleoman from Michigan, Mr. Lee. All those in favor, please say I. I. All those opposed say nay. Nay. In the opinion of the chair, the nays have it. The nays have it. And the amendment is not adopted. Recorded vote requested. A recorded vote is requested by both the ranking member of the full committee and Mr. Lee of Michigan. uh raise your hand if you wish a recorded vote.
▶ 5:13:46A sufficient number having raised their hand, a record vote is ordered. Pursuant to C5 of rule three of the committee rules, further proceedings on this amendment are postponed. Is there an additional amendment to Mr. Styles amendment in the nature of a substitute? Mr. Chairman, I have an amendment at the desk. Miss Williams has an amendment at the desk.
▶ 5:14:06We'll pause and wait for it to be Thank
▶ 5:14:39you. Short and Mr. Chairman, I reserve a point of The clerk will report the amendment. An amendment to the amendment in the nature of a substitute to HR2392 offered by Miss Williams of Georgia designated as 31.
▶ 5:15:10The amendment will be considered as if read and the gentleoman from uh Georgia is recognized for five minutes in support of this amendment. Thank you, Mr. Chairman. Y'all, my number one priority in Congress is to close the racial wealth gap. And if we're going to build back black if we're going to build black wealth and an economy that works for everyone, lawmakers have to work with our partners in the financial services industries.
▶ 5:15:33And let me tell you, nowhere is that more important than in my home city of Atlanta, which has the largest racial wealth gap in the country. Building wealth is important to my constituents, and it's important to me too, y'all. I'm someone who went from being unbanked and living paycheck to paycheck to having the honor of representing my community in Georgia's fighting fifth congressional district. So, this markup is kind of personal today. We need more stories like mine where people can achieve the American dream.
▶ 5:16:03I know that we need to embrace innovation if everyone is going to experience the promise of America. And as financial technology develops, Congress can't sit idly by and hope that the rules of the road will write themselves. Congress has a responsibility to keep up with innovators and make laws that give both industry and consumer certainty and predictability. So y'all, we got started on that process last Congress.
▶ 5:16:29Former Chairman Mckenry and Ranking Member Waters had productive discussions toward a bipartisan stable coin regulatory framework, but the bill we have before us today kind of discards a lot of that progress instead of building on it. Today, we have a bill in front of us that would allow Donald Trump to issue his own stable coin and create loopholes so that his rich buddies continue to get even richer.
▶ 5:16:53Unfortunately, as currently written, this legislation doesn't uplift both industry and consumers, which should always be our goal. Nonetheless, I think it's important to govern how we want to be governed. So, I'm going to offer a common sense, bipartisan supported amendment. It won't completely fix all of my concerns with this legislation, but it'll make it a lot better for people back home. Even more importantly, it'll model how we should be putting together a bill as important as this.
▶ 5:17:22So, let me break it down to you because it's really short, really simple. All the stable coins we're regulating under this bill have to hold reserve assets for them to have value. In this bill, we spell out what kind of assets count like coins and currency, treasury bills, and demand deposits. All my amendment says that is if those assets become tokenized or digital in the future, those assets are still eligible to back up stable coins.
▶ 5:17:49This amendment is a clarification, is good for the stable coin industry, and is good for our constituents who want us to responsibly embrace innovation. And you don't actually have to just take my word for it. My amendment matches word for word a provision of the Genius Act, a Senate stable coin bill that got marked up on a bipartisan basis with every Senate Republican on banking, housing, and urban affairs supporting it. It's supported by industry and this should get unanimously passed into this base bill.
▶ 5:18:17So, I urge my colleagues to join me in legislating on a bipartisan basis and passing my amendment. I yel back, Mr. Chairman. Who seeks recognition? Miss Waters, ranking member of the full committee, recognized to strike the last word. Thank you very much.
▶ 5:18:39I do believe uh that Miss Williams um has offered uh this amendment because there was some discussion along the way about um what reserves, how the reserves are handled on the blockchain. And I would now request um a colloquy with Mr. Foster uh to see if he uh dealt with this issue.
▶ 5:19:05As I am examining it, it seems as if not enough attention has been paid to uh whether or not uh um reserves on the blockchain is some kind of better than the digital reserve. Are you familiar with this? Um I my apologies. I just stepped into the hearing here. I don't know the context, so I'd prefer to wait. Okay. Reserving my time.
▶ 5:19:32Miss Williams, I do believe that uh what you are describing ensures that the reserves are real and that they are uh can be counted on. Would you further delve into that? I would yield to you to help further explain that. Absolutely. So, every currency needs to have actual assets to back it up.
▶ 5:19:55And in this bill, it spells out what those assets can be, currency, coins, demand deposits, treasury bills, and and more. And all my amendment says is that if these assets are digitized in the future, that they're still eligible to serve as reserves for stable coin. And it's just a clarification to be helpful as the technology continues to develop. I don't think you Thank you very much.
▶ 5:20:19I would urge support uh for Miss Williams Gentlewoman yields back. The gentleman from uh Wisconsin, the author of the bill, Mr. Style, you're recognized to strike the last word. Thank you, Mr. Chairman. Uh I'll be brief. I rise in opposition to the amendment. The amendment's unnecessary. Um reserves uh in tokenized forms would already be captured.
▶ 5:20:44And so, for example, uh a registered money market fund that is tokenized uh would be a qualified reserve. So, the the amendment uh is unnecessary. I would urge my colleagues to oppose it uh in in brevity. I'll yield back. Gentleman yields back. Is there any further debate on this amendment? Anybody speak in favor? Uh hearing none. The question now occurs on amendment offered by the gentleman from Georgia, Miss Williams. All those in favor, please say I. I. All those opposed, you'll signify by saying no. No.
▶ 5:21:15Independent of the chair of the nays have it. The nays have it. The amendment is not adopted. Vote requested. Uh recorded vote is requested. That all those in favor of recorded vote, please raise your hands. A sufficient number having raised their hand. A recorded vote is so ordered. Pursuant to section C5 of rule three of the committee rules, further proceedings on this amendment postponed. Is there an additional amendment to Mr. Styles amendment in the nature substitute? Mr. Lynch is Uh Mr.
▶ 5:21:43Chairman, I believe I have an amendment at the desk. Stand by and we'll have it uh distributed. Thank you so much.
▶ 5:24:46clerk will report an amendment to the amendment in the nature of a substitute HR2392 offered by Mr. Lynch of Massachusetts designated as 29. Without objection, amendment will be considered as read and gentleman from Massachusetts, Mr. Lynch is recognized for five minutes in support of this Thank you so much, Mr. Chairman. Uh Mr.
▶ 5:25:08Chairman, I am thankful uh that this most recent iteration of the bill um the stable stable act uh does does preclude uh paying interest uh for uh for stable issuers to to pay interest on um on payments. So, uh, I'm I'm thankful because that that that would have introduced a whole host of issues that we would have had to get into, but thankfully we can avoid that.
▶ 5:25:36The one gap here is, however, that uh it does not preclude a stable coin exchange uh or crypto exchange from from collecting uh interest or paying interest rather um to depositors.
▶ 5:25:55And so that that does prevent that does present a whole host of uh concerns if exchanges now were to be in competition with um with savings banks and others uh for resources especially uh the fact that so much has to be held in reserve in and in many cases uh the reference 's
▶ 5:26:25denomination is the US dollar and uh so those reserves would be held in dollars. Um this amendment would prohibit crypto exchanges or other parties affiliated with stable coins from paying interest or yield to stable coin holders.
▶ 5:26:44While this bill does not include a provision that would prevent a stable coin issuer from paying interest or yield to a holder, it does not prevent an exchange or other party from paying attractive yields on stable coins. We've already seen the incentive crypto exchanges offer to attract stable coin holders. Coinbase offers a 4.1% APY to its customers holding their stable coins at Coinbase.
▶ 5:27:11The exchange even pays a higher 4.5 uh% to consumers who hold Circles USDC. Given that Coinbase and Circle are now business partners, the company's share revenues produced by Circles USDC and additionally Binance offers even higher yield of 11% on USDC.
▶ 5:27:35So these types of business arrangements between stable coin issuers and exchanges are a clear example of how closely stable coins are connected with cryptocurrencies and it refutes the claims that stable coins do not pay interest. This essential uh this essentially makes stable coins an investment option and not just a mechanism for payments.
▶ 5:27:59Additionally, I have concerns about how these types of offerings will impact credit availability, particularly for local communities. I'm skeptical of claims that stable coins issued by non-banks will not compete with bank deposits and undermine the ability of banks to make loans to consumers and main street businesses. Allowing crypto exchanges to pay interest on stable coins would create competition between non-banks and FDIC insured banks.
▶ 5:28:28Non-bank issuers would also face much lower compliance costs than traditional banks, allowing them to offer significantly higher interest rates, creating an unfair playing field. When consumers put fewer deposits into banks, it leaves local banks with less credit availability and therefore less capacity to support local communities through loan programs.
▶ 5:28:48Also, siphoning off deposits will harm the very local and community banks, which my colleagues on the other side of the aisle have stated they would like to protect. This amendment would prevent the bill from creating unnecessary and harmful competition between non-banks and FDIC insured banks, ultimately harming Main Street businesses. Uh, that's about it, Mr. Chairman. Thank you, and I yield back. Gentleman yields back. Uh, who seeks recognition? I seek recognition.
▶ 5:29:19Strike last word. Mr. Uh thank you, Mr. Chairman. Move to strike the last word. Uh the amendment would undermine uh deliberately chosen language in section 49 of the stable act. The restrictions uh carefully focused to preserve payment stable coins as payment instruments uh that are backed one to one not as investment instruments provided by the issuer.
▶ 5:29:42So include other entities under that prohibition being appropriate in this bill which is concerned with ensuring strong reserves maintained by the issuer uh for these payment instruments. So as you know we're working uh on other digital asset legislation including digital assets market structure uh and encourage my colleague uh to work with us on clear guidelines related to this issue as it applies uh to other types of entities uh beyond issuers. So I appreciate the amendment but encourage my colleagues uh to vote no. Mr.
▶ 5:30:11Chairman, I yield back. Gentleman yields back. Is there further debate on this amendment? Uh, the gentleman from California, ranking member, recognized. Strike the last word. Uh, thank you very much, Mr. Chairman. Uh, I'm listening carefully uh to Mr.
▶ 5:30:29Lynch and I'm listening um from your side of the aisle and it seems as if there's some agreement uh that um the stable coin should not be uh issuing interest uh that it should be done by the exchange. Am I to conclude uh that basically there's some Mr. Hill, Mr. I wish to enter into a colloquy. I'd be happy to.
▶ 5:30:59Uh, I just said that based on what I think I just heard from you is that there appears to be some agreement about Stablecoin should not be issuing interest and that you guys have given this some thought and uh you are open uh to taking a closer look at this in order to make sure that uh it's the exchange rather than the issuer uh and that uh you want to work further with us on this. Is that correct?
▶ 5:31:29I I'm definitely interested to learn more about uh you and your colleagues position. I think it's important that we're preser as it relates to stable coins that were focused to preserve the payment stable coins as payment instruments um that are backed one to one. But I'd be happy to engage in further dialogue in particular as we go about um completing the drafting of the market structure bill u that'll be introduced for this Congress. Uh thank you very much. Uh, I support uh this amendment by Mr. Lynch and I yield to Mr.
▶ 5:31:59Lynch. I thank the general lady for yielding. Yeah, we we get the onetoone uh backing. We get that the last six or seven stable coins that failed all had one to one until they didn't. That's that's the whole idea. That's when they broke the buck, right?
▶ 5:32:15Um so so I understand that stable coin themselves will not be able to pay However, there are arrangements between issuers and exchanges like like circle and and others where they have partnerships with exchanges.
▶ 5:32:37So um what they could do and I imagine what they will do is they will park their stable coins at the exchange and the exchange under this bill is allowed to to pay interest. So that would defeat the efforts by the bank the traditional banking community has been lobbying both the house and the senate to get rid of that stable coin paying interest capacity.
▶ 5:33:07But now it just moves to the exchange and the exchange will pay the interest and the exchange will compete with the traditional banks and compete for deposits. That's that's what I'm trying to get at with this amendment. I'm trying to get rid of that.
▶ 5:33:24I would like for depositors at banks to have an advantage here because they're their their deposits are are insured at traditional We don't want them to uh to begin parking their deposits at uh uninsured exchanges to the detriment of the lending community that
▶ 5:33:54services local communities. That's that's the idea here. Um it would put traditional banks because of all the regulations that they've got to abide by. It would put them at a serious disadvantage. Um, and it would create a an advantage for the exchanges.
▶ 5:34:11They'd be able to pay pay higher interest rates for parking, you know, stable coins at the exchange and they would out compete eventually uh that that that that base that's located right now at our at our traditional uh banks. So, uh it would be bad all the way around. Um and I yield back to the claiming my time. I would simply ask for support uh for Mr. Lynch's amendment.
▶ 5:34:39It seems as if we're all thinking uh the same way about how we deal with this question of interest and we have a lot of consideration as we look at our um lending institutions etc about perhaps what maybe look like competition. So I asked for an I vote on Mr.
▶ 5:34:57Linton's Who seeks recognition? Uh, is there further debate on the amendment? Hearing none. The question now occurs on the amendment offered by Mr. Lynch of Massachusetts. All those in favor, please say I. I. All those opposed, please say no. No.
▶ 5:35:24In the opinion of the chair, the nos have it and the nays have it and the amendment is not adopted. Recorded vote request. A recorded vote is requested. All those in favor of record vote, raise your hand. A sufficient number having raised their hand, a record vote is so ordered. Pursuant to subsector C5 of rule three of the committee rules, a vote on this amendment is postponed. Is there further amendment to Mr. Styles uh amendment in the nature of substitute? Mr. Lynch, Mr. Chairman, I believe I have an amendment at the desk.
▶ 5:35:54Amendment at the desk will pause while it's distributed. Mr. Chairman, I reserve a point of Gentlemen from Wisconsin reserves a point of order. Thank you so much.
▶ 5:36:46Clerk will report an amendment to the amendment in the nature of a substitute HR2392 offered by Mr. Lynch of Massachusetts designated as 11. The amendment will be considered as read and I yield to my friend from Massachusetts five minutes in support of his amendment. Thank you very much, Mr. Chairman. This amendment is is crucial to ensuring the stability of our financial system and protecting consumers from potential harm.
▶ 5:37:16This amendment would require all issuers and distributors of stable coins to be federally insured depository institutions. Without this requirement, we are opening the door to significant risk. Runs on these assets, failures, and ultimately a ste a destabilized economy. Stable coins are functionally like bank deposits. issuers make a promise to redeem them on a dollar for-doll basis whenever the consumer requests it within a certain time.
▶ 5:37:46As my colleagues would likely agree, products that have the same risk should be required to comply with the same regulations. Therefore, stable coins should be regulated like deposits. Institutions insured by the FDIC benefit from critical protections such as deposit insurance, regulatory oversight, and supervisory powers that ensure our financial system stays secure.
▶ 5:38:12We also have procedures in place for resolving failed banks, capital requirements to safeguard the stability of these institutions, and measures to ensure that they remain safe and sound. The Biden administration's president's working group recommended that Congress pass legislation prohibiting persons other than federally insured depository institutions from issuing stable coins in order to provide for supervision, credential standards, and access to a a federal safety net.
▶ 5:38:42The Stable Act provides a path that would incentivize most stable coin issuers to bypass these protections either by choosing to be uninsured state-based issuers or by selecting an uninsured OC charted non-bank issuer option. This move would exclude key regulators like the FDIC, the Federal Reserve, and the NCUA from playing a meaningful role in establishing the safeguards we need for this market.
▶ 5:39:10Additionally, in the event of failure, the FDIC must be able to step in as a conservator or receiver. This would avoid bankrupt proceedings, bankruptcy proceedings for the stable coin subsidiary as long as the FDIC determines that conservatorship or receiverhip for the parent bank is the best course of action. I remain deeply concerned about the risks posed by uninsured deposits in this space.
▶ 5:39:37Advocates for the stable coin industry claim that these products are fully backed one to one and that the reserve requirements are more than sufficient. But history has shown us time and time and time again that uninsured deposits are vulnerable to systemic runs. When you tie stable coins to volatile crypto products, that risk only increases.
▶ 5:40:00And when you allow stable coin issuers to be involved in other commercial activities that invite risk, that risk multiplies exponentially. We should not forget the lessons from the failure of Silicon Valley Bank.
▶ 5:40:16Circle, one of the top uh stable coin issuers, held a $3.3 uh deposit in uninsured deposits at the Silicon Valley Bank, representing a significant portion of USDC's total reserves. When SVB failed, USDC's value dropped below 88 cents and it only retained its $1 peg after the federal government intervene and bailed out those uninsured depositors.
▶ 5:40:45If we don't act now to regulate stable coins properly and provide a strong safety net, the risk of widespread runs on these assets becomes real. This amendment ensures that stable coin issuers are subject to the same protections that our insured depository institutions must adhere to. It would create a regulatory framework that protects consumers, promotes financial stability, and safeguards our broader economy. We have a duty to act in a way that guarantees these assets are issued responsibly.
▶ 5:41:15And I urge my colleagues to support this amendment. And I yield. Would the gentleman yield for a question? I I would I would. Yeah. Thank Thank you, sir. Um, the intent of the amendment is that that it prohibits a non-bank from issuing a stable coin. Is that fair? Because the way I read it, it says, "Notwithstanding any of the provision, only a sub of an insured bank may issue a stable coin." So, you prohibit non-banks.
▶ 5:41:39They if they acquired uh if if they acquired uh deposit insurance, they could they could do that. Well, but we don't operate. Okay. Well, we don't but non-banks aren't subject to deposit insurance. You're saying that if that regime is That's what we wanted to do. Yeah. That we want to import that regime. The I see. Okay. So, you're actually arguing that all stable coin issuers should be FDIC insured. Correct. Yeah. Okay.
▶ 5:42:05I we I just when you look at the actual amendment, the implication was you're prohibiting non like because you're amending this bill that permits both that you're uh and since they're running out of time, I'll yield back to you. But I I I now understand your point. Okay. Thank you, Mr. Chairman. I thank the gentleman from Massachusetts who yields back. Uh is there uh others to speak on Mr. Lynch's amendment?
▶ 5:42:39Hearing none then I will call the question without objection amendment is good let's see uh the now question is now on the amendment by Mr. Lynch of Massachusetts. All those in favor, please say I. I. Any opposed? Say nay. Nay. Any opinion? Sure. The naysay have it. The nays have it. Amendment is not adopted. Would you like a recorded vote? Gentlemen ask for a recorded vote. All those in favor, please uh raise your hand. A sufficient number having raised their hand. A recorded vote is so ordered.
▶ 5:43:08Pursuant to section C5 of rule three, the committee on of the committee rules. Further proceedings on the amendment are postponed. Is there addition additional amendment uh to the amendment in the nature of substitute? Mr. Casten, would you seeking recognition? You're back. We're back live now. Mr. Casten seeks recognition. Uh there's amendment at the desk and we'll pause for it to be distributed.
▶ 5:43:44Mr. Chairman, I reserve a point of order. The gentleman from Wisconsin reserves a point of order. Thanks so much.
▶ 5:45:19clerk will report the amendment. An amendment to the amendment in the nature of a substitute to HR2392 offered by Mr. Casten of Illinois designated as 38. Commissioner, the amendment will be considered as read and I now call on my friend from Illinois, Mr. Kassen, for five minutes to explain his amendment. Thank you, Mr. Chairman. Uh, so this amendment would address potential undisclosed financial relationships between stable coin issuers and cryptocurrency exchanges or other financial institutions.
▶ 5:45:49Um, as as we know in this committee and certainly spent enough time talking about it today, dollarbacked stable coin issuers tend to mint and burn new stable coins only when institutional customers that purchase tokens in large quantities, including exchanges, fintech firms, etc., um, before they're made available to retail clients through secondary markets. We also know that's a potential risk. In 2021, a year before its collapse, uh, TerraUSD fell below its dollar pegged to 90 cents.
▶ 5:46:17This was an algorithmic stable coin, of course, but we found out later that it recovered um thanks to a secret deal with the US highspeed trading firm Jump. Jump agreed to purchase tens of millions of dollars worth of Terara to push its price back to a dollar. But in the terms of that deal, Jump um was allowed to buy Tara and Luna at 30, 40, and 50 cents over the next three years, leading to more than a billion dollars of profits. That is um illegal. And in fact, the founder of terror was convicted of fraud.
▶ 5:46:47Subsidiary of Jump was settled a fine. Both of which were brought by the SEC. Yes, that was an algorithmic stable coin, but similar market manipulation could happen with with fiatbacked or other payment stable coins. And nothing in this bill prevents that from happening again.
▶ 5:47:02To the contrary, I think it makes it more likely because on page 75 of this bill, it explicitly says that payment stable coins are not securities, which would virtually guarantee that the SEC could not prosecute market manipulation by stable coin issuers of the type that happened with Teral Luna. This amendment simply fixes that. It would require stable coin regulators to adopt anti-deceptive practices and anti-manipulation rules that are consistent with CFTC rules required by DoddFrank. As you'll remember, Mr. Mr.
▶ 5:47:30Hill, I had um offered a similar amendment during the stable coin markup last Congress and you had offered to work with our office on the issue under many subsequent legislation. So, I'm just trying to make sure that we address this now. And I I I hope the text is simple enough that it can reach bipartisan amendment to make sure that we we close this uh proverbial barn door. Uh thank you. I yield back. Gentleman yields back. Uh seeks recognition. The author of the bill, Mr. Style, recognized the strike last word. Thank you very much, Mr. Chairman.
▶ 5:47:59Um, I'll be brief yet again. Appreciate my colleague concern appropriately focused on mun manipulation, fraud, deceptive practices. Um, it's just that they're already illegal and so this uh bill uh is unnecessary and duplicative. Uh the underlying text provides strong regulatory and supervisory oversight uh to prevent these violations. So I agree with the underlying intent to prevent uh manipulation, fraud, deceptive practices. Uh the good news is they're already illegal.
▶ 5:48:29Uh and the underlying bill addresses the concerns the gentleman raised. I urge my colleagues to vote no and I yield back to you, Mr. Gentleman yields back. Uh the gentleman from California, the ranking member of the full committee, Miss Waters, recognizes I move to direct last word. You're recognized. Uh this amendment would incorporate strong anti-manipulation language to this bill. Market manipulation in the crypto ecosystem remains a significant concern for many of us.
▶ 5:48:59We've seen time and time again how bad actors engage in schemes that impact the value of stable coins and can lead to what is known as depending. I hope Republicans will honor their commitments from last Congress to Misty Casten by accepting this amendment. Uh, I appreciate um the statement that was just made about, oh, this is already taken care of in the bill.
▶ 5:49:28That's not good enough. Uh, as a matter of fact, if it's synonymous uh what's what's in the underlying bill, then it certainly would cause no harm. Uh, it would just reinforce.
▶ 5:49:41And so I would expect uh that the opposite side of the uh the aisle here could simply show some degree of cooperation uh on an issue such as this uh that really does no harm but rather enforces the fact that we're all concerned about manipulation. Uh I would ask for an I vote on the amendment. I yield back.
▶ 5:50:12Gentlewoman yields back. Is there further discussion on the amendment? I'll recognize myself for five minutes just to reiterate that I agree with Chairman Style on this fundamental practice is certainly embedded in federal law in the uh oversight of this act.
▶ 5:50:34But I also acknowledge and recall our discussion last year as we discussed FIT 21 and stable coins in that committee markup that we are we'll take this language certainly work with you on it as we think about the bill text and also take it into account as we think about drafting the FIT 21.0 bill which this committee will consider in the next few weeks.
▶ 5:50:59Uh, and so I we will continue to work with my friend from Illinois, but I do uh urge our colleagues today to reject the amendment as it is today. And I yield back. Any Mr. Chairman? Uh, yes, Mr. Lynch. Strike the last word. Uh, I rise in support of Mr. Castton's amendment and I yield my time to Mr. Thank you, Mr. Lynch. I want to just quickly comment on my my friend Mr. Styles comment.
▶ 5:51:26It's fine to say something's illegal, but saying that something's illegal while you fire the sheriff um creates an enforcement problem. And there's a lot of things that happen in the crypto ecosystem that are illegal. You know, having having the broker and the dealer and the exchange all being the same people issuing tokens, wash trade, that all that's illegal. But if we're not beefing up the enforcement agency, then we are not actually making it less likely to do that crime.
▶ 5:51:52And of course, some of the challenge with crypto is that these transactions are so fast and so immediate and so easy to hide the paper trail that we are inviting more crime. I the you know the analogy that I would use is I would encourage everybody for a whole lot of reasons. Um go go rent Beverly Hills cop uh German bearer bonds as a tool to facilitate moneyaundering is illegal.
▶ 5:52:16Um, the Beverly Hills Police Department knew it was illegal, but they didn't have the enforcement arms to go through and prosecute that crime until they drew on some resources from the Detroit Police Department who sent out sent out a young man to come out and help them help them crack that case. What we find here is a situation where we're saying right now the Beverly Hills Police Department has jurisdiction over this, that being the SEC.
▶ 5:52:41We're going to say this stuff is illegal, but I'm going to move this all to the jurisdiction of the town I live in, Downers Grove Police Department. Much smaller town. Good good police officers, don't get me wrong. They're they're good friends, but they don't have the resources. When we're taking this out and we're saying we're not going to use the SEC, but we're going to move this into the CFTC, that's maybe a tenth the manpower of the SEC. saying that it's illegal while you're simultaneously getting rid of the police department is not a way to li limit crime.
▶ 5:53:10So if we care about this stuff, if we don't want these markets to be manipulated, then let's include this amendment. And I hope that at some point we can also make sure that we uh you know we beef up the number of Axel Foley out there that can go and shut down this crime. Um thank you and I yield back to Mr. Lynch. Gentleman yields back to Mr. Lynch. Uh if there are no other members uh that need time, I will yield back to the chair. Thank you.
▶ 5:53:35I'm a sucker for an Eddie Murphy analogy, so I thank the gentleman from Uh, is there further discussion on Mr. Kassen's the gentleman from Wisconsin? I move to strike the last word. Gentlemen, um, many of the benefits of blockchain, you've already spoken. The gentleman from Ohio move to strike the last word. Gentleman's recognized. I yield to the gentleman from Wisconsin. You're good.
▶ 5:54:06Well, as uh as fitting as the analogy is u and a good one, as Mr. Styles pointed out, it is already illegal. Uh there are cops on the beat and frankly far more responsible than where Gary Gensler was basically just putting everyone in jail uh that he didn't like. I yield back. Gentleman from Ohio yields back. Is there someone seeking recognition on the casting amendment? If there's no further debate, the question now occurs on the amendment offered by the gentleman from Illinois.
▶ 5:54:36All those in favor, please say I. I. Any All those opposed to say nay. Nay. Opinion of the chair. The naysay have it. The ns have it and the amendment is adopted. The gentleman requests a recorded vote. All those in favor of recorded vote raise your hands. A sufficient number having raised their hand. A recorded vote is so ordered. Pursuant to subsection C5 of rule three of the committee rules, action on this amendment are is postponed. Is there an additional amendment to Mr.
▶ 5:55:05Styles amendment nature substitute? Mr. Cast, we'll pause for its uh reporting. Mr. Chairman, I reserve a point of Gentleman reserves a point of order.
▶ 5:57:34The clerk will report an amendment to the amendment in the nature of a substitute to HR 2392 offered by Mr. Casten of Illinois designated as 35. Without objection, the amendment will be considered as read. And my good friend from Illinois, Mr. Castton's recognized for five minutes in support of his amendment. Thank you, Mr. Hill.
▶ 5:57:56Uh, so this amendment would require stable coin issuers with more than $1 billion in assets to prepare an annual financial statement, undergo a formal audit by an independent public accountant, and submit such statements and audits to applicable federal or state regulators. This is comparable to audit requirements for FDIC insured financial institutions. Now, currently under this bill, stable coin issuers would have to prepare monthly reserve reports that are that are examined, that's the term of art in the bill, by an accounting firm registered with the PCAOB.
▶ 5:58:27Examined is not the same as an audit. And it's worth talking about this distinction. Stable coin issuers have issued and continue to issue reserve reports. That's to demonstrate that they have sufficient collateral to back the total number of stable coins in circulation. But these reserve reports only represent a snapshot of an issuers's balance sheet at a particular moment in time.
▶ 5:58:49Um the analog I'd make to all my colleagues here because it's the beginning of a new quarter, which means that all of us were probably spending some part of the the last few weeks going out and trying to raise as much money as we could into our campaign accounts. and we all did the thing that we all do where we defer making payments because we want to show as much cash on hand at the end of the quarter. Um, that's fine. You also wouldn't catch that in an in the absence of an audit that's going through and looking at what your actual practices are that you're using. An audit is a different beast.
▶ 5:59:19Um, because those those examinations don't review the underlying data to confirm whether the issuers's claims about its reserves are materially accurate. They don't express an opinion about the adequacy of reserves or financial stability. um they don't measure the effectiveness of a stable coin issuers's internal controls or governance. All that stuff is captured in an audit. And PCAOB has in fact recently warned investors to exercise extreme caution, their words, when relying on reserve reports.
▶ 5:59:46Their 2023 advisory said that reserve reports quote do not provide any meaningful assurance to investors or the public. Um and uh the SEC and PAC PCAOB have pointed out that there are no specific requirements for the terms of these examination engagements. Again, there's a big difference from an auditor. You hire a GAP auditor, they are going to set the terms. In these cases, the stable coin issuer is setting those terms.
▶ 6:00:13So even if you have the same auditor in two different firms, they may be given different terms and have very different definitions. Um so it's clear that reserve reports even with examination can be unreliable. Um and uh that is not to suggest that reserve reports aren't valuable. They just are incomplete in the absence of a full audit. Um so what we're trying to do is if we're going to make sure that stable coins are in fact stable that we staple these examination requirements to a proper complimentary audit.
▶ 6:00:43Um the uh in the spirit of bank-like activities, bank-like regulation, I'm hopeful that all my colleagues will support this amendment to put stable coin issuers and FDIC insured financial institutions on the same level playing field. Thank you and I yield back. Gentlemen yields back. Mr. Style, author of Sabak, is recogn Oh, do you support reserve continue to reserve your point of order? I I wave my point of order and move to strike the last word. Uh the gentleman's recognized for five minutes. I appreciate it, Mr. Chairman.
▶ 6:01:14Appreciate my colleagues uh amendment. Um it it um it brings up an important topic. The Senate bill, our counterparts, the Genius uh bill has a similar type framework. They have a $50 billion threshold. Uh the amendment as proposed is a $1 billion threshold uh for these audit requirements uh for issuers. Um I think it's really important to tailor the regulatory burden to the size and scope uh of the entity.
▶ 6:01:41and so uh open to working uh with my colleague uh as we work uh to take this bill from the committee to the floor. However, I'd urge my colleagues to oppose uh the bill in its current form or the the amendment in its current form um for the uh the fact that the threshold put forward uh is too low uh in ownorous. So, I appreciate the intent in which was offered. I'd be happy to continue to work with my colleague from Illinois on the topic.
▶ 6:02:09uh he brings up an important point, an important topic, something willing to work on, but I'd urge my colleagues to vote no on the amendment before us. Would the gentleman yield just for a quick response? I I will yield. So I I think there's a structural issue of are these going to be regulated essentially as deposit taking institutions that are earning interest on the money and are able to play with that money or not. Um the $1 billion threshold is to tie this to the FDIC rules because we don't want to create an arbitrage opportunity in between.
▶ 6:02:38We got plenty of examples with with Tether specifically, right, where they're taking deposits. They're loaning those out. Nobody's got any clarity about what the heck is inside Tether. They've never provided an appropriate audit. And if we're going to maintain a structure within the overall within the overall piece of this bill where stable coins are not at the end of the day very stable and very boring, then we need to make sure that we've got thresholds that are no different from what we have inside banks where they're hypothecating assets,
▶ 6:03:09they're loaning them out, there's less liquidity in there. So I I I I think as it sits right now, given where some of these other amendments sit, we should make sure that this aligns with the FDIC rules. Um, maybe there's another scenario, but that would require a lot more surgery to this bill to get to a point where where we aren't just creating an arbitrage opportunity for anyone between one and 49 billion. I I'll reclaim my time. I appreciate the the concern. I think directionally I'm I'm aligned with what you're you're you're generally trying to do.
▶ 6:03:36Um, I would note that there's significant differences here because these aren't deposits that are being reh rehypothecated. And we're not talking about banks. talking about stable coins in the context um of a payment tool. Um and so while I I um appreciate the the intent in which the amendment is over, I don't think that that analogy is an exact correlation to the issue that we're addressing.
▶ 6:04:01Again, uh to the the core concept of tailoring the regulatory burden to the size and scope of the entity. I I am of the the view that the threshold is offered by my colleague is too low. Again, I note that the Genius Act on the Senate side has a similar structure as it approaches about $50 billion. Um, again, open to continuing this dialogue uh as this bill uh moves uh into final form, enters the floor or or goes forward.
▶ 6:04:29Um I will yield to the chairman of the full committee, Mr. Hill. I just want to thank the two of you for your discussion of this. I think um setting solid audit standards in this regard are merited and uh hope that you guys would work together on the style of those audits and a dollar amount. I understand my friend from Illinois while he's suggested the amount and look forward to working with you on that and thank you for the colloquy. Mr.
▶ 6:04:56Chairman, it's it's my time I'd be happy. I'm sorry. No, no. I I I yield back to the to the chair. Gentleman yields back. Who seeks recognition? Uh Mr. Shannon, the gentleman from Massachusetts, Mr. Lynch, recognizes strike the last word. That's a interesting, you know, I I first of all, I want to support uh Mr. Cassen's amendment. I think audits are are absolutely necessary given the opakeness of of some of these uh systems.
▶ 6:05:24What what I worry about as well is that uh as a stable coin issuer decides what architecture to use, if they choose a public permissionless uh blockchain, it will be first of all, it's it's impossible to figure out who is behind each node because those are in many cases anonymous. They're often bad actors.
▶ 6:05:54So new you question whether the efficacy of a an audit whether it's whether it's adopted within the bill will be possible because and this goes to another amendment that I have but but right now uh an issuer could just establish a public permissionless blockchain where we don't know who these people are and there's no need there's no requirement for them to to cooperate with an audit uh and and to to get at, you know,
▶ 6:06:24what's behind the reserves and and uh you know, who the parties are. So, um I f I certainly support the idea of an audit. I just without uh a requirement that it be a permissioned uh blockchain where people actually know who each node is and and there are legal recourses against those individual node operators if they don't cooperate in a in a lawful
▶ 6:06:54way um in a legal way. Um there could be you know there could be recourse there. So um just want you know I I I do support the ongoing discussion between uh the chairman of the committee and and uh and uh Mr. Casten. But I do want to point out some of the other operational difficulties that might exist beyond that beyond the fact of the audit itself. And uh unless Mr.
▶ 6:07:24Castton needs my time. Yeah, I'll yield my additional time to Mr. Casten. Thank you Mr. L. I just want to raise just one point about this this size threshold. Let us presume for a moment that somebody says I'm a $49 billion asset under management stable coin. Therefore, I'm not subject to compliance. Um, how do you know that? Well, because I because I brought in somebody to examine my reserves who subject to my own rules said it was 49 billion. Was it audited? No, I wasn't required to.
▶ 6:07:52The $49 billion is a lot of money, right? So we have an unodudited number and now what happens if that entity is sitting there saying well my reserves are actually not what they claim to be all of a sudden there's a run on that stable coin and that very quickly leads to contagion and wherever their other banks are and how you get this through. It seems to me that asking a a a1 $1 billion institution, which is not this is not a tiny institution that can't afford to hire an auditor, right?
▶ 6:08:20Much less a $ 49 billion institution to say get an auditor to say that if you're going to tell us the size of your operation, then we'll make a decision. I don't know how we would ever trust somebody says I'm less than 50 billion and just trust me because I set the rules of my own valuation metrics. So I don't think this should be super complicated. Will the Will the gentleman will the gentleman yield? I yield back to of course. Yeah. Um I I I would note just for the record the bill has monthly attestation requirements to be certified by a CPA. So I wouldn't I I think it'd be maybe misleading to say that there's there's no requirement.
▶ 6:08:51Then the question is how do we scale the regulatory burden to the size and scope. Again more than willing to work with my colleague as to what is the appropriate size and scope. U we could we could dialogue that. I'm of the personal view that the the threshold offered by my colleague is too low. Uh but but I think it would be an inaccurate statement to say that there's there's no there's no requirement. The requirement is simply scaled. So it' be a monthly attestation requirement to be certified by a CPA. A lower standard than than an audit as as noted. That's correct.
▶ 6:09:19Uh but the threshold for the audit is suggested by my colleague. To me is too low. I'm encouraging people to vote no. But I am uh very open to engaging uh in an analysis and a dialogue with my colleague to find uh that appropriate threshold. And again, I note just for sake of comparison, our colleagues in the Senate found 50 billion uh to be an appropriate number. So, look forward to the to the conversation working with my colleagues and I'll yield back to you, Mr. Yeah, thank you.
▶ 6:09:45Perhaps our colleagues in the Senate were anticipating meta or or somebody coming in big there. That's why they put the 50 billion uh mark on that. But again, uh Mr. Castton, do you need more time? Okay, then I yield back. Mr. Chairman, thank you. Gentleman from Massachusetts yields back. who seeks recognition. Appreciate that discussion. Uh if there's no further debate, the question now occurs on the amendment offered by Mr. Castton from Illinois.
▶ 6:10:14All those in favor, please say I. You want to say I now? I. Uh those who oppose the amendment say nay. Nay. Independent chair. The nays have it. Nays have it. The amendment is not agreed to. Request a recorded vote. The gentleman from Illinois requests a recorded vote. All those in favor of recorded vote, raise your hand. A sufficient number having raised their hand, a recorded vote is so ordered. Pursuant to section C5 of rule three of the committee rules, further proceedings are postponed. Is there an additional amendment uh to Mr.
▶ 6:10:44Styles uh ANS? Mr. Chairman, gentleman from Massachusetts. Thank you, Mr. Chairman. Um Mr. Chairman, I have an amendment at the desk. We'll pause and have it
▶ 6:11:22Mr. Chairman, I would like to reserve a point of order. From Wisconsin reserves a point of order.
▶ 6:12:01Clerk will report the amendment. An amendment to the amendment in the nature of a substitute to HR2392 offered by Mr. Lynch of Massachusetts designated as 28. Without objection, the amendment will be uh considered as read and Mr. Lynch is recognized for 5 minutes to explain his amendment. Uh thank you, Mr. Chairman. This amendment would simply require stable coin issuers to issue their products on permissioned blockchains.
▶ 6:12:30Just to to elaborate a little bit, permissionless public blockchains, which some of them use, many of them use are databases that are hosted on multiple different computer servers, each of which is a known is known as a node. Uh instead of having one centralized entity host and maintain the database, each node runs software that allows it to host a version uh of of the database.
▶ 6:12:57Permissionless means that any computer running the necessary software can become a node. There's no identification or vetting involved which is a problem. Transactions are carried out by updating the database but because it's quite plausible that a node could be a bad actor. Nodes need to be discouraged from approving problematic transactions like like double spending or or transferring assets to themselves.
▶ 6:13:25Public permissionless blockade blockchains rely on game theorybased consensus mechanisms like proof of work or proof of stake to discourage such behavior. So, Mr. Chairman, this amendment would require stable coin users to issue their products on permission blockchains. Stable coins are built on permissionless blockchains technology right now, meaning anyone with the right software can join the network and become part of that blockchain.
▶ 6:13:54This open access structure while innovative also comes with very serious risks. The lack of identification and vetting of participants creates a dangerous avenue for illicit activities like money laundering and sanctions evasions. These blockchains do not operate in a vacuum. They require constant vigilance and maintenance to safeguard against security flaws that could compromise the entire system.
▶ 6:14:19In light of these vulnerabilities, permissionless blockchains should not be the foundation for any financial services, especially one as critical as stable coins. We need to move toward permissioned or private distributed ledgers for these types of transactions. And by using a permission blockchain, we can ensure that the entities involved are accountable, they're identifiable, and subject to regulation and oversight that is essential to maintain the integrity of our financial system.
▶ 6:14:50Uh with that, Mr. Chairman, I yield back. Gentleman yields back. Who seeks recognition? Mr. Chairman, I wave my point of order uh and seek to strike the last word. Gentleman's recognized for five minutes. Um many of the benefits of blockchain including kind of the resilience, the openness uh resistance to falsification uh don't apply in the same way uh to the same extent uh in permissioned systems.
▶ 6:15:15Uh and so by forcing a choice of blockchain, you're not only taking away the decision uh from innovators and consumers but also limiting blockchain future development um as open public ledgers. So it really goes at the core of the bill. Uh indeed, one of the primary value propositions associated with blockchain technology is that it's transparent uh and open source. Anyone with an internet connection can view and audit uh the digital ledger of transactions.
▶ 6:15:44So if the stable act were to require permissioned blockchains, this transparency and accessibility would actually be lost. So Congress shouldn't be in the business of picking winners and losers in technological innovation. Uh and I think we want to remain technology neutral. Uh moreover, legally mandating permission blockchains uh locks out other innovations including decentralized transparent and open solutions.
▶ 6:16:08Technology it's evolving quickly as we know it requires specific design uh in law ages poor specific design in law ages poorly and reduces uh flexibility. So nothing in the stable act prevents a payment stable coin issuer from issuing their assets on a permission blockchain that's still available. If the market decides that permission blockchains are more desirable than permissionless blockchains, bill allows for it. Gives it that flexibility.
▶ 6:16:34However, section 5 uh does not let regulators deny applications because stable coins are issued on an open public and decentralized network. And so I think at its core I I I disagree with my colleagues approach here. I think at its core we want to let the market decide what type of blockchain payment stable coins uh that what type of blockchains payment stable coins should be issued on.
▶ 6:16:59And so uh I don't think you want the heavy-handed approach that I think my my colleagues amendment would bring. I think would stifle innovation. Uh and accordingly I'm going to urge my colleagues uh to vote no on my uh my colleagues amendment. And Mr. Chairman I'll yield back. Gentleman yields back. Who seeks recognition? If there's no further debate, the question now occurs on the amendment by the gentleman from Massachusetts. All those in favor, please say I.
▶ 6:17:30All those who are opposed, say nay. Nay. Any chair? The nays have it. Nays have it. Amendment is not Okay. Is there additional amendment? Yes, please. Record a vote, please. The large s of the chair will will permit that. Thank you. I appreciate votes requested. All those in favor raise your hands. System number have raised their hands.
▶ 6:17:57Court votes order pursuant to section subsection C5 of rule three. The committee rules. Further proceedings are postponed. Is there a further amendment cast? Amendment at the desk. Amendment at the desk. We'll pause for Mr. Chairman, I reserve a point of order.
▶ 6:18:27Mr. uh Style reserves a point of order. clerk will report an amendment to the amendment in the nature of a substitute HR2392
▶ 6:18:58offered by Mr. Cassen of Illinois designated as 39. We will consider the text as read and I would now yield to my friend from Illinois uh for five minutes to explain this amendment. Thank you, Mr. Hill. Uh so this amendment when we drafted it last night and then I got in here as we're bouncing in and out and I was listening to your exchange with Mr. Foster and I was thinking I didn't do my homework properly. Um but I think this amendment is still necessary and I'm hoping in the exchange uh we're both in agreement on it.
▶ 6:19:26This amendment would limit bank deposits that are eligible as collateral for stable coins only to those that are insured. Um, this is to protect stable coin holders funds during times of market stress and middle mitigate financial stability risks that a potential run in a stable coin could cause. Under the current text of the stable act, stable coin issuers would be permitted to invest in assets that are not particularly safe, including uninsured bank deposits.
▶ 6:19:49Specifically page 14, line 16, um, bill says, quote, "Funds held as demand deposits at insured depository institutions are eligible to act as collateral, but doesn't state that those deposits have to be insured, meaning that uninsured deposits are also allowed." Now, in a prior draft of this um that was posted on the Republican committee's website on February 6th, it did actually say insured demand deposit. So, I don't know if that was an oversight or a strikeout, but I'm hoping that we can get that back in.
▶ 6:20:17um which would seem consistent with the spirit of the colloquy that you had with Mr. Foster earlier. Stable coin reserves in the form of uninsured deposits we know can create systemic risks because of the panic that occurred when Silicon Valley Bank failed. The time of that failure, as we discussed earlier in this hearing, Circle held $3.3 billion of uninsured deposits at SVB, which represent a large portion of USDC's total reserves. The value of USDC dropped to 88 cents after they failed. Um bounced back only after they were bailed out.
▶ 6:20:46So we are in a world right now if we keep the text of the stable act as written where USDC is only considered to be stable because the taxpayers bailed it out. And I don't think any of us want to continue that definition of a quote unquote stable coin. Now the Republican witness at the hearing for this um a few a month or so ago only mentioned algorithmic stable coins as a risk, but I just want to stress that that is disingenuous.
▶ 6:21:11There was a 2023 Bank of International settlement study of 60 stable coins, including prominent ones like Circle and Tether, and they found that they had all lost their price peg at least once. That's the opposite of stable. Every single one of them had lost their price peg. Um, now that is because when investors have doubts about these reserves, they move to quickly redeem the tokens. That can create runs that collapse the price of the stable coin and cause market contagion.
▶ 6:21:36FSOC has called attention to these run risks, warning that quote, "Stable coins continue to represent a potential risk to financial stability because they are acutely vulnerable to runs." Former Treasury Under Secretary for Domestic Finance Nelly Lang recently said, quote, "For stable coins to function and not cause or pose risks to financial stability, reserve assets have to be very safe and very liquid." There's a second problem that is also currently in the Stable Act, but it's the exact same problem.
▶ 6:22:00The stable act also says that stable coin reserves can include euro dollars which are eur US dollar denominated deposits held at foreign banks. Page 21, lines 18 through 21 directs federal and state payment stablecoin regulators to establish regulate requirements regarding approval for foreign depository institutions to hold deposits as collateral. There is nothing in that section that requires those deposits to be insured. And as we know the Euro dollar market generally is not insured.
▶ 6:22:28Um, it's estimated to have total outstanding value of about 13 trillion with a T dollars. Last year, former SEC chair Gary Gendler warned that much of that 13 trillion is in US currency held offshore by US banks is in fact uninsured. It emphasized the EUR dollar markets have played a role in deepening economic downturns across the globe, including the 2008 financial crisis. So, if we can agree, as I think the colloquy with Mr. Foster and Mr.
▶ 6:22:52bill played out that we need to make sure that these that cash assets underlying stable coins are insured. Um then FDI FDIC deposit insurance plays an important role in in promoting financial stability and we also need to make sure that a run on US dollar denominated deposits at global banks uh is not possible. Um, federal government has incurred significant costs in rescuing uninsured depositors during financial crises many times.
▶ 6:23:211980, 1992, 2007, 2023. This bill would invite future taxpayer bailouts, and I don't think any of us want to say that we were here, we were warned, and we chose not to act. So, I hope we'll heed these warnings from our regulators, apply these lessons, and just make sure that cash deposits that are used as reserves for stable coins are in every case insured. Thank you. And I yield back. Gentleman yields back. Who seeks recognition? Gentleman from Wisconsin. I I'll also wave my my point of order.
▶ 6:23:51Gentleman waves his point of war. You recognize the last word. Thank you, Mr. Chairman. This this is really taking us back to the previous discussion uh with Dr. Foster. So section 4A of the stable act includes the following as permissible reserve assets. I think it's just let's stage set here.
▶ 6:24:08So demand deposits or other deposits that may be withdrawn any time uh held at insured depository institutions subject to limitations established by the FDIC and CUA respectively to address safety and soundness risks of such insured depository institutions. So this means that for insured holding depos for insurers holding deposits that exceed the deposit insurance limits uh they'll be subject to rigorous requirements. So let's think about that first.
▶ 6:24:37The FDIC and the NCUA determine how much and uninsured deposits they're able to hold to help avoid uninsured deposit concentration risk. Second, issuers face reserve asset diversification requirements under the joint federal rulemaking. So this would include requirements covering the amount of deposits an insurer is able to have at a single depository institution.
▶ 6:25:01And then third, uh, ensure depository institutions already have deposit concentration risk requirements that limit how many deposits they're allowed to hold uh, from a single customer. So, if we establish that issuers were only able to hold insured deposits, uh, they'd have to do so with the help of a deposit sweep network resulting in frictions to redemptions uh, that could leave that could actually leave consumers worse off.
▶ 6:25:27And so furthermore, uh, my colleagues struck the ability of insurers to hold the reserves at foreign depository institutions. One of the benefits of stable coins is their ability to be used abroad uh to process global payments. Section four of the stable act gives our regular regulators uh the ability to jointly determine which jurisdiction or institutions uh would be appropriate uh for issuers.
▶ 6:25:51So this amendment uh in summary is unnecessary and impedes the payment stable coin econ ecosystem uh from reaching its full potential. Uh so I would urge my colleagues uh to oppose the amendment uh as drafted and Mr. Chairman I will yield back. Gentleman yields back who seeks Mr. Foster of Illinois. Yeah.
▶ 6:26:18And just like to this point about recognize the strike the last word. Yeah. Strike the last word. Um so the just in response to the the uh gentleman's discussion previously um the the it doesn't seem like a bad thing for the consumer if um these things are are put into sweeps that spread the spread the um the stable coin reserves into multiple insured uh accounts. It seem you know it's regularly done.
▶ 6:26:47It is very inexpensive and it means that you're not going to have one stable coin that will be shakier than another one and will presumably trade differently than those or or behave differently under stress. You know this u you know it's a well well exercised model to do that and I don't see what's the objection to it. Um there will be a small fee associated with it.
▶ 6:27:08it will make the the issuer slightly less profitable, but I it seems like that is a very small risk compared to having unlimited numbers of uninsured deposits. I'd be happy to yield. I I'll I'll take the the moment there. I think what we're looking at is the resulting friction to redemptions um that would exist.
▶ 6:27:29And I think the the second point is the um uh the the underlying amendment struck the ability of insurers to hold reserves at foreign depository institutions. And again, one of the core concepts of this is people's ability to use a US dollarbacked um stable coin on a on a global basis. And so there's layers of risk management in the underlying text of the bill. So I wouldn't want to walk away and say that there's none if we don't take this.
▶ 6:27:58there's a robust layer um of risk management kind of as laid out by me from the FDIC, NCUA, uh reserve asset diversification, insured depository institutions have deposit concentration risk requirements. Um and so there's layers of risk avoidance in the underlying bill. I just don't think that the the layer that's being offered uh in the underlying amendment outweighs the burden it places uh in the friction that would pose uh in the system.
▶ 6:28:28Yield back. No, I understand but I think you know the friction is going to be a very small impact on the overall profitability of of the issuer and so that um uh doesn't seem to be a major objection to this. Also, I should mention I'm going to be offering a a simpler version of this than simply we've had some confusion here in this hearing. The the chair has has said I believe repeatedly that only insured uh demand deposits um are accessible.
▶ 6:28:57So, I I'm going to have a a similar amendment that will just insert the word insured where relevant and that should clarify whether or not only insured deposits are are here. Anyway, that was my comment. And oh yeah, can I yield to um Representative Cast? Uh thank you, Dr. Foster.
▶ 6:29:17Um I I just want to point out that if in fact there's already all sorts of belts and suspenders in here, it does raise the question of why the February 6 draft was modified because the February 6th draft that we were first reviewing said insured demand deposit. So there was a decision made by the Republicans here to take that out and we're now arguing that what's there directing the executive branch to fix this is going to cover that. I would argue in this loperbrite era, we should be clear about our intent, not count on the regulators to figure out what we meant.
▶ 6:29:45And if I was a bank who was trying to take advantage of this, I'd say, well, they had that language and they didn't put it in there, so clearly that wasn't Congress's intent. Put the language back in. And with respect to Euro dollars, look, the I get it. We could make lots of parts of our financial system much bigger, much faster if we took off the brakes. That in of itself is not valuable.
▶ 6:30:08Why would we say that these are stable if we are going to allow the cash that we are depositing to be in a place where we don't don't know if it's there when we it? An uninsured deposit in a US bank is no different from an uninsured deposit in a European bank. If it ain't there, it ain't there and therefore it's not stable. And again, we learned this lesson with SVB on this committee. Most of us in this room were here.
▶ 6:30:31Most of us remember that point where I think it was the weekend we all got pulled over on the side of the road talking to the FDI and the Treasury saying, "Holy smokes, this bank is melting down. We have to inject a bunch of money into it." What did we learn from that? If what we learned from that is let's do it again, it's a mistake. This this seems like common sense. Yield back to Mr. Foster. And I yield back. Gentlemen yields back. Who seeks recognition? Mr. Lynch.
▶ 6:30:59Uh, you know, and I I I I certainly support Mr. Kassen's amendment. It's common sense and and uh it it could avoid uh much of the the damage that we expect uh if if one of these stable coins breaks the buck.
▶ 6:31:16Um however there's also another part of this which is that the underlying legislation also permits the the merger of of banking and finance excuse me banking and and commerce. U it allows it basically is unlimited as to what stable coin what other businesses a stable coin issuer might engage in.
▶ 6:31:42And you know, for a very very long time in this country, that was something that Congress uh was very careful about and and and very protective of depositors and and protective of uh the integrity of our financial system. And that's going away in this bill. That's going away. We're blowing it up.
▶ 6:32:04uh so that someone who actually is is creating currency out of thin air can also engage in any level or extent of of uh commercial activity including the biggest biggest players including uh Meta and Amazon and uh X and and everybody else.
▶ 6:32:24So, um, it it really we're looking at the likelihood that some source of volatility will cause these one or more of these stable coins to break the buck. I think that's that's that's automatic. That's going to happen. And so, I I think what Mr.
▶ 6:32:49Casten is wisely trying to do is to limit the uh the damage that that might be caused or the likelihood that that one of those uh unpegging event occurs. So, uh I appreciate his his uh his thoughtfulness on this and uh I hope members will support his amendment. I yield back. Gentleman yields back. Who seeks There's no further debate.
▶ 6:33:19Question now occurs on the amendment offered by the gentleman from Illinois. All those in favor please say I. I. Any opposed say nay. Nay. Opinion of the nays have it. The nays have an amendment is not agreed to. Vote. Court vote is requested. All those in favor of court vote raise your hands. Sufficient number having raised their hands. Record vote is so ordered. Pursuant to section C5 of rule three, the committee rules for proceedings are Is there further amendment? Mr.
▶ 6:33:49Licardo recognized. Thank you, Mr. Chair. There's amendment at the desk. Pause and let the amendment be distributed. Thank you. It's the one number 010. Thank you.
▶ 6:34:34Mr. Chairman, I reserve a point of I think we've passed out the wrong amendment. Okay. You gave me a Foster amendment, not a Licardo amendment. Criminal penalties. We'll just Yeah. No, this is the right one. It's criminal Criminal penalties. Yeah. Yeah. Licardo. This is uh Licardo in section three. Should be 0 one 0 one. Got it.
▶ 6:35:13I'm here till midnight.
▶ 6:35:49Clerk will report an amendment to the amendment in the nature of a substitute HR2392 offered by Mr. Licardo of California designated as 1010. Without objection, the amendment will be considered as read and the gentleman from California is recognized to explain his amendment. Uh thank you, Mr. Chair. Uh currently, this draft of the bill contains no criminal sanction for the unpermitted issuance uh of a uh of a stable coin.
▶ 6:36:19And uh the current provisions for civil penalties uh would penalize a violation for up to $100,000 per day. That's under section 3 B3. Uh obviously there is concern with regard to this section three around extr territorial enforcement. The largest stable coin company in the world is headquartered in El Salvador.
▶ 6:36:43Uh and to my knowledge I don't believe El Salvador is um the the beacon for sound financial management globally. uh we should be concerned about this as well as other companies elsewhere in the world. Uh there are criminal penalties in other parts of this bill. Specifically in section four, it criminalizes submission information that doesn't fairly present financial status for monthly certification by a CEO or CFO.
▶ 6:37:09Uh section 4 also criminalizes misrepresentation of FDIC insured status. So there are criminal penalties here but not for this particular violation which is the unlicensed I'm sorry unpermitted issuance of stablecoin. Uh now the Senate version does contain this language uh that would impose criminal penalties for unlicensed issuance.
▶ 6:37:31Uh it is a particular concern to me because as we think about what the civil penalties are up to $100,000 per day uh and you consider just the profit last year made by that one company headquartered in El Salvador, Tether, $13 billion last year, $6 billion in the fourth quarter alone.
▶ 6:37:53So if Tether wished to operate in an unpermitted state, it could do so at a cost of $9 million for a quarter in which it earned $6 billion profit. Let me be clear about that. That was profit, not revenue, but net revenue, profit. So to take uh Mr. Cassen's Beverly Hills cop analogy one step further.
▶ 6:38:15Uh if the civil penalty moving some billions of dollars of German Vera bonds with a $6 billion profit was only a $9 million civil penalty. I think most crooks would take that risk. Certainly not suggesting that's the case with this company that they're in any way crooked or they're intending to be impermitted. The point is there is a great temptation for anyone to operate well beyond the bounds of the law.
▶ 6:38:43Uh and so I would like to see some more significant penalty imposed here if we're going to ensure that everyone's operating lawfully. Now uh I guess through Mr. Chairman uh I I know that Mr. Style and I have had some conversations. I'd certainly welcome colloqui. Uh I've been informed that there may be some consideration around penalties and I'd certainly welcome Mr. Styles. Will will the gentleman yield? Yes, I first appreciate your engagement on this bill.
▶ 6:39:11It's been constructive and have enjoyed working with you on the drafting. Would further commit uh to working with you as we look at the penalties in this section. Um you're you're correct. There are criminal penalties in section four is currently drafted, not in section three. Um, we want to make sure we rightsize uh the the the penalties to hold bad actors accountable uh and very open to further dialogue uh as it relates to section three.
▶ 6:39:37And so um with that commitment, I would I would ask if the gentleman would be willing to withdraw his amendment as we work uh to further refine uh the bill in this section in particular uh prior to uh floor action. Mr. Chair, uh yes, I I I would be willing to withdraw. I I certainly can see where the votes have been going. Um I I would also suggest I think in negotiation with the Senate u should this pass, as I expect it will in the House, there'll be an opportunity for us to revisit this.
▶ 6:40:08I I appreciate that and I look forward to continuing to working uh with my good friend from California. I'll ask for unanimous consent then withdraw. The gentleman's amendment is withdrawn. I appreciate the colloquy and the willingness to work together on this important proposal and I thank the gentleman from California for it. Is there further uh amendment? Mr.
▶ 6:40:32Foster is recognized this for a new The one that was previously passed out. I have an amendment at the desk. It's at the desk. We'll pause for I think it's been distributed. Um may ask the clerk. Uh no.
▶ 6:41:06Yeah, that's what I've got. Yeah. Okay. it. Pause while the court distributes Dr. Fosters's amendment.
▶ 6:41:49Mr. Chairman, I'd like to reserve a point of order. Gentlemen of Wisconsin reserves a point of order. The clerk will report an amendment to the amendment in the nature of a substitute HR2392 offered by Mr. Foster of Illinois designated as 22. I thank the clerk. The amendment will be considered as read and I now call on the gentleman from Illinois, Dr. Foster, to explain his amendment. Yeah, very briefly. Um, my amendment is simply sort of a stripped down version of Rep. Casten's previous amendment.
▶ 6:42:19Uh, just to clarify um whether the intention here is uh that uninsured deposits be allowable or only insured deposits. And so my amendment simply inserts the word insure in insured four places on the last paragraph on page 14.
▶ 6:42:36Um and as indicated and um so that's pretty much it and it's my I think it'd be very valuable if you're willing to accept this amendment then what the the chair's indication that only insured deposits will go through. Um otherwise I think a a recorded vote will be useful to get the committee on record as to what our intent is here. Well, I appreciate the gentleman and I just would I said to Mr.
▶ 6:43:02Cassen, I would say to my my friend, if he'll yield to me, that, you know, we'd love for our staffs to work with you on this section and un make sure everyone on both sides of the aisle fully understands uh how the the banking industry has recommended that this be done for safety and soundness purposes and make sure you understand the existing authorities in the draft about the limitations that the uh bank regulators are are going to impose as well.
▶ 6:43:29So, I I'm not asking you to withdraw the amendment, but I am explaining to you that uh I think we ought to have some conversation about it. I'm happy to put it put it up for a vote again. Uh but um I think that would be helpful to to you and Mr. Castton as well. But yeah, I'll yield back too. Yeah. Thank you. And um yeah, I guess at this point, well, let's proceed, but I intend to put it up for vote. It'll just be useful to have everyone on record here. Yep. The gentleman yields back.
▶ 6:43:56Who seeks Uh if there no further debate then the question now occurs on the amendment offered by Dr. Foster. All those in favor please say I. I. Those opposed please say nay. Nay. Any been chair of the naysay have it. The nays have it. The amendment is not adopted. Request recorded vote. Recorded vote is requested. All those in favor recorded vote raise your hands. A sufficient number having raised their hand. A recorded vote is so ordered.
▶ 6:44:26Pursuant to subsection C5 of rule three of the committee rules, further proceedings on the amendment are postponed. Is there further amendment?
▶ 6:45:24hearing. No further amendments. The question now occurs on ordering the bill as amended, reporting to the House with a favorable recommendation. Those in Mr. I've asked twice, but I'll I'll now yield to the gentleman. A vote. H I thought I don't know. It just went radio silent there. We I didn't understand what you were talking about. Well, it was I was looking for something, but we didn't go radio silent. I asked if there was any more amendments, and I didn't hear anybody say anything. Yeah. Okay. I do. Yeah. Thank you.
▶ 6:45:52Gentleman's recognized for five minutes or got an amendment at the desk. The desk. Yep. Wait for the clerk to report it.
▶ 6:46:29Thank you.
▶ 6:47:00clerk to report an amendment to the amendment in the nature of a substitute HR2392 offered by Mr. Lynch of Massachusetts designated as 20. Without objection, the amendment will be considered as read. gentleman from Massachusetts recognized to explain his amendment. Thank you, Mr. Chairman. Uh, this amendment would prohibit all foreign issued stable coins from being offered or utilized in the US absent authorization.
▶ 6:47:26Uh, to safeguard the integrity of our financial system, we must ensure that foreign actors are not able to bypass US regulations and potentially compromise our economic Many of my colleagues also share the concern that if this bill were to become law, there is little to prevent large foreign issuers such as Tether from continuing to operate outside US law, paying by its own playing by its own rules and undermining the regulatory framework that we're trying to establish here tonight.
▶ 6:47:58I also have grave concerns that this bill might incentivize US-based stable coin issuers to relocate overseas simply to continue offering their products to American consumers from abroad. This would defeat the very purpose of this bill. Additionally, Tether has repeatedly been at the center of reports linking it to illicit activities, including being a preferred financing method for terrorist organizations and sanctions evaders. This is not a risk we can afford to ignore.
▶ 6:48:26If foreign issuers are allowed to operate freely in the US, they could continue to exploit the system to facilitate these dangerous activities. According to the Wall Street Journal, which has reported extensively on the abuse of digital assets by Russian middlemen to evade sanctions and trade for billions of dollars worth of weapons parts, quote, "Forl Vladimir Putin's war machine, Tether has become indispensable." Close quote.
▶ 6:48:51Russian companies have specifically relied on stable coin to procure drone parts and other high-tech equipment for Vladimir Putin's invasion of Ukraine with Russian middlemen converting rubles into tether and paying out local currency to foreign suppliers in China and the Middle East. Our prior oversight work on this committee has evidence the same.
▶ 6:49:13Just last December, we learned that Treasury's Office of Foreign Asset Control sanctions several individuals and entities associated with the TGI group. This international moneyaundering network used Tether and other stable coins to facilitate illicit activity and sanctions evasion on behalf of Russian Russian elites.
▶ 6:49:34If this committee wants to maintain a transparent, secure, and accountable US financial market that is the envy of the world, then we need to ensure that foreign actors do not undermine our system. Allowing foreign issued stable coins like Tether to operate without proper oversight would only expose American consumers to financial harm, but it would enable bad actors to continue exploiting loopholes in our regulatory framework.
▶ 6:49:59So I urge my colleagues to support this amendment to ensure that foreign issued stable coins cannot be used as a backdoor to circumvent the regulations that you are working to put in place. This is about making sure that the US remains a leader in financial regulation and that our financial system is not compromised by those who operate outside of our laws.
▶ 6:50:22So, if we are to pass this bill, it would be great if if it actually applied to all stable coins and that for those that would not comply, we keep those outside our borders. It's it's not it's not outside of what you've already considered in the main bill. It just uh it harmonizes I think our national interest with the purposes of the bill.
▶ 6:50:52Thank you and I yield back. Gentleman yields back. Who seeks Did you reserve a point of order? I I will withdraw my point of order. You didn't reserve one, but I'm going to assume that you reserve one and then you just withdrew it. Is that fair? I reserve and withdraw, Mr. There you go. Thank you. And I would move to strike the last word. Uh the gentleman from Wisconsin has gone to point of order and he is uh recognized for five minutes. I thank the chairman.
▶ 6:51:20Um I think I think it's worth noting that in the United States we have a history of allowing foreign firms uh that are from countries with substantially sim similar regimes to the US to be able to operate uh in the United States. And so as we leave stable coins and we think about other financial services spaces, uh we can think about the the banking sector where RBC, Royal Bank of Canada, uh is able to operate with integrity uh in the United States.
▶ 6:51:47Um, and so as we look back at how we structured the stablecoin bill, the amendment as offered would not allow any person to, and I'm going to quote this, would not allow any person to quote transact using a payment stable coin through the use of any medium or by any means of access to interstate commerce end quote. Uh, so we it would it would set up a structure uh of punishing an individual from using a foreign issued stable coin uh maybe that they acquired abroad. You can envision a scenario where a US citizen travels abroad.
▶ 6:52:17They engage in commerce with a stable coin outside the regime of the United States, outside the jurisdiction of the United States and then would return back to the United States maybe with that digital asset in their personal wallet. Um that that I don't think is something that we want uh to to criminalize the behavior of the the stable act. uh instead takes what I view as a balanced approach by restricting non-permitted stable coins ability to be offered uh on an exchange.
▶ 6:52:46We do not punish individuals for merely having a token in their wallet. And so I appreciate kind of the the thought process here of the underlying amendment. Uh but um I think the underlying text of the bill is a balanced approach is well reasoned and I think it works well and I encourage my colleagues uh to vote no uh on the amendment before us. Gentleman yields back seek recognition. Ranking member I move to strike the last word. Gentleoman's recognized.
▶ 6:53:17This amendment would include critical language that was originally proposed under um my bipartisan legislation that I had worked out uh with former chairman Mckenry, which addresses a loophole for risky offshore firms like Tether to issue a stable coin in the United States.
▶ 6:53:38This amendment would simply make it unlawful to issue directly or indirectly a payment stable coin for use by consumers in the United States that is not approved under this bill. This language would ultimately block foreign issuers like Tether, which is the largest global stable coin issuer, from issuing stable coins for use by US consumers without being subject uh to proper regulations, examinations,
▶ 6:54:08and enforcement by US regulators. Tether is widely known for its opaque operations and recognized as the stable coin of choice for criminal activity across the world like money laundering, terrorism, illegal trafficking, of cyber fraud, and more. Financial regulators and policy makers have long raised concerns regarding Tether's violations of economic sanctions and anti-money laundering rules.
▶ 6:54:37Tether's attestations also failed to provide sufficient transparency and address concerns about the company's practices. This amendment would ensure US customers are not subject to the risk arising from tether and similar shadowy stable coin firms without proper oversight. Um I just I think I heard Mr.
▶ 6:55:03style say uh there's no need for this that somehow it's covered or taken care of or will be covered and taken care of. I don't know which uh he said but it seems to me we would all be concerned about this. We're forewarned about Tether and some of their past activity and what they're capable of doing.
▶ 6:55:26What's wrong with adopting language here today that would ensure uh that uh we do not allow them to operate in this manner in this Mr. Hill, are you yielding back? I yield to you. Well, uh okay.
▶ 6:55:52Uh I think uh the Senate bill was insufficient on this point and I think our bill is quite clear that uh a stable coin issuer that's not incorporated and operating under the laws of the United States may not offer directly or indirectly that stable coin in the US unless they come into the United States and be subject to the US law or they operate in a rest in a in a juris jurisdiction
▶ 6:56:22that like we do for banking and like we do for securities has a substantially similar uh enforcement and regulatory system that our Treasury Secretary certifies as sub substantially similar. This is how we've operated globally.
▶ 6:56:41We have as chairman style noted foreign banks, foreign broker dealers, others doing business in the United States and they are uh admitted into the country either as is a branch in the case of some banks or they're operating the company pursuant to a reciprocal arrangement with their my time. Mr. Chairman, I'd like to get back to Mr. Lynch. He would not have proposed this uh if he thought it had been well taken care of. I yield to Mr. Lynch. Thank the ranking member.
▶ 6:57:09Look, this empowers our country. So So it it prevents a foreign stable coin from being offered directly or indirectly in the United States unless the government authorizes it. So this is a this is a shield. So look, we all know that Tether is is operating uh in Iran. It's it's it's uh facilitating the conversion of resources to Iran, Venezuela, Russia.
▶ 6:57:40Uh so this would allow your law that you're passing to be applied to those foreign stable coins. This would empower what you're trying to pass by giving the ability of Treasury to authorize those stable coins that you welcome and and want to have in the country.
▶ 6:58:06But it gives you the ability to reject those that are feeding, you know, uh, illegal finance, tax evasion. So Joe, this is me, this is was not a hostile amendment. This was no to be in harmony with what you're doing here. Gentleman's time is expired. Mr. Chairman, who seeks recognition? Timonss from South Carolina. Uh Mr. Timonss of South Carolina recognize the strike the last word. Thank you. I move to strike the last word.
▶ 6:58:36I I too want to speak against this amendment. Uh the purpose of the stable act is to create um a a global system that protects uh consumers and allows digital assets to thrive not only in the United States but in the in the global economy. This is not a US um we want to be the the center of the crypto future but we are not going to exclude the rest of the global economy.
▶ 6:59:05And while I disagree with this amendment, I actually do have an issue that I'd like to discuss uh regarding section three. And it really it's from the last six years of my time in Congress. My concerns with section 3 is the role of the Treasury Secretary and their ability to unilaterally uh deem a foreign regulator out of compliance.
▶ 6:59:27So we see the wild swings in policy from administration to administration whether it is at the SEC, the CFPB, DOJ, FBI and and the the the business community wants stability. They want predictability. They want to be able to invest long term and know that the world is not going to so violently change. And if that's not enough, just the predictability aspect of it, we also have the weaponization aspect of it.
▶ 6:59:54So the last administration you saw political appointees abusing their authority at the CFPB, at the SEC, at the DOJ and we need to learn from the past and we need to make the stable act more uh protected and insulated from political whims. So to that end and I I had an amendment that I was working on, but I I am not going to um submit it. I we've agreed to a colloquy and this is something that we're going to work on long term.
▶ 7:00:21But I I believe that the Treasury Secretary, if he deems a foreign regulator out of compliance, that there needs to be a a notice requirement where that foreign government uh receives a written notice of deficiency of what is wrong with their system and then have an opportunity to cure that deficiency with also having a national security exemption for exigent and extraordinary circumstances.
▶ 7:00:46I think that that additional check uh and balance will further allow the stable act to to thrive and allow digital assets to thrive in the global economy while making sure that the US is still the best place to start uh and to build a business. And I appreciate Chairman Hill and Chairman Styles's willingness to work with me on this. And um I look forward to making sure this issue is addressed in uh the bill that the president's going to sign shortly. Gentleman deal. Yes.
▶ 7:01:15I thank uh you for raising this issue. I think it's um it's very important that we get the Treasury Secretar's U role correct here and I'll say in conjunction with the all the regulatory agencies because it's in consultation with the stable coin regulators collectively that make a determination if a nation is comparable to the requirements under the act.
▶ 7:01:39That's the standard and this is the same kind of standard we use in other financial crossber financial regulatory uh situations so that uh we can count on the enforcement and the regulatory standards in the in the foreign country and so I think it's important that that analysis uh and and that there be an appropriate balance there. So I thank the gentleman from South Carolina for his uh work on this and I yield back to him. Thank you Mr.
▶ 7:02:09Chairman, I yield back. Gentleman yields back. Who seeks recognition? I'll recognize myself for five minutes. I want to thank uh Mr. Lynch for his um I'm sorry, Mr. Sherman, did you want to speak on this amendment? No, we're not ready for that yet. Just um momento. U I want to thank Mr. Lynch for his thoughtful amendment. I think he raises an important point.
▶ 7:02:32I think it's shared with both sides of the aisle that we want America to be the uh the name and rule of law as it relates to issuing payment stable coins and that people want access to the American market. They need to come in and be incorporated here and be subject to American um regulation and supervision. Uh and I respect his his views on that.
▶ 7:02:59I think this certification process that we have of foreign jurisdictions uh because I've seen it work in banking and securities can be uh made to work uh in a successful manner. I urge my friend from Massachusetts to engage in in thinking about that. The other thing that I note in his amendment I just would call to his attention chairman style referenced it early in his initial response is unlawful for any person.
▶ 7:03:26So uh when it we talk about it in an institutional context in an issuer or a regulated entity under the act so an exchange or someone engaged in the business but as Mr. Style noted people can incidentally not be in the business but would fall a foul of your wording. They could come back or they could have a business uh uh in Argentina.
▶ 7:03:50They could be using a non US stable coin in that business efforts outside the United States, have it in their wallet and seek to convert that back into dollars, for example, in the United States, and they might run a foul of the the way your amendment is precisely worded because they'd be just they're not holding themselves out doing business. They're just doing it incidentally, which is why we phrased it the way we did in section three of the of the draft bill.
▶ 7:04:19I'd urge my colleagues to work with Chairman Style if they have suggestions on section three. I think it's adequate to enforce the laws and it does not permit a uh stable coin issuer to come in to the US and issue or offer stable coins without being in a jurisdiction that's fully vetted and recognized by the United States.
▶ 7:04:43And I'd also just say for uh our discussion, I don't know of a stable coin issuer in the state of New York or internationally that's active that would meet the standards under the stable act. Meaning I think they all have a lot of work to do uh to meet the full requirements that are contemplated by the the stable act in order to be in fully in compliance. But again, I thank my friend. He and I have worked on elicit finance issues for years together.
▶ 7:05:10He raises an important point and I yield back the balance of my time. But I do urge my my colleagues to to reject his amendment and let's work together on section three. If there's no further debate, the question now occurs on the amendment from the gentleman from Massachusetts. All those in favor, please say I. I. All those pleased no opposed, please say nay. Nay. In opinion, the chair, the nays have it. The nays have. The amendment is not adopted. request roll.
▶ 7:05:39Uh roll call votes been requested. All those in favor of recorded vote, raise your hands. Sufficient number having raised their hand recorded vote is so ordered. Pursuant to subsection C5 of rule three, the committee rules. Further proceedings amendment are postponed. Is there an additional amendment? Mr. Lynch. Thank you, Mr. Chairman. Uh this amendment would Excuse me. I I have an amendment at the desk. Pause for it to be distributed.
▶ 7:06:16Chairman, Mr. Chairman, request a point of order. Uh, gentleman from KY's recognized for a point of order. Oh, you're reserving a point of order. Sorry, I thought you had a question. Beg, gentlemen's reserved a point of Clerk will report the amendment.
▶ 7:06:49Sorry. Stand by. We have the wrong Sherman a minute. Stand by. whatever is easiest. I'm happy to do whatever you guys want to cooperate.
▶ 7:07:24Yeah, Mr. Chairman, I have an amendment at the desk which I believe is the one they may have been handing out. the the clerk is distributing the amendment. Okay. Okay. So, I'm gonna go it's okay. They're going this one. I here we go.
▶ 7:08:11doing my two back to back. Good Nope. This one.
▶ 7:08:44It's gone as smooth as it has. They're not going to vote for it whether they read it or not. It's ML and then after that is right. You're back. Good.
▶ 7:09:48The Sherman amendment has now been uh distributed. Uh a point of order on the the Sherman amendment has been held by the gentleman from Kentucky and the clerk will please report the amendment. An amendment to the amendment in the nature of a substitute to HR2392 offered by Mr. Sherman of California designated as without objection the amendment is considered as read. Uh the gentleman uh from California is recognized for five minutes on his amendment.
▶ 7:10:16The crypto universe can thrive only if it is both above and below the water. You see, if it's just a method of that's subject all entirely to know your customer and anti-moneyaundering, it has no particular advantage over the US dollar and a lot of disadvantages, including the price changes every few minutes.
▶ 7:10:45So, it has to be above the water. A portion of it has to be subject to the know your customer and then it also has to function below the water without know your customer so that it becomes a payment system that has a substantial value to some people. Others may use it just because it's there but it has to have a substantial advantage to the majority of users.
▶ 7:11:10That advantage is that the underwater portion will be excluded from the anti-money laundering provisions. Now, this amendment would apply anti-moneying lo money laundering and know your customer requirements to all persons that transfer uh payment stable coins between wallets, including unhosted wallets.
▶ 7:11:33So, the crypto world isn't going to like this because it deals with the unhosted wallets. And an unho hosted wallet, I think, as we all know, is a situation where you're sending the money to a number, but you have no idea who that person is, and there's no way for law enforcement to find out even if they had a warrant.
▶ 7:12:02So, I can't say that I'm going to get a whole lot of support on the Republican side for this amendment, but this amendment would apply the anti-moneyaundering provisions to both the hosted and the unhosted wallet. Both the account at Coinbase where a court order could reveal the information and the numbered account where nobody knows who it is.
▶ 7:12:29So, if you have an unhosted wallet and you're unwilling to reveal uh who you are, then you can't play with the stable coin. Uh nor can the portion of the stable coin ecosphere that is above the water do business with you.
▶ 7:12:51Uh, I think it's a simple amendment and uh, I'm looking to see if anybody wants me to yield time and seeing none, I yield back to the chair. Gentleman yields back. Uh, the gentleman from Ohio, Mr. Davidson, is recognized to strike the last word. I thank the chairman. Look, the gentleman's amendment sounds like it protects people, but the reality is the underlying bill already offers the exact same protections.
▶ 7:13:15The know your customer obligations are very explicit on stable coin issuers and frankly the banks that customers would use to move money uh with you know their cash to acquire uh stable coins. So uh the know your customer provisions are already there. There are on-ramps and off-ramps. That's where the surveillance is. Individuals aren't uh complying with the bank secrecy act today. It would require rule making for people that aren't even covered.
▶ 7:13:44directly by it. The Bank Secrecy Act applies to people that operate uh banks and money service businesses and uh the the underlying uh stable act requires compliance with those laws. So the protections are in fact already there. I urge opposition to the bill and I yield to the chairman. Will the gentleman yield? I yield the chairman style. Okay. The gentleman is yield back. Does any other members seek recognition? Can you give me a minute? Mr.
▶ 7:14:15Foster is recognized for five Yeah. If the gentleman's right and the amendment is harmless, I would hope that the Republican majority would accept it. If the amendment has teeth and will prevent uh the use of unhosted wallets to evade the anti-money laundering provision, then I'm sure that all those who support uh every part of the program of the crypto community will oppose the amendment.
▶ 7:14:44So if the strongest argument against this amendment is that it's harmless, uh I think it would be accepted. Gentleman from Illinois, I yield back. The the gentleman yields back. Uh does any other members seek recognition? Seeing none, I recognize myself for five minutes uh on the bill. U requiring Finen and KYC of every single self-hosted wallets.
▶ 7:15:08Um not only not really appropriate in this particular legislative vehicle, uh but it would also really apply bank-like standards uh to individual Americans making transfers for their own personal and family purposes. It'd be like KYCing every physical wallet with cash in it, it'd be a dramatic invasion of personal liberty. So, the good news is with blockchain technology, there's transparency.
▶ 7:15:32So, law enforcement can leverage uh the transparency of the blockchain uh to follow the money between bad actors, but individual Americans should not be treated uh the same as financial institutions. And so I will be opposing this amendment and happy to yield to my colleague from Ohio if he wishes. I think the chairman made the point exactly. It wouldn't be a harmless amendment.
▶ 7:15:55It would actually create a rulemaking burden on uh Treasury to somehow find a way to start regulating individuals as if they were banks. And so it's a very bad idea and I yield to the chairman. The gentleman yields back. Is there any further debate on the amendment? Okay. If there's no further debate, the question now occurs in the amendment offered uh by Mr. Sherman from California. All those in favor signify by saying I. I. Those opposed, nay. The opinion of the chairs, the nays have it.
▶ 7:16:23The nays have it and the amendment is not adopted. On that, I request a recorded vote. Recorded vote is requested. All those in favor recorded vote, raise your hand. Uh a sufficient number having raised their hand. Recorded vote is ordered. Pursuant to subsection C5 of rule three, the committee rules of the committee rules, further proceedings on the amendments are postponed. Uh, is there an additional amendment? Yes, I have an amendment at the desk. Mr. Sherman has another amendment at the desk.
▶ 7:16:50This is the one that deals with We'll pause while the clerk distributes the amendment. Mr. Chairman, reserve a point of order. Gentleman from Kentucky reserves a point of order.
▶ 7:17:21The clerk will please report the An amendment to the amendment in the nature of a substitute to HR23. Without objection, the amendment is considered read. The gentleman uh from California, Mr. Sherman, is recognized for five minutes on his amendment. I think I can get a round of applause in the room by indicating this is my last amendment to this particular bill. True. This amendment is quite simple.
▶ 7:17:48It uh prohibits the uh use of mixers for any of these stable coins. and uh by the nature of uh and of course being added to the bill, it's uh authorized and directing the Secretary of the Treasury to issue the appropriate regulations. What is a mixer? A mixer is there to help make sure that even with a court order, the information is not available to law enforcement.
▶ 7:18:17A mixer is there to mix up law enforcement. Who wants to mix up law enforcement? people who are doing illegal things. So if we want these stable coins to uh play a good role in our society, we would not want them to be subject to use to to a to a mixing device which is there to confuse um
▶ 7:18:47law enforcement. I'll point out that uh just last month the Trump administration removed sanctions against Toronto cash which is a crypto mixer which was responsible for getting US dollars to terrorist organizations.
▶ 7:19:04Um, I hope that uh we would the there is no legitimate purpose of a mixer unless you think it's legitimate to hide transactions from the court system, including family law, where spouses are fighting about money, or you think it's legitimate to evade uh u uh law enforcement, including uh the IRS, when they have a warrant.
▶ 7:19:31And um if this is a chance for people to show whether they're on the side of law enforcement or on the side of those who can make money by designing a tool which is usable in a mixer system the sole purpose of which is to evade US law and to promote uh and facilitate criminality. Uh with that I'll look around. I see nobody asking me to yield time and I yield back to the chair.
▶ 7:20:00The gentleman yields back to the gentleman from Kentucky. Insist on his point of The gentleman withdraws his point of order. The gentleman from Ohio, Mr. Davidson, is recognized for five minutes. Strike the last word. I thank the chairman. Um, mixers sound okay until when you listen to Mr. Sherman. But the reality is there is a legitimate use case when you have a checking account. And in the old school days, you would write longhand the checking account. It had your routing number and checking account number. That was a security risk.
▶ 7:20:27So people have diminished checks, but it didn't reveal how much money you have in your bank account. The reality is the because a public blockchain is there, it's knowable how much is in the wallet that the money was transferred from. So you wouldn't want to necessarily reveal how much money you have.
▶ 7:20:47So, what the gentleman refers to as mixing is simply sometimes taking a wallet that has a significant amount of money in it and mixing it so that you move it into a smaller wallet. So, you're only paying the $200 for the service uh and not revealing that you might have, you know, $10,000 in the wallet that it was moved from.
▶ 7:21:11So, it is a useful purpose for legitimate uses by law- abiding citizens and it shouldn't be undermined by the gentleman's amendment. And I yield to chairman. The gentleman yields back. Uh, does any other members seek recognition? Um, the incorrectly name plate labeled uh Mr. Casten from Illinois is recognized. Mr. Casten, Miss Waters, whatever you'd like to refer to me as. Thank you, Mr. Chairman.
▶ 7:21:42Um, so I support Representative Sherman's amendment and I wish we could have a conversation about this issue that is not doesn't so quickly get into intellectual dishonesty. We hear on the one hand that we don't need all this enforcement. We don't need all this tracking because the blockchain lets us know all the history of transactions. On the other hand, it's really important for us to have anonymity because there's all sorts of reasons why we have to have mixers. Those two things are not intellectually consistent.
▶ 7:22:07And we need Representative Sherman's amendment to do something really important to say that entities who are deemed payment stable coin issuers under this bill would have to prevent their tokens from being laundered through mixers because that's what they do. We know that mixers which obiscate the source destination or amount involved in their transactions play a serious role in financial crime including money laundering.
▶ 7:22:28Treasury's Financial Crime Enforcement Network working with law enforcement, other national security agencies, issued a determination in 2023 that convertible virtual currency mixers were quote a primary moneyaundering concern.
▶ 7:22:43This rare designation from Fininsen was issued because, as Fininsson said at the time, quote, "Mixing transactions are frequently used by criminals and state actors to facilitate a range of illicit activity, including but not limited to money laundering, sanctions evasion, and WMD, weapons of mass destruction, proliferation by North Korea, Russian associated ransomware attacks, and illicit darknet markets.
▶ 7:23:06Further, a recent assessment by Fenen determined that the percentage of transactions processed by mixers that originated from likely illicit sources is increasing. quote. To say that pay payment stable coin issuers would have to build protections into their technology to block mixer addresses on their blockchains is to say that these US dollar back stable coin issuers will take action to make it harder for ransomware perpetu perpetrators, cyber thieves, and fraudsters to launder the proceeds of their crime.
▶ 7:23:36That seems important. It's one that I would think everybody here should support, especially if we're all concerned, as I think we are, with fentanyl trafficking, Iran, North Korea's nuclear ambitions. The idea that this is just some like noble person who wants to hide their bank account violates all the fact that we know how people are using this. They're using it to do bad things and to hide their trails. I can't imagine under what circumstance.
▶ 7:24:03It is in the United States interest to make it easier for people to traffic drugs, to facilitate weapons of mass destruction, to fund the North Korean nuclear program. I don't think that is the purpose of US fiscal policy. We need Mr. Sherman's amendment, not just vote for it. We need it if we're going to say we believe what we say we believe. Urge my colleagues to support the amendment, yield back. Gentleman yields back. Does any other member seek recognition on the Seeing none, I recognize myself for five minutes to strike the last word.
▶ 7:24:32Um I I think this broader conversation which relates to sanctions is a pretty worthy uh conversation of the committee. The bill is really just not the appropriate vehicle uh for this type of restriction that would fall on entities other than payment stable coin issuers uh because it falls on other market participants. Uh so in addition, this amendment I think is also a little overly broad uh and under specified. Uh it risks sweeping into a prohibition the providers of software services that can be used uh by the general public including for lawful purposes.
▶ 7:25:03And so the gentleman is only interested in prohibiting mixers being used to evade uh other sanctions. And that is a different amendment uh with a narrower scope uh than the one he's proposed. something that's probably worthy of a conversation uh in a dialogue as we look uh to move forward in the broader digital asset space. So, I appreciate um maybe the intent of the underlying um amendment uh but I don't think that it's specific.
▶ 7:25:28I think it's outside the context of the underlying bill and so I'd encourage my colleagues uh to vote no on the bill. Is there further debate on the amendment? Seeing none, if there's no further debate, the question now occurs in the amendment offered uh by the gentleman from California, Mr. Sherman. All those in favor signify by saying I. All those opposed, no. No. In the opinion of the chair, the nos have it. The nos have it and the amendment is not adopted. I ask for recorded vote. Recorded vote is requested. All those in favor recorded vote raise your hand.
▶ 7:25:57A sufficient number having raised their hand. Recorded vote is ordered. Pursuant to subsection C5 of rule three of the committee rules, further proceedings on the amendment are postponed. Is there an additional Mr. Foster is recognized. My amendment. Yeah. Okay. Yeah. I have an amendment at the desk.
▶ 7:26:28Is Foster. Mr. Foster has an amendment at the desk. Does the gentleman from Kentucky request a point of order? reserves a point of order. The gentleman reserves a point of order. The clerk will report the amendment.
▶ 7:27:09an amendment to the amendment in the nature of a substitute. That objection amendment is considered read. Uh the gentleman from Illinois is recognized for five minutes on his amendment. Uh thank you, Mr. Chair. Um, my amendment uh simply inserts uh the language from the Senate bill uh that will require stable coins issued under this bill to build the capability to freeze, seize, and burn uh the tokens themselves when they're identified uh to have been used for illicit purposes um such as drug
▶ 7:27:40trafficking, terrorism finance, you name it. Um, and these provisions just allow stable coin issuers in coordination with law enforcement officials to freeze, confiscate, or destroy these u stable coins. Um, nearly all of the major stable coin issuers operating in the United States today have this capability already built into their stable coins. And this amendment would simply make clear that this should be the standard for all stable coins issued here in the United States.
▶ 7:28:06Uh in our March 11th full committee hearing, uh one of the Republican witnesses u you know enthusiastically um pointed out that they had been very successful at um at blocking some major um illicit activities using these capabilities. Uh in fact, just this last month, stable coin issuers have reportedly used this cap ability to freeze nearly $30 million in stable coins associated with suspicious activity or sanctions.
▶ 7:28:35Um, digital assets without this capability have almost no mechanism to limit their movement around the world, allowing them to be stolen by bad actors sent overseas, run through a mixer, and deposited into the pockets of scammers, criminals, and our adversaries. It's not perfect, but it allows you, among other things, you can't always detect which wallets have been used for bad purposes.
▶ 7:28:57uh but when you do detect that it'll provides a mechanism uh to be able to to freeze and and reverse mistaken or fraudulent transactions. So although this language won't entirely halt the use of stable coins and elicit finance, it allows the assets to make be made useless or inaccessible to criminals once they've been identified. Um so I appreciate why the Senate in included this language and that's why I'm offering this amendment. That's it. Yield back. The gentleman yields back.
▶ 7:29:27Does any member seek recognition? Does any members seek Mr. Does the gentleman from Kentucky insist on his point of order? The gentleman withdraws his point of order. Mr. Castton from Illinois, now properly labeled, uh, is recognized to strike the last word. Uh, thank you, Mr. Chair. I want to support Mr. Foster's amendment. This amendment would add important national security capabilities to this bill.
▶ 7:29:57It would ensure that regulators require payment stable coin issuers to build into their technology the capacity to freeze on chain. So that means that payment stable coin issuers who are created by this bill would have the tools to restrict access to funds uh held in those stable coins in the event that they need to do so to comply with regulations to prevent illicit activities. Um let's let's just imagine a scenario.
▶ 7:30:19The FBI comes to a payment stable coin issuer proof court order says that US registered corporate entity to which it sold its stable coins is actually owned by Iran's Islamic Revolutionary Council Guard or the Sinaloa cartel or some other bad actor.
▶ 7:30:35The issuer would then have the tool to freeze the addresses, blacklist and even confiscate those tokens that would ensure that bad actors would not be able to access or transfer those tokens to continue with their fraud, moneyaundering or sanctions evasion Many of the prominent existing stable coin issuers such as Paxos, Tether and Circle already have this capability and many new companies that arise should be compelled to do the same. I would add that similar language is already in the Senate's Genius Act. So we should have the same protections in the House stable coin bill.
▶ 7:31:04Urge members to support the amendment and I yield back. The gentleman yields back. Is there further debate on the amendment? Seeing none, I'll recognize myself for five minutes. Um I would strike the last word. uh statutoily requiring all payment stable coin issuers under the bank secret secrecy act to block freeze or reject transactions that would raise legal technical and policy problems.
▶ 7:31:27We want to be careful not to push innovation into closed systems and riskdriving development offshore undermining the open interoperable financial ecosystem that stable coins help enable. Uh the stable act already requires issuers to engage in robust BSA compliance uh including via AML programs monitoring suspicious activity uh which can include uh appropriate dist distributed ledger analytics uh as well as compliance with sanctions.
▶ 7:31:56Uh because of that I urge my colleagues to reject this amendment uh and I yield back. Is there further debate with it? If there's no further debate, the question now occurs on the amendment offered uh by the gentleman from Illinois, Mr. Foster. All those in favor signify by saying I. I. All those opposed, no. No. In the opinion of the chairs, the nos have it and the amendment is not adopted. Recorded vote. The gentleman requests a recorded vote. All those in favor recorded vote, please raise your hand.
▶ 7:32:26A sufficient number having raised their hand. A recorded vote is ordered pursuant to subsection C5 of rule three of the committee rules. Further proceedings on the amendment are postponed. Is there an additional It m would like first. Whatever you want to go first, Mr. Casten of Illinois has an amendment at the desk.
▶ 7:32:56I'd like to reserve a point of order. The gentleman from Kentucky reserves a point of order.
▶ 7:33:34The clerk will please report the amendment. An amendment to the amendment in the nature of a substitute to HR2392. Without objection, the amendment is considered read. Uh the gentleman from Illinois is recognized for five minutes on the amendment. Thank you, Mr. Chairman. Um the I want to just comment there's a consistent theme here that when when the Democrats are introducing legislation to prevent criminal activity, the response is this would constrain innovation.
▶ 7:34:00Um I would note that if we were to pass a bill that said Walter White cannot excavate a cavern underneath a dry cleaner, that would also constrain Walter White's ability to innovate. Um, not all innovation is good, my friends. Um, there are a lot of smart criminals in the world who do a lot of innovation. Um, it ain't always good. Um, even though I'm told that that meth that Mr. White made was really exceptional. Um, what this amendment would do is to build on Mr.
▶ 7:34:27Fosters amendment by directing the Treasury Department in consultation with the Department of Justice to propose a rule that outlines under what scenarios a stable coin issuer must act to block illicit stable coin transactions without explicit authorization. The amendment would also apply to foreign issuers like Tether. Similar to traditional banks, stable coins can play an important role in restricting access to assets limited to criminal activity.
▶ 7:34:53Financial institutions today have systems in place to block, freeze, reject transactions, report suspicious transactions to Fininsen, file currency transaction reports with OFAC, SARS, what have you. Similarly, stable coins are generally centrally controlled, allowing issuers to freeze and even burn tokens associated with illicit activity. We've heard people in this committee who've been in prior hearings have made that point. Stablecoin issuers work with law enforcement agencies and blockchain analytics firms to monitor transactions in real time. that happens already.
▶ 7:35:21When suspicious wallets are identified, stable coin issuers can blacklist addresses, preventing criminals from using the frozen funds and assisting authorities in recovering those funds. Stable coin issuers generally only act to freeze stable coin transactions if they receive a court order or a directive from a federal law enforcement agency.
▶ 7:35:38Although I would note that there have been instances where stable coin issuers have acted without explicit authorization to blacklist wallets linked to North Korean state sponsored However, there has been some criticism of at least one stable coin issuer, I believe this was Circle, for taking four months to cut off North Korea's funding streams. We got to understand four months, and this goes back to the the comment I made before about Axel Foley and Beverly Hills COP. It is one thing to say these things are illegal.
▶ 7:36:07It is something else to say, do our enforcement authorities have the ability to move quickly enough? Took them four months to shut off North Korea's funding returns. Well, let's let's review the bidding. Last month, it took just two minutes for North Korean hackers to steal $1.5 billion from Bybit, one of the largest cryptocurrency exchanges, and start moving those funds. The hackers were able to launder 300 million of that or 20% of that total of those stolen funds almost instantaneously because of the nature of digital money.
▶ 7:36:37According to the blockchain analytics firm Elliptic, those funds have quote gone dark and will likely never be In that context, if you're going to take four months to shut it down, you might as well take never because the money's gone. Since 2017, North Korea has stolen more than5 billion dollars worth of cryptocurrency, including this latest exploit. Experts say that the North Korean hackers are working nearly 24 hours a day and potentially funneling the money into the regime's military development, including their nuclear weapons program.
▶ 7:37:08In fact, national security officials estimate that that half of North Korea's nuclear program is funded by cryptocurrency theft and cyber attacks. So, this committee serious about addressing those national security risks, lawmakers, regulators, and industry have to remain vigilant about and consider tactics to respond to activities like North Korea's use of cryptocurrency to develop nuclear I think this amendment strikes the right balance between providing adequate tools to detect and prevent illicit activity while also safeguarding against unreasonable searches and seizures
▶ 7:37:38and protecting privacy. I urge my colleagues to support this amendment and I yield back. Does any does the does any other member seek recognition? Mr. Foster of Illinois. I I just want to say that there are examples you can think of of pretty simple rules that all of us would agree should trigger uh action.
▶ 7:38:00You know, for example, if it's found that this wallet is under the control of a sanctioned entity, you know, that should there should be a default understanding that everyone involved should immediately freeze that. Uh and so, you know, there there are simple rules. There are times when you have to go to a court. The situation's complicated. Go to a court, have it discussed, you know, get a warrant and have an action taken that way. But there's a real merit to having rules for the simple cases. And that's why I support this amendment.
▶ 7:38:31Gentleman yields back. Gentleman yields back. Um, Mr. Lynch, Massachusetts, recognized for 5 minutes. Thank you. Uh, I I certainly support uh Mr. Cassen's amendment. um given the nature of of of stable coins themselves, but also recognizing that since February 10th, uh President Trump has suspended the Foreign Corrupt Practices Act.
▶ 7:38:54And so we have very little operationally to thwart uh the type of activity, illicit and illegal activity, criminal activity that Mr. Kassen is trying to get at in his amendment. So with that, I I'll yield back. Gentleman yields back. Does any other members seek recognition? Seeing none, I'll recognize myself for five minutes for the purpose of striking uh the last word. Um I rise to oppose Mr.
▶ 7:39:24uh Casten's amendment. I think it's really important to note that under current law, OFAC already requires all US persons uh including entities in the US and incorporated in the US to block transactions involving sanctioned persons. So in other words, blocking is already part of OFAC regulations and therefore the amendment uh is unnecessary.
▶ 7:39:46Uh there's there's also a litany of other tools that digital asset firms and stable coin users use to prevent these kinds of transactions before they happen in the first place. So uh with that said, uh I urge my colleagues to oppose the amendment and I yield back. Is there further debate on the amendment? If there's no further debate, the question now occurs on the amendment. If the gentleman from Kentucky withdraws the gentleman from Kentucky withdraws his point of order.
▶ 7:40:13So the question now occurs in the amendment offered by the M. Mr. Casten of Illinois properly labeled. I should be able to get this. All those in favor of the amendment shall signify by saying I. All those opposed, no. In the opinion of chairs, the no have it. Nos have it. The amendment is not adopted. A recorded vote is requested. All those in favor of recorded vote signify by raising your hand. A sufficient number having raised their hand. A recorded vote is ordered.
▶ 7:40:39Pursuant to subsection C5 of rule three of the committee rules, further proceedings on the amendment are postponed. Is there an additional amendment? Mr. Lynch of Massachusetts is recognized. Thank you, Mr. Chairman. Mr. Chairman, I believe I have an amendment at the desk. Mr. Lynch has an amendment at the desk. The clerk will distribute the amendment.
▶ 7:41:19The clerk will please report the amendment. Thank you, sir. An amendment to the amendment in the nature of a substitute to HR2392 offered by Mr. Lynch. Without objection, the amendment is considered as read. Uh, the gentleman from Massachusetts, Montana. The gentleman from Montana is requested. Point of order. Mr. Chairman, I'd like to reserve a point of order. Point of order has been reserved by the gentleman of Montana. Uh, without objection is considered as read. The gentleman from Massachusetts is recognized for five minutes on this amendment. Thank you, Mr. Chairman. Mr.
▶ 7:41:49Chairman, this amendment would prohibit stable coins from being issued if they are pegged to the national currency of a hostile foreign power. This committee should not allow stable coins to be redeemable in money issued by China, Iran, Russia, North Korea, and other nations that are hostile to US interests.
▶ 7:42:07Additionally, stable coins should not be redeemable in money issued by the China sponsored Asian Infrastructure Bank, the China sponsored New Development Bank, and the Russian sponsored Eurasian Development Bank.
▶ 7:42:20As reported by the president's working group on digital assets, stable coins and other digital assets can be readily exploited by terrorist financeers and money launderers and governments proliferating weapons of mass destruction to perpetrate illicit activities and evade US and international sanction regimes.
▶ 7:42:40In particular, foreign stable coins, CBDC's, and other digital assets could be developed to operate outside an integrated international financial system, thus making it easier for rogue actors or countries that are subject to sanctions to avoid those US sanctions. given the national security concerns and the lack of robust financial regulatory reg regimes and the president's February 10th um suspension of the foreign corrupt practices act.
▶ 7:43:10Stable coins issued in the US should be limited to the money issued by the Fed or G7 nations. With that, Mr. Chairman, I yield back. Gentleman yields back. Who seeks recognition? The gentleman from Wisconsin. I'm sorry. Beg your part. Mr. uh Downing from Montana is recognized to strike the last word. Yes. I'd like to withdraw my point of order. Withdraw your Sorry. Thank you.
▶ 7:43:39And he withdraws his point of order. Mr. Style, we recognize to strike the last word. Thank you very much. Uh Mr. Chairman, uh first uh I think it's worth noting the stable act does not permit foreign governmentissued obligations to act uh is reserves. So um this amendment is really a solution in search of a problem.
▶ 7:44:00Uh second, the amendment specifies foreign governments that are subject to sanctions but by definition it'd be illegal to transact with such a government as all property and interests in property of the government would be blocked. So, so in other words, even if the bill allowed foreign government issued reserves, which again it doesn't, it would still be illegal to p purchase securities of sanctioned foreign governments.
▶ 7:44:26Uh so the amendment is actually two solutions in search of one problem, two problems, three problems uh that don't exist. So I urge my colleagues uh to reject the amendment. Uh and Mr. Chairman, I yield back. Gentleman yields back. who seeks recognition. Mr. Cassen of recognized the strike last word. Thank you, Mr. Chair. I want to commend Mr.
▶ 7:44:49Lynch for offering this amendment to ensure that the payment stable coins discussed in this bill cannot be backed by currencies of nations that present a national security threat to the United States. Representative Lynch's amendment prohibits governmentbacked obligations of nations like Iran, Russia, Burma, Bellarus, and North Korea from being included in a payment stable coins reserves.
▶ 7:45:09Importantly, it also means that the currencies and central banks of those nations will not have the benefit of being co-mingled in the same basket with stable, reliable, credible, and real currencies like the US dollar, euro, British pound, what have you. We've targeted with sanctions the governments, governmentbacked enterprises and officials of those nations for good reason.
▶ 7:45:29And we have designated certain nations as state sponsors of terrorism for very good Representative Lynch's amendment will make it clear that those who want their stable coins to be used by US individuals and entities cannot provide economic benefits to those bad actors as well. Urge my colleagues to support this common sense amendment and I yield the balance of my time to Mr. Lynch. Thank you very much. I think the gentleman for yielding.
▶ 7:45:54I would like to remind my my colleagues that earlier uh the majority rejected an effort to prohibit foreign issued stable coins from being sold in this country. So there's nothing to stop foreign stable coins from being backed by those foreign assets at all. There's no no prohibition on that all at all.
▶ 7:46:19And my amendment would been would have been to authorize authorize the government to reject those applications. Will a gentleman yield? I would I think it's worth noting maybe there's a point of clarification that that would be helpful here in the structure of the bill. Uh a foreign issued stable coin would still be subject to the rules and regulations of the bill. it would be a foreign issued stable coin from a similar from a substantially similar regime is as authorized by the secretary of the treasury.
▶ 7:46:48Uh and so therefore uh the the functions of the bill would apply to that stable coin if you're allowing them to operate either directly or indirectly without without authorization by the United States. How would you know? How would you know on a on a a public blockchain? How would you know? Okay, gentlemen, yield. I I yield. I'm happy to yield to a colloqui. I think it's my time, but I'll yield to the chair. Okay.
▶ 7:47:19Sorry. Sorry, forgot about that. Uh, no, I'm happy to yield. Well, let me just respond briefly on that. to reiterate that a a foreign issuer, somebody that is a a foreign stable coin issuer outside the United States may not issue that in the United States in the secondary market or issue directly without being in a regime, United Kingdom, Switzerland, uh you name the location that has been certified
▶ 7:47:50by the Secretary of the Treasury and the federal payment stable coin regulators that it is substantially similar both on the reserves, the audit standards, the enforcement standards, etc. So, let me yield back to the gentleman. That that's my only point there.
▶ 7:48:04Well, this would just solidify that investing or or having uh assets backed by any of these hostile powers would not be substantially similar uh to to or under that under that that regime under that protocol. Well, gentlemen, I know we're still gentleman yield. Let me the gentleman from Illinois. Let me answer that question. I'll yield to the gentleman who I yield to the gentleman in front.
▶ 7:48:35So I I hear what you're saying, but of course we already in a hostile regime that wouldn't be a certified entity because under all the other laws, the secretary of treasury wouldn't do that and the bank regulators wouldn't do it and they wouldn't qualify. Okay. Reclaiming my time. You back.
▶ 7:48:54So, so it seems like we are bending over backwards in this bill to refrain from taking any action against anybody who's operating uh even even hostile powers. Those you know we we that's a bridge too far. We we cannot we cannot protect uh the consumers. We cannot protect them uh from bankruptcy.
▶ 7:49:17We cannot protect them from uh bailouts because dear Lord that would that might inhibit the operation of these stable coins. We can we can cut 800,000 people, excuse me, 80,000 people from the VA. We can lay off, you know, 20,000 researchers at HHS, but we can't find a way to protect the American people in this bill. So, I'll yield back. I yield back to the gentleman from yield. Cast yields back.
▶ 7:49:47who seeks recognition. Is there any further debate on the amendment? If there's no further debate, the question now occurs on the amendment offered by the gentleman from Massachusetts, Mr. Lynch. All those in favor, please say I. All those opposed say no. No. The nose have it and the nos the amendment is not agreed to. The gentleman requests a recorded vote with those wanting a recorded vote.
▶ 7:50:16Raise your hands. A sufficient number having raised a voted recorded vote is uh agreed to. Pursuant to uh C5 of rule three, the committee further proceedings on the amendment or postpon. Is there additional amendment to the style ANS? Mr. Foster. We have an amendment at the desk. Stand by. Let us have it distributed.
▶ 7:50:52Gentleman from Montana. Mr. Chairman like to reserve a point of order. Gentleman reserves a point of order.
▶ 7:51:26Clerk will report the amendment. An amendment to the amendment in the nature of a substitute to HR2392 offered by Mr. Foster of Illinois designated as 19. The amendment will be considered as read and I yield to the gentleman from Illinois, Dr. Foster for five minutes to explain his amendment. Thank you, Mr. Chair.
▶ 7:51:49Um, this bill authorizes uh every stable coin issuer to create a potentially vast payment highway with unlimited numbers of anonymous unlicensed vehicles and with an anonymous unlicensed drivers on it. Um, with everything u dangerous that can happen on such a a roadway.
▶ 7:52:08Um I believe that there is a a marketplace will be a market demand uh for a a similar type of of payment mechanism where the participants are actually licensed in some way specifically KYC or something similar to that so that you have an assurance for example if you go on a social media account and there's a blue check mark that this is a person who is a real person who if they do harm is legally traceable.
▶ 7:52:35You don't have to know who they are, but you have to have some assurance that that if they do you harm, if your screen locks up with ransomware, um you know, demanding a payment in in this coin that you can actually go to, uh the legal system, figure out who they are, um and you know, haul them into court if they've done something illegal.
▶ 7:52:56Without that assurance, everyone operating um on on the payment rails that are proposed by this bill, you know, must understand that um they may be aiding and abetting criminal activities simply by using these. And not many people want to do that. Um and so uh there there multiple ways that this can happen.
▶ 7:53:18Um it was pointed out in earlier in the debate that you could have a permission blockchain where simply the permission was getting KYC and I think that would be a very simple certainly technically feasible mechanism and then operating with that coin um you you'd know that everyone was KYCed. I want to emphasize this was an optional thing.
▶ 7:53:38This is this is this is something that should be allowed uh of and recognized um by by this legislation that um some people may want to have coins where all of the participants in that in that coin are are simply legally traceable people um with with all the anonymity that uh you know normal banks and more would allow.
▶ 7:54:03Um, this would also I be very useful for self-hosted wallets, which is not um not immediately obvious. The mechanism proposed here would allow you if you spin up a self-hosted wallet and you say, "Okay, this is um I have my little piece of hardware with a self-hosted wallet on it, but but I want to play I want to participate in a um in a coin where all of the players are legitimate and traceable." um still you know they can be anonymous until a a criminal activity has has
▶ 7:54:33been detected but you can then register that self-hosted wallet with an entity get yourself KYCD and then anyone looking at a transaction to your self-hosted wallet um would be able to tell that okay you are a legally traceable person you are not a crook because you know the vast majority of people using stable coins are not crooks uh they're operating off exchanges they've already been KYCed in fact um in all probability, but there is an edge case of the people that are not.
▶ 7:55:02And we do not, I believe, want to construct an on-ramp for uh converting dirty money back into clean money. Um, and this would allow you, um, back to the self-hosted wallets. Actually, there's some benefits in self-hosted wallets. If you're worried that the exchange you're operating on will go bankrupt and all of your your your coin will be tied up in bankruptcies, you feel more secure with a self-hosted wallet. That's fine.
▶ 7:55:25But at the same time with the mechanism proposed by this amendment more similar ones you can actually uh participate and have the benefits of self-hosting and the benefits of of um you know of everyone involved in that coin know that you are not a crook and I think it's the benefits of that sort of mechanism are going to be much wider than simply uh coins stable coins rather for example NFTTS the market's basically shut down because of the amount of fraud on it.
▶ 7:55:55If all of the the participants there had the ability to um to identify themselves in a legally traceable but anonymous way would um I think there might be a hope of actually rescuing the NFT market and making it into something more successful than it currently is. Uh anyway, that's um that's the mechanism that this is about and there there multiple ways of accomplishing that.
▶ 7:56:18But I think it'd be very valuable if this legislation recognized that there was a role for coins where the players in that coin are are basically KYCed. And that's uh that's the purpose of the amendment and happy to work with anyone who'd like to to um you know perfect this but I think it's a very valuable thing that we should be pursuing would be very important in getting my support for the underlying bill. Thank you.
▶ 7:56:44I yield Gentleman yields back. Who seeks recognition? Mr. Style, you're recognized to strike the last word. Thank you very much, Mr. Chairman. Um, I rise in opposition Mr. Foster's amendment.
▶ 7:57:00Um, I think it's important to note the stable act already treats stable coin issuers is financial institutions under the bank secrecy act uh and even delineates uh with strict requirements issuers uh that that issuers must comply with. Um the treatment already encompasses appropriate know your customer procedures.
▶ 7:57:22Uh so this is another amendment that restates current law and for that reason I view it as unnecessary and urge my colleagues to oppose uh the gentleman's uh amendment. I'd also note my colleagues amendments are really outside the scope of the bill and private sector entities are already working to provide options um that the my colleague is is concerned about uh by providing wallet verification broader uh analytic services optional wallet verification by the government's
▶ 7:57:52uh not appropriate uh for discrete payment stable coin bill designed to ensure the soundness of stable coins. Um, and so with that, I would urge my colleagues to oppose the amendment and I'll yield back to the chair. Gentleman yields back. Is there further debate? Mr. Downing, do you continue to ask for your point of order? Mr. Chair, I withdraw my point of order. Who seeks recognition? Ranking member is recognized to strike the last word.
▶ 7:58:22I move to strike the last word. You're recognized. This amendment would seek to develop a path by which an individual wallet holder could choose to have their personal wallet verified as compliant with the bank secrecy act in asking the financial crimes enforcement network that is Ben to establish standards centralized exchanges, payment stable coin issuers and other uh financial institutions that have customer identification
▶ 7:58:52program and which um do customers due diligence could add essentially a seal of approval to a willing customer's wallet. Such a seal could travel with the customer through their transactions facilitating their safe secure onboarding into the financial system.
▶ 7:59:15The concept is an interesting one that seeks to create a voluntary option for those who wish to choose accessible secure identity over the anonymous and dark corners of the crypto ecosystem. So I support the idea and support Mr. Fosters's amendment. I yield back. Gentlewoman yields back. So what? Anyone seek recognition to talk on Dr.
▶ 7:59:42Foster's Mr. Chairman, General, I will yield to Mr. Foster. I I just want to um emphasize the voluntary nature of this that I I think it will be very useful if there's someone on the other side of a crypto transaction.
▶ 7:59:59You don't have to know who they are, but it would be very valuable to know that if they something bad happens that you actually um you have some assurance that you'll be able to figure out who they are under some appropriate legal pattern. I think there would be a real appetite for that. It could be very lightweight.
▶ 8:00:17You know, for example, you could get out your digital your real ID compliant digital driver's license, go hit um you know, competent federal authority and said, "Yep, you have just uh pass KYC for that for that purpose." So that this could be a almost instantaneous thing that would not be really very intrusive to the customer who was a good actor and simply wanted to be able to prove it and prove to the world that this wallet was a clean wallet. And so that's the purpose of the amendment.
▶ 8:00:43I think it it would be a real boon, frankly, to the the whole stable coin ecosystem and the crypto ecosystem as a whole. Um, thank you. That yield Gentleoman yield back. Gentleoman yields back. Who seeks recognition? Uh, if there's no further debate, the question now occurs on the amendment offered by the gentleman from Illinois. All those in favor, please say I. I. Those who are opposed shall signify by saying nay. Nay.
▶ 8:01:13The pendant chair of the naysay have it. Nays have it. The amendment is not adopted. Recorded vote is requested. All those in favor recorded vote raise your hand. A sufficient number having raised their hand. A recorded vote is so ordered. Pursuant to subsection C5 of rule three of the committee rules proceedings are It's my intention to push through and continue this markup until we've completed consideration of all the noticed legislation.
▶ 8:01:40So, I invite members and staff to be prepared for votes late into the evening. Is an additional amendment to Mr. Styles uh amendment in the nature of substitute. Mr. Licardo. Uh thank you, Mr. Chair. Uh I believe I have an amendment at the desk. If you'd pause, we'll have it distributed. Should be the with the one with the number 008. Thank Mr. Downey, reserve a point of order. The gentleman's recognized. Uh, Mr. Chair, I move to reserve a point of order.
▶ 8:02:08A point of order is reserved by the gentleman from Montana.
▶ 8:02:53Clerk will report amendment to the amendment in the nature of a substitute to HR2392 offered by Mr. Licardo of California designated as eight. The amendment will be considered as read and I now call on the gentleman from San Jose, California to speak for five minutes in support of his amendment. Uh thank you, Mr. Chair. Uh again this amendment is focused on section three uh because I think we recognize what's happening in the market with stable coins.
▶ 8:03:23The largest issue of course is outside the country uh and the extr territorial effect of our regulation is of concern uh and certainly we know that uh very very limited um reciprocity is the framework that's set out in this bill and I understand why I know it's a very pragmatic approach.
▶ 8:03:43Uh my concern specifically is that the determination of the secretary of treasury about whether the regulatory regime of that foreign country uh is in the terms of the bill comparable to the requirements under this act is not guided by any specific criteria in my view and the word comparable I believe could be strengthened.
▶ 8:04:06What I had suggested is language uh very similar to what we see in the Senate version of this bill uh that would require the Senate to consider a number of specific elements such as reserve requirements, supervision, sanctions, compliance standards and other elements that we know are critical for any uh appropriate regulatory regime uh that we should have confidence and trust in.
▶ 8:04:29Of course, the elephant in the room is again Tether, which I have no reason to believe is anything other than um a well operating uh company. I don't know pretend to know anything about Tether beyond what I read in the news. Uh but I am concerned about conflicts of interest given uh the position that Commerce Secretary Lutnik held as CEO of the company that was uh or is still the primary custodian of Tether. I know he stepped down as CEO. His son is now the current chairman of that company.
▶ 8:04:57uh I am concerned that we have very clear very specific guidelines for the secretary treasury's determination so that we can all have confidence about uh reciprocity and how it will be applied. Um I know I've had good conversations with Mr. Style and the chairman. I appreciate that. Um and certainly I'd welcome Mr. Styles's uh response if the chair would be willing to enter cl a cloquy. I I appreciate uh my colleague from California, Mr.
▶ 8:05:27Licardo, and appreciate your your thoughtfulness and approach uh to this legislation. Uh and and your your work to further refine uh the bill and in particular section three. Um as noted, the current draft provides the secretary the ability to determine when foreign regimes are comparable to the requirements uh of the act. And so it's my intention uh that comparable regimes be subject to robust standards and that the American holders of stable coins are protected. I think that we we share this as a mutual goal.
▶ 8:05:57Um and so my colleagues looking for more assurances. I'm happy to work with you in further clarification of this uh between now and when we enter this to the floor. Same dialogue occurred earlier as it relates to the same section uh with Mr. Timmons and his interest as it relates uh to this broader process. And so uh with that commitment, I would I would request my colleague to to withdraw the amendment uh and engage in a conversation with myself, chairman of the full committee, Mr.
▶ 8:06:23Hill, and others as we work to further refine this uh prior to bringing u the bill uh to the House floor. Thank you, Mr. Styles. I appreciate that. Uh and with that, Mr. Chairman, I would request unanimous consent to withdraw. Gentleman withdraws his amendment. I appreciate his work on this.
▶ 8:06:39I certainly uh reiterate that I'll work with him and with Chairman Style to accommodate his very specific constructive comments on how to make uh the B paragraph on section three more robust. Uh the gentleman withdraws his amendment. Yes, Mr. Chair. Is there additional is there additional amendment to Mr. Styles draft?
▶ 8:07:11Seeing no further amendments. Oh, yes. Okay. Well, I I I don't know how many I know there's a list and Miss Vasquez has two and then I'm after her. I'm just waiting. Okay. Well, uh this I don't have a list. I'm not going to be testy. I'm just going to simply say I asked for amendment. No one spoke up. So, I have an amendment. I did this. Okay. Mr. Lynch. Oh. No, no, no, no. It's Miss Miss Bask first. All right, Miss Velasquez. Very good.
▶ 8:07:40Be delighted to hear from Miss Velasquez. Thank you so You have an amendment at the desk? Yes, I have an amendment. Let's wait till it's distributed, please. Mr. Chair, I move to uh reserve a point of order. Uh gentleman from Montana has reserved a point of order. This is the one.
▶ 8:08:05This tired, you know.
▶ 8:08:48Clerk will report an amendment to the amendment in the nature of a substitute HR2392 offered by Miss Velasquez of New York designated as 15. The amendment will be considered as read and I now yield to the gentleoman from New York five minutes to explain her amendment. Thank you, Mr. Chairman. My amendment is simple.
▶ 8:09:11It requires the secretary of the treasury as chair of the financial stability oversight council to include in their annual report to Congress an assessment of the threat that payment stable coins and the issuances of payment stable coins pose to the financial stability of the United States.
▶ 8:09:31We established EPSOG as part of the DotFrank Act following the 2008 financial crisis to take a broad-based look at the financial system. Look across agencies and regulators to study, investigate, and if necessary address potential sources of systemic risk.
▶ 8:09:52In my opinion, requiring the FSO to report on a new financial innovation like payment stable coins that have the potential to do significant damage to our financial system is exactly what we designed the EPS to investigate and report on. As of March 5th, the market capitalization of stable coins was approximately $230 billion.
▶ 8:10:19While some may argue the $230 billion market capitalization of payment stable coin is dwarfed by the US equities market by comparison which currently has a market capitalization of more than 62 trillion dollars and therefore these coins po pose little or not systemic risk. I will argue this market has expanded rapidly over the last several years.
▶ 8:10:49For example, in March 2020, the market capitalization of payment stable coins was only 5.4 billion. And now look at it is it at $230 billion. That is a growth rate of 46 time over just five years. And now we are legitimizing this industry through legislation. I expect this industry to expand even more rapidly.
▶ 8:11:20We have already seen in other circumstances how rapid expansion and crashes of markets have the potential to pose a sign significant systemic threat. Stable coins have already depect on numerous occasion. For example, al algor I go algorithmic stable coins were an early breed of un untested stable coins.
▶ 8:11:50Bit u USD began trading in 2014 and collapsed just four years later in 2018 after only eight years and multiple others crashes. Algorithmic stable coins have already been generally dismissed as a valuable enterprise.
▶ 8:12:11Coll collateral and fiatbacked stable coins have also failed to hold their pegs on multiple occasion between June 2021 and June 2023. Binance stable coins B USD depect several times and by as much as 13 cents.
▶ 8:12:35The regional banking crisis in March 2023 resulted in C circles USDC losing its spec to the dollar by as much as 13 cents. It is also important to note that S circle held $3.3 billion dollar of US deceased reserves in uninsure accounts at Silicon Silicon Valley Bank reserves meant to ensure that consumers could redeem USDC
▶ 8:13:05as it at le price of $1 and those reserves were given special treatment and guaranteed by the bank banking regulators. After the collapse of the Silicon B Valley Bank held off a broader banking crisis, stable coins also have operational risk challenges that can arise from the failure of participants in the network to respond to demand for processing transactions and the lack
▶ 8:13:35of accountability for risk manage management given the decentralized environment. Stable coins are also vulnerable to bugs and hacks. They are also an unreliable form of settlement and users are not always able to redeem their rights in full and on demand.
▶ 8:13:57Should users be unable to redeem their rights in full on demand, it could certainly cause risk to the stable coin issuer and the financial institution that store the reserve. While some may argue that the issues I'm bringing up have been accounted for or are never likely to occur, I will say that through my time on this committee, I have seen on multiple occasions events that people said could never happen happen.
▶ 8:14:28That is the exact purpose of the EPSOC and the reason for my amendment here today to guard against this risk and ensure the impossible never occurs with payment stable coin. Thank you, Mr. Chairman. I yield back. Gentlewoman yields back. Does the gentleman from Montana maintain his point of order. Mr. Chair, I withdraw my point of order. Gentleman withdraws his point of order. Who seeks recognition? Gentleman from Wisconsin, the author of the stable act, Mr. Style. Appreciate uh that, Mr. Chairman. Move to strike the last word. Uh, I appreciate my colleagues amendment.
▶ 8:14:59Uh, however, I'm urging my colleagues to vote no on the amendment. Um, ESOC already includes information on stable coins and digital assets in their annual financial stability report. So, I'm not implying that FSAC shouldn't be able to look at stable coin activities uh, in any financial stability consideration they pose through a balanced activitiesbased approach. Uh, this amendment just puts an unnecessary spotlight on stable coin issuers.
▶ 8:15:25So, if we recall, even former Treasury Secretary Yellen testified before this committee uh that stable coins didn't pose a systemic risk to the financial system. Uh we should instead ensure FSAC is responsive to the real financial stability risks our nation faces instead of being distracted. And so with those comments, Mr. Chairman, gentleman yield. I yield to the chair. Yeah, I thank the gentleman for his clarification.
▶ 8:15:53I think the gentleoman from New York brings up an excellent point that's is thoroughly uh vetted as the chairman said not only has the treasury secretary testified to this fact before the committee but stable coins and their risk to the economy and the analysis around them was fully outlined in the 2024 2025 focal discussion.
▶ 8:16:18So I I think this amendment is unnecessary and I agree with Chairman Style that it should uh uh people should not support it as it's already being taken care of. Uh who seeks recognition? The gentleoman ranking member of the full committee strike the last word. I move to strike the last word.
▶ 8:16:33This amendment would require the Secretary of the Treasury to include the Financial Stability Oversight Council's annual reports to Congress, a section that discusses the status of the threat payment stable coins pose to the financial stability of the United States. ESA has systemic risk tools that can help prevent underregulated stable coins from threatening the stability of the US financial system.
▶ 8:17:02FPS's efforts to evaluate stable coin risk and share that information with Congress are necessary given the broader economic risk that President Trump has recklessly adopted for the country. Since taking office, Trump's actions and policies are on track to engineer a recession and move over move our country into a period of higher inflation, reckless tariffs, and mass layoffs.
▶ 8:17:31On today's so-called liberation day, Trump has announced reciprocal tariffs of a minimum of 10% that runs as high as 49% that will not only hit our country's allies, but also American consumers who will have to deal with a sharp hike in prices.
▶ 8:17:51We've also learned from past collapses that stable coins contain fragilityities that make them v vulnerable to runs and also pose risk to monetary policy, financial stability, and fair competition. These confirmed factors present apparent economic risks to American consumers who are already struggling. For these reasons, we must support the FSOX e efforts to continue to inform Congress on payment stable coin risk.
▶ 8:18:21And I yield to the gentle lady from New York. Thanks the gentle lady for she yielding. It is true, Mr. Mr. Chairman, that EPSOC is already charged with monitoring financial stability and reporting on those risk risk to Congress. But there is nothing in the statute that specifically requires EPSOC to monitor or report on stable coin.
▶ 8:18:49Following the financial crisis, we determined that there were gaps in the regulatory system given segmented jurisdictional authority of regulators. Regulators were too slow and missed emerging threats. EPS was designed to help coordinate the regulatory agencies. Mr.
▶ 8:19:11Chairman, I am one of only a few members on this committee that was here prior to the financial crisis and we listened to the expert tell us that these new and innovated products called credit default swap that were designed to ensure mortgage bonds were safe and an appropriate vehicle for banks and investors to park their money and will show them substantial returns. And look what happened.
▶ 8:19:41Subprime M mortgages and their correlated credit default swap torpedo our financial system and our economy. I am not saying that stable coins will do that here. I hope they don't.
▶ 8:19:58But what I'm saying is that experts have told us that concerns being raised by new and innovative financial products are unfounded and could never happen and yet they happen. This amendment will ensure we are monitoring those risk. Yes. Yes. Thank you so much. Thank you so much. Oh, I'm sorry. Thank you. Uh and and I I couldn't agree with you more.
▶ 8:20:26You've outlined it perfectly that uh as they said, risks were hidden in plain sight, which was why FSOC was created to comprehensively look at bank and non-bank threats to the economy. And I think they have, and that's what Chairman Style and I are noting is that they have noted that these kind of financial inst innovations may pose risk and that they thoroughly cover them in the report. I don't think they're sherking their responsibility from DoddFrank. I yield back to the gentleman. Reclaiming Miss Waters time.
▶ 8:20:56Mr. Chairman, requiring the FSO to monitor and report on this new and rapidly expanded market is a prudent charge. I don't want to be here next year and telling you I told you so. If this market and payment stable coin issuers pose non systemic threat then EPS job will be easy and inclusion minimal.
▶ 8:21:24On the other hand not requiring EPS to investigate and monitor this market could be catastrophic and I yield back. The gentleoman yields back who recognition. Is there any further debate Mr. on the gentleoman's amendment? Mr. Chairman. Uh, Mr. Lynch, are you on on her amendment? Yeah. Mike like to strike the last word. Yes.
▶ 8:21:54Gentlemen, you're recognized. Thank you. I fully support Miss Velasquez's uh amendment. I think it's welld designigned. It's targeted perfectly uh to the people who would be most in the safety and soundness of our financial system including Treasury, the Fed, CFTC, the SEC as well as the control of the currency.
▶ 8:22:19But importantly, there are a number of uh members of of the of FSOC uh that represent state interest, state banking, state insurance that I think also because of the structure of this bill would would have a big impact on on state uh financial systems as well.
▶ 8:22:40Um, I do want to note that when Janet Yellen made her comments about risk on the part of uh, stable coins, she did not anticipate or expect the expansion that this bill authorizes uh, which would greatly, I think, amplify the the impact of of stable coins across our economy. With that, Mr. Chairman, I I yield back. Mr. Lanch yields back. Who seeks recognition?
▶ 8:23:10There's no further debate on the amendment. The question now occurs on the amendment offered by the gentleoman from New York. Those in favor, please say I. I. Those opposed, please say nay. Nay. In the opinion of the chair, the nays have it. The nays have. The amendment is not. Chairman, I request a recorded vote. The gentleoman from New York requests a recorded vote. All those in favor of recorded vote, raise your hand. A sufficient number have raised their hands and a recorded vote is so ordered. Pursuit it to subsection C5 of rule three of the committee rules.
▶ 8:23:39Further proceeding amendment are We're Is there further amendment? Mr. Chairman of the gentleoman. Yes, I have an amendment at the desk. A gentleman has an amendment at the desk. We'll p pause for it to be um Mr.
▶ 8:24:08Chair, I reserve a point of order. Gentle from Montana reserves a point of
▶ 8:24:53The clerk will report the amendment. An amendment to the amendment in the nature of a substitute to HR2392 offered by Miss Velasquez of New York designated as 13. Uh thank the clerk. Without objection, this amendment is considered read and the gentleoman from New York's recognized on her amendment. Thank you, Mr. Chairman.
▶ 8:25:13I am offering this amendment with the intent to withdraw in order to raise this important issue and I hope we can work on it together as this bill or another bill moves to the floor.
▶ 8:25:27One of the main reasons we're here today is to build a cryptocurrency industry that is fair and inclusive for all stakeholders, especially our our constituents who have invested in digital assets like stable coin to diversify their income stream and improve their quality of life. Across party lines, we aim to establish a regulatory framework that is coherent and has teeth.
▶ 8:25:56One that assures every individual that their government stands behind them, empowering them to make the most of their investment without falling prey to uncheck speculation or regulations designed to benefit a select few. To do this, we must confront a major loophole in our federal tax system.
▶ 8:26:19The ability of wealthy US citizens to pay zero federal taxes on capital gains, interest, and dividends from their digital assets simply by residing in Puerto Rico for six months out of the year. My amendment seeks to close that loophole.
▶ 8:26:39Since Hurricane Maria in 2017, Puerto Rico has become a testing ground for influential members of the US blockchain and crypto community. Nearly 3,000 crypto enthusiasts have established residency there, not to support the local economy, but to legally sidestep federal This influx has created deep tensions in a jurisdiction where
▶ 8:27:09the poverty rate hovers near 40% and where these tax benefits are unavailable to locals. Puerto Rican investors have been left behind in an economic landscape that increasingly feels raped. And I am certain that if more Americans on the mainland currently preparing to pay their taxes knew about this, they will be just as outraged.
▶ 8:27:38Equally alarming is the potential loss to the federal treasury. Here we are trying to look for every penny, firing off the federal workforce. Well, why don't you act on this? I invite you to join with me in correcting this wrong.
▶ 8:27:58An IRS whistleblower recently disclosed that at least 10 billion dollars is being reported annually as Puerto Rico source income in order to avoid federal taxation. And look, you could look at all the all the articles that have been written. Why are cryptocurrency evangelists flocking to Puerto Rico? Puerto Rico's crypto community enjoys a tax haven.
▶ 8:28:25But does Puerto Rico benefit at a time when the federal government is actively seeking new sources of revenue and working to establish a coherent regulatory framework for stable coins and digital assets. We simply cannot allow a crypto tax haven to expand unchecked within a US jurisdiction.
▶ 8:28:49So, some may argue that my proposal threatens Puerto Rico's competitiveness, but the facts tell a different story. Between 2020 and 2026, Puerto Rico's projected to lose $4.5 billion in revenue from tax exemptions granted to individual investors. That is nearly a third of the island's entire general fund for one year.
▶ 8:29:15Meanwhile, the island continues to struggle with severe challenges. Puerto Rico should remain competitive, but not by turning itself into a tax shelter for the ultra wealthy that prices out small investors and local entrepreneurs in both the territory and the mainland. This is not just about clo closing a tax loophole.
▶ 8:29:42is about restoring fairness, protecting federal revenues, and ensuring that every American, regardless of zip code, equally benefits from the promise of this new technology. I respectfully urge your support for my amendment. Let's get this right together. Thank you. And I yield back. Gentleman yields back. Yields back. The gentleman from Montana. Mr. Chairman, I insist on the point of order pursuant to clause seven of rule 16 of the rules of the House of Representatives.
▶ 8:30:11The amendment is not germanine because it is within the jurisdiction of the Ways and Means Committee, not within the jurisdiction of the Committee on Financial Services and therefore violates rule 10 of the rules of the House of Representatives. Yes, Mr. Chairman, I know all that. Yes, gentlemen. Does the gentleoman withdraw her amendment? Yes, but I would like for you to work with me and other members in reaching out to the Ways and Means Committee.
▶ 8:30:35I think this is a very important issue if we intend to deal with the deficit and and and and it just this is morally wrong and I ask you to join forces with me in addressing this. I'll be happy to work with the gentleman gentleman's reputation and knowledge for the the care and prosperity on Puerto Rico well known to this committee and look forward to working with you. Uh gentleoman withdraws that amendment. Is there additional amendment?
▶ 8:31:05One more. Uh, Mr. Lynch is recognized. I believe I have an amendment at the desk. We'll wait for it to be distributed. Mr. Chairman, I reserve a point of order. Gentle from Montana reserves a point of order.
▶ 8:33:00the clerk will report the amendment. An amendment to the amendment in the nature to without objection, the amendment's considered as read. Uh the gentleman, Mr. Lynch, is recognized for five minutes on this amendment. Thank you, Mr. Chairman. Mr. Mr. Chairman, this amendment would remove a provision of the bill that states that if the primary federal regulator fails to review a stable coin issuers application for approval within 120 days, that application is automatically approved.
▶ 8:33:31At a time like now when federal workers at various financial services regulators are being illegally fired, placed on administrative leave given limited resources and limited access to their workplaces. It is unreasonable to expect that federal regulators can meet this deadline.
▶ 8:33:52In the meantime, Elon Musk and his Doge uh committee continue to interfere with independent financial regulators attempting to strip them of resources needed to conduct statutoily mandated work. How would a financial regulator which is already stretched on resources prior to this election be able to conduct an adequate review of an issuers's application?
▶ 8:34:15Also, the sequencing in the bill allows stable coin issuer applicants to swamp the CFTC with applications which they are not familiar with and they've never done this type of work before. No one has and they continually lack adequate numbers of of employees properly trained to conduct this new responsibility.
▶ 8:34:39If this committee was truly invested in providing a thorough and robust regulatory structure for stable coins, it would be giving financial regulators significantly more resources, not less. Providing an issuer with an automatic approval if a regulator is a unable to process an application while also stripping that regulator of resources is not in the best interest of the public. This provision will allow issuers to slip through the cracks without adequate review.
▶ 8:35:08And I urge my colleagues to ensure our financial regulatory system remains robust and remove provisions that allow for automatic repro approval. Thank you and I yield back. The gentleman yields back. Is there further debate on the amendment? Uh Mr. Lawler of New York is the ranking member. Yes, the ranking member, Miss Waters. Master five minutes to strike the last word. Um I move to strike the last word. I would like to thank Mr.
▶ 8:35:36Lynch for offering this amendment which is crucial to ensure our federal regulators have the time to properly render a decision on the payment stable coin issuers applications. This amendment ensures that applications are not deemed approved simply because the regulator waits out the clock.
▶ 8:35:57Under the Trump administration, the provision in this amendment cuts could lead to a massive loophole in the bill allowing all payment stable coin issues, stable coin issuers to be approved regardless of if they meet the requirements or not if the regulator only waits long enough. We know that Trump's own stable coin will be going through the process and knowing what we know about Mr.
▶ 8:36:24Trump and the way he does business, the way he intimidates everybody and the way he changes the rules in the middle of the game. And the same thing with Elon Musk once he issues his own saber coin as well. We cannot allow them to go through the regulatory process with a rubber stamp. And uh I'm sure they're poised to do so. So I urge members to support this amendment. And I yield back. The gentleoman yields back.
▶ 8:36:53Is there Does the gentleman from Montana insist on his point of order? Uh, Mr. Chair, I withdraw my point of order. The gentleman withdraws his point of order. Is there further debate on the amendment? Uh, Miss Wagner, the former ambassador to Luxembourg is recognized for five minutes to strike the last word. And the chairman of the capital markets subcommittee. I'm sure you meant to say that too. And um I thank you, Mr. Chairman. And I I have to say I strongly oppose the removal of of this provision of the uh stable act.
▶ 8:37:24Uh this is simply good governance, Mr. Chairman, where congressionally enacted law requires a federal agency to review a completed application, it must do so and be incentivized to do so. We can't let a pocket veto become a means of operation chokepoint 3.0.
▶ 8:37:52Too many applications before regulators under other frameworks previously have been allowed to lapse without appropriate review. Uh, American businesses and consumers deserve efficient processing of applications, Mr. chairman to bring issuers within the perimeter.
▶ 8:38:16Uh the least the government can do is process applications within the time allotted by by Congress, Mr. Chairman. So, um again, I strongly uh oppose the removal of this provision, oppose the gentleman's uh amendment, and I yield back. Will will the gentleman gentleoman yield? I'd be happy to yield to the chair. The the gentleoman yields.
▶ 8:38:41Um appreciate your comments, appreciate your leadership uh in the um in the broader financial services space, but particularly the engagement uh on this important piece of legislation. Um I think as we come in the home stretch of the amendments, what we're seeing uh is a series of bills that are really um rather than uh diving in in and adding in into some of the structure of the bill. I'll speak in more um detail on the amendment.
▶ 8:39:08uh in a minute, but I do think we have a huge opportunity here is we think and step back and just step back to 50,000 feet for a moment. What we're looking at is a legal landscape that was really throttled uh by the Biden administration for four years. You have Gary Gensler at the SEC putting forward rules and regulations that are pushing this innovation and development offshore. We've now shifted dramatically.
▶ 8:39:34We now have proc crypto uh folks inside the administration. We've had great engagement from different agencies on this legislation and this is a moment of time to really move back into the United States and doicile uh the innovation development in the US.
▶ 8:39:53And so I think as we look at some of these amendments, and again I'm gonna I'm going to comment on this amendment in full uh in a minute, but as we look at some of these amendments, I think it's as if the baseline is perfection rather than the baseline being the economic reality around the globe. So we're in an environment right now uh where stable coins are being issued across the globe. Some well founded, well backed. Uh we have cryptocurrencies being issued, some well founded, well backed. Um some some that maybe are less so.
▶ 8:40:23And what we have is a huge opportunity to put forward a regulatory framework uh to address the risk that uh is being discussed uh by my colleagues across the aisle uh to scale that risk to protect American consumers uh but also at the same time benefit from economic development and growth here in the United States.
▶ 8:40:46And so as we step back big picture, I feel as if some of these amendments that have come before us today is as if um there is a utopia of perfection on the other side. And at a previous hearing uh we were talking about what happened uh when the Obama administration uh provided access to Iran of uh millions of dollars of cash.
▶ 8:41:12So as we recall cash was literally like flown to Iran and then the question was you know what are the protocols in place once cash is in the hands of a regime like Iran and the reality is there's very little control or mechanism so that is not a good scenario uh this gives us an opportunity to dramatically improve upon that and so I don't want it to be lost in this broader conversation discussion that we're having today um that is as if
▶ 8:41:42the the risks that are being uh purported by my colleagues on the right um would move us in that direction. I think the reality is is that there's serious and substantive risks that exist uh for a lot of these challenges and how do we address them should be a broader part of this conversation. So uh where cash is a default for a lot of people or you could use cigarettes or anything else. Uh let's just not let perfection be the enemy of the good. I'm going to come back to this in full. I'll yield back. The gentleoman's time is expired.
▶ 8:42:13Have does any others seek recognition? The gentleman from New York, Mr. Lawler, is recognized for five minutes to strike the last word. I move to strike the last word. Mr. Chairman, uh on this uh great bill that you've put forth, uh I believe it's 75 pages. Uh, at any point in those 75 pages, do the names Donald Trump or Elon Musk appear in the text of the bill?
▶ 8:42:43Mr. Chairman, do the names Donald Trump or Elon Musk? The gentleman's yielding to me now. Yes, I yield back. No. No. Okay, So, a 75page bill that is been written for the purpose of establishing clear definitions and a regulatory framework for payment stable coins and has no mention of the names Donald Trump or Elon Musk.
▶ 8:43:10And yet throughout the course of this day, my colleagues on the other side of the aisle have spent hours talking about Donald Trump and Elon Musk. I'm very glad that nobody over there was playing the drinking game because you would be absolutely uh if you were.
▶ 8:43:30Uh the fact is that this bill is necessary to ensure uh a regulatory framework uh that ensures that stable coin uh coins are safe that they are secure.
▶ 8:43:48uh the 1:1 ratio with the dollar uh is critical to ensure uh that we don't have a situation uh that some of my colleagues talked about earlier uh concerns that the federal government would have to bail out stable coins.
▶ 8:44:07Um yet interestingly many of my colleagues on the other side on another bill shortly are going to uh be opposed to a ban on a central bank digital currency which is kind of ironic uh given that they're so concerned about uh the potential of bailing out stable coins.
▶ 8:44:26Um but on this particular amendment uh to echo the words of my colleague uh the chair of the capital markets uh the fact is so many businesses uh on the federal government or state government or a local government uh to make timely decisions and often times the government fails to do that.
▶ 8:44:56and it has a compounding negative impact on these businesses. And so the purpose of that section is to say that the government and the regulatory body has a responsibility to make its determination in a timely manner. And if they fail to do that, then the application is deemed approved.
▶ 8:45:20And so hopefully they will do their jobs effectively and that won't be a problem. But businesses should not be harmed by the failure of the regulatory body to act within a timely manner. Uh and again the whole purpose of this bill which has nothing to do with Donald Trump and nothing to do with Elon Musk despite the hours of commentary we've heard today.
▶ 8:45:49Um the the reality is that this is about setting up a regulatory framework to ensure transparency and uh within the stable coin market. That is the objective of the bill. And again, it requires a uniform federal floor. Uh it requires payment stable coins to be backed one to one by high quality liquid assets.
▶ 8:46:15It requires issuers to establish procedures for redemption and publicly disclose those policies. It requires monthly public disclosure of reports detailing the total number of outstanding payment stable coins and the amount and composition of backing assets.
▶ 8:46:32It establishes tailored capital requirements, liquidity standards, and risk management requirements for operations compliance, reserve asset diversification, cyber security, and information technology through a joint rulemaking by the primary federal regulators in consultation with state regulators. And it prohibits permitted payment stable coin issuers from paying interest or yield to holders of their payment stable coins. This is a necessary bill.
▶ 8:47:01Uh it is something that has broad bipartisan support. Three members uh of the Democratic Conference are supporting this bill as co-sponsors. Uh the bill uh is uh going to pass. And yet we've spent hours uh listening to diet tribes about Donald Trump and Elon Musk, which has nothing to do with this bill. I yield back. The gentleman yields back.
▶ 8:47:29Uh the gentleoman, Miss Velasquez, recogn word. Mr. Chairman, uh you don't need to use the name of Donald Trump and Elon Musk to know what's going on. If you read the article by voters, uh it says here how the Trump family took over a crypto firm as it raised hundreds of millions of dollars.
▶ 8:47:56And then CNBC, maybe they were drunk. Trump backed cryptobank joins stable coin wars with new dollar pecked token. So don't come here and talk about Democrats raising the name of Elon Musk and Donald Trump. We know what's going on. Thank you. I yield back. The gentleoman yields back. Is there further debate on the amendment? Uh Mr. Nun of Iowa is recognized for five minutes. Well, thank you, Mr.
▶ 8:48:26chair and this has been a illuminating conversation. We have the opportunity to lead on the world stage in innovation with your act, the stable act. Or we have the opportunity to sherk responsibility and turn over the innovation, the dependability, the ability to track and stop elicit financing and give it over to those more aligned with a riby market
▶ 8:48:56out of Beijing than a dollarback leadership out America. Look, I make no bones about it. I am proud to support chairman styles stable act. We have the opportunity to manage and move money that is rapidly transforming in this space.
▶ 8:49:14and stable coins are offering us a powerful opportunity to create a modern and efficient payment system that can not only will reshape the economies of main street communities like mine in Iowa but drive a benefit to every single American both in their ability to feel secure in a USbacked stable coin but also to eliminate things like transfer fees, overdrafts, costs that inhibit the
▶ 8:49:44ability to make purchases. Everything from a home down to that first car or even buying eggs at the supermarket. Stable coins provide us the ability to know what the value is going to be.
▶ 8:49:59And when it is backed by the American dollar, it provides us the ability to proliferate not only around the world, but to drive more people to invest in things that not only are produced in America by Americans, but make us a pre-minent leader for good in world. I will offer though, without congressional action, we risk limiting not only the growth of stable coins, but of the role America plays for that force for good in the world.
▶ 8:50:28As we've noted here, the United States through debates like this have vested good ideas. But if we fail to act, we are going to let other actors, whether they be in London or Singapore or offshore, potentially fill the void. We will see bad regulation like the kind seen out of the European Union take hold throughout the world.
▶ 8:50:54or worse, we will allow the worst kind of actors, those in Moscow, in Beijing, in Tran own this operation space.
▶ 8:51:07And with it, it won't just be a competition against the US economy or the undermining of the US dollar, but it will become an information superighway for illicit funds to be used in things like human trafficking, cartel management, the proliferation of illicit drugs, and worst of all, the funding that will go to the very root of those things that threaten us most.
▶ 8:51:32terrorist actions and state sponsors of terrorism that can culminate in real threats like we're seeing today in Iran of trying to build their own nuclear regime by using illicit funds. We only need to look at what the Department of Justice focused on last week disrupting nearly $200,000 intended for Hamas. Stable coins could have provided a better security blanket for this on the front end.
▶ 8:52:00Last year, the US used blockchain, something stable coin would run on an international effort to dismantle a Russian moneyaundering network, resulting in over $22 million that were seized. This is what the American dream is capable of when we use our innovation to track these down versus pilfer it away out of fear and cadly, Mr. Chair, ignorance on the issue.
▶ 8:52:23Together, I believe that both Republicans and Democrats have the opportunity not only to lead on this, but open up a broad new future in innovation and what can happen in stable coin and grow our economy. And to your credit, Mr. Chairman, this is an opportunity the Senate can learn from what we do in the House, the House closest to the people and something I have heard time and time again from leaders in my community that want to see this innovation take place.
▶ 8:52:47And those innovation leaders might not only be in the classroom and in the academic institutions, but they're also the merchants on Main Street. They're the hometown farmers who want to be able to see this as they pass it on to their next generation and can make commodity decisions based on something that's stable. And clearly, Mr. Chairman, as you noted, there's nothing more stable in our future than an economy that is successful. And Stablecoin has the opportunity to help make that possible across our area.
▶ 8:53:14I hope that this is not only something we can pass today, but I look forward to marching this forward into the future of America's innovation and economic dominance. With that, Mr. Chairman, I yield back. The gentleman yields back. Is there further debate on the amendment? Uh, Mr. Lynch of Illinois is recognized if I strike the last word. Mr. Foster of Illinois, I apologize, Mr. Foster. No, no problem. Um, I will yield my time to the ranking. Thank you very much. I move to strike the last word. We've talked a lot today about the many concerns with this bill.
▶ 8:53:44Listen, my biggest concern is Trump and the fact that he is brazenly sponsoring his own stable coin as Congress prepares to vote on legislation. But I'm not just concerned with the blatant corruption of a president controlling and writing the rules for a single one.
▶ 8:54:04I believe uh that what we are experiencing feels like a coda one that if not stopped threatens the very fabric of our democracy. Trump has undermined our constitutional freedom of the press, freedom of speech, the process, and an independent judiciary.
▶ 8:54:26He's taken full control of the Department of Justice and with executive orders is exacting revenge on anyone he considers an enemy. His efforts to undermine this government also extend to the private sector where he is threatening corporation and law firms to bend the knee to him.
▶ 8:54:49If Trump's effort to undermine the freedom of the press in his efforts, one of the first actions was to revoke the Associated Press's access to the White House press briefing room after AP refused to refer to the Gulf of Mexico as the Gulf of America. He also cut funding for the Corporation of Public Broadcasting and has filed lawsuits in uh courts against media outlets.
▶ 8:55:15In a speech at the Department of Justice, he threatened the press by describing two major outlets as quote really corrupt and illegal. And just last month, he fired numerous journalists at the Voice of America. And as he's suppressing the media, he's stacking the White House press briefing room with Trump loyal outlets who will parrot every word he says.
▶ 8:55:42This pattern of intimidation is a direct attempt to silence dissent and replace truth with propaganda. Trump is also attacking freedom of speech, thought, and expression as well as due process by threatening the funding of universities and abducting, imprisoning, and endangering the lives of immigrant students who hold views that Trump just does not like.
▶ 8:56:08He's attacking our independent judiciary for daring to uphold the law and block his illegal actions. He and his regime are threatening impeachment of judges and dismantling of the judiciary. He has fully asserted his control of the Department of Justice and has made clear his attempt to use all levers of the DOJ to exact revenge on anyone he disagrees with.
▶ 8:56:36He's weaponizing the Department of Justice to make good on his campaign promises to prosecute Democrats and anyone he considers quote the enemy from within which is eerily remnants of Nazi Germany. And finally, he's turned his eye to the private sector, deploying the DOJ and his executive orders to force parts of the private sector to bend knee or suffer the consequences.
▶ 8:57:04This includes seeking revenge by revoking the security clearances and security details of President Biden, Secretary Clinton, Vice President Harris, and Chairman of the Joint Chiefs of Staff, Mark Miley. And he's targeting law firms that have represented Democrats, forcing them to capitulate or to be barred from appearing before judges.
▶ 8:57:29Before I close, I want to point out one of his executive orders that prohibited foreign aid to South Africa as a political favor to Elon Musk. Elon Musk is threatening the president of South Africa. He wants to uh put his battery factories in South Africa as a result of a parttheid and we got rid of it. Then there was reconciliation.
▶ 8:57:51In that reconciliation, it points out that the black South Africans in particular who have been prohibited from being a part of contracts and government and all of that that he wanted Ramaposa to get rid of that and if he didn't he would tell Trump to stop all foreign aid and that's what Trump has done.
▶ 8:58:13use USA ID to stop the aid to South Africa because Elon Musk won his battery factories there without a 30% participation by black South Africans and then he had the audacity to stir up the Africanist the white South Africans and tell them if you don't like what's going on come on to the United States while he's deporting people he's inviting this this is what is going on this feels like a coup d'eta this feels like All of what we
▶ 8:58:43understand about how cools take place is what is happening with the president of the United States of America. And so, ladies and gentlemen, while we are dealing and trying to make stable corn um something that will not be a ripoff to the citizens of this country and that we have uh safeguards around it, all of this that I'm describing is going on and you know it is, you know, this feels like a coup detailed with the press,
▶ 8:59:14with the judiciary, with private law firms, on and on and on and even education that He is dismantling and threatening and intimidated. We'd better beware and I am very concerned and I yield back to Mr. Foster. Yield back my time. Gentleman yields back. Um the gentleman from Montana, Mr. Downing is Mr. Chairman, I move to strike last word. So recognized.
▶ 8:59:42So I share my uh colleague uh from New York um Mr. Lawler's uh quandry here. I understand this bill that we're talking about here and thank you for all your good work on it. Uh there's been a lot of work that's gone into this bill, but I see this as a bill about innovation and about a framework, a regulatory framework. I don't see this as a bill about the president.
▶ 9:00:08And I'm really confused why we seem to have spent the majority of our time talking about the president where we really should be talking about a regulatory framework and how this solves some very real problems and how this promotes innovation in the United States of America. And these are two things that I really like about this bill and that are really important to me. Innovation and regulatory clarity. And I'm going to start on the innovation part.
▶ 9:00:36Um, you know, I I started my my career as a research scientist at the Krant Institute of Mathematical Sciences at New York University, surrounded by some of the smartest people I've ever worked with. And uh, we were changing the world. We were innovating and the things that we do we did there, I'm incredibly proud of.
▶ 9:00:55And I left there to do a startup company that um uh I was fortunate enough to successfully merge with the naent Yahoo Incorporated back in the 90s. Talk about innovation. You know, we were again doing things that nobody ever thought about changing the world. That was all happening here in the United States of America. I'm incredibly proud of the work that we did. Again, surrounded by smart people doing incredible things.
▶ 9:01:24And then from there went into uh technology venture. So helping other innovators change the world, helping them figure out how to raise money, how to build their companies, how to be successful in taking their ideas and innovating. So then fast forward from there, the last four years before I was in this office, before I I ran for Congress, I was the u uh securities regulator.
▶ 9:01:52I was the commissioner of securities for the state of Montana. And one of the things that really struck me is in being the securities regulator is there was so much ambiguity regulatory ambiguity in the digital space in the crypto space.
▶ 9:02:14uh the SEC seemed to be unfriendly and somewhat ambiguous on on this space and that was difficult for us to to deal with as a regulator. We had to deal with everything from BlockFi to FTX and you know saw obviously a lot of um things happen and really what as a regulator what I attribute attributed a lot of those problems with is we did not have a reasonable regulatory framework to have
▶ 9:02:44a lot of these innovations happening in the United States of America. And so obviously we saw one of the biggest headline getters there being offshore. And I think it's incredibly incumbent upon us to have a regulatory framework that encourages that innovation to stay here because we have we have adversaries that are going to try to leave us in the dust and they're not going to have the opportunities or they're they're going to surpass us if we don't continue to bring a
▶ 9:03:15reasonable framework into the United States of America. And most companies just want clarity. You know, I talk all the time about uh you know, if you're putting together a business plan, you're trying to run a business, what you want, you want to know where that bar is. And you can always plan for that bar. And if you plan for that bar and you know that bar is not going to be moved or it's not going to be swinging like a pendulum, you can do incredible things. You can plan your capital. You can plan your investments. So having a bar that's stable, I think, is incredibly important.
▶ 9:03:43And so you I want to thank all of my colleagues for the great work they've done here. I I appreciate the um the dialogue we've had today. But uh I'm very excited about this because this gives us the regulatory clarity with the sideboards that we need so that we can actually be global leaders in this space. And I think that that's what we want to continue to do is be global leaders.
▶ 9:04:10And by creating this regulatory clarity and making it easy to understand what the expectations are, what those sideboards are to bring this type of industry into the United States and make sure that it is here, that it is dollarbacked or dollar-based, I think is incredibly important, you know, not just for this industry, but uh also for continuing to grow the value of the dollar.
▶ 9:04:36That's one of my other concerns is making sure that that is the, you know, global reserve currency and we continue to add to that. So, I'm very excited about this work. Uh, Mr. Chairman, thank you for all the, you know, thoughtful work you put into this. Thank you to my colleagues who have reached out to stakeholders to really make this, you know, the incredible piece of um of legislation that we have in front of us.
▶ 9:05:01And uh I'm I'm just excited about having this so that we can continue to innovate and we have clarity moving forward into the 21st century. So on that I yield. The gentleman yields back. Is there further debate on the amendment? The gentleman from North Carolina. Is the gentleman from North Carolina from more seek Yes, Mr. Chairman. Thank you. Recognized for five minutes to strike the last word. Thank you, sir. Just as I've listened to this debate, I had to sometimes check and I checked with my good friend Mr.
▶ 9:05:30down in here to make sure that we were actually on what bill we were on at times because it sounded like we were trying to relitigate the uh 2024 presidential election at many times. But um you know this bill is about bringing crypto bringing digital assets up to date. You know I think the the latest stats that I've seen show that roughly 30% of the American people either own or use cryptocurrency in some form or another.
▶ 9:05:59And this legislation, Mr. Chairman, is is very well thought out. And I I just have to tip my hat to you to the to the work that you and the others did in in working on this legislation and getting stakeholders involved and getting folks in consumers involved, getting folks from the industry involved to come up with something comprehensive that provides for the rules of the road, which is very important. It provi provides for consumer protection. It provides for transparency.
▶ 9:06:28It provides numerous safeguards so that digital assets can be used in this growing economy. Now the reality is is where where we as a where America has has failed to act capital has left our shore. These funds, these investments have gone offshore, have gone to other countries.
▶ 9:06:50And as the world's premier superpower, as the strongest economy in the world, we owe it as a nation, frankly, to the to the international order, for lack of a better way, to to have this in in the United States because we are the soundest economy here. We have the most predictable laws and it only makes sense that you adopt this plan.
▶ 9:07:15And so this this proposal and I know it's supported on bipartisan basis. I frankly am surprised it's not unanimous. And I I I regret that there are all these other distractions about the president and anyone else uh about, you know, members being concerned or having gripes with with what's happening there. I personally support the president. I think he's doing a great job. But regardless of that, uh, this bill on its own merits is a good piece of legislation.
▶ 9:07:44And I would say that regardless of who's in the White House, uh, because it's going to provide that certainty that that Americans need to be to continue to invest in digital assets, to continue to use digital assets in commerce. This is not going anywhere. the arguments against it are kind of like the arguments for improving you know the wheels on you know the wooden wheels on a wagon or something. I mean this is and it's not just the future.
▶ 9:08:14It is today. Uh when I look around this room I see uh I see a lot of young folks and I see generationally uh younger folks want to use more and more digital assets and I think it because they understand the technology there. I I get the feeling that from a generational standpoint, there are some folks this is a new technology and there's a lot of fear about it.
▶ 9:08:37Well, the purpose in adopting this law is to provide those protections so that everyone regardless of their um knowledge or background or comfort with technology can participate in this market. And so that it it's been well thought out and and of course we we've aptly I got to say, Mr. Chairman, we've aptly debated all of these amendments. We have fully discussed. I think we've been here since, I believe, 10:00 a.m.
▶ 9:09:07and we're still on the first bill. And I think it shows the true deliberative nature of this body and and of this committee in really working to try to come up with legislation that is going to improve the economy of this great nation.
▶ 9:09:24So, I would reiterate what many have said on this side of the aisle and frankly a couple on that side of the aisle in support of this legislation uh that is that is the result of months and months of work and and meetings with stakeholders that will if we adopt it, if we can get past all of the political rhetoric and all this other stuff, pass this bill because because Mr. Chairman, this is if we pass this, we're doing right by the American people. And with that, I yield.
▶ 9:09:56The gentleman yields back. Is there further debate on the amendment? Move to strike the last word. Gentleman from Texas is recognized to strike the last word. Mr. Chairman, I yield my time to my colleague, Congressman Lawler. I thank you, sir, for yielding to me. Um, look, a lot has been said over the last uh, I don't know, 10 hours of debate over this one bill.
▶ 9:10:22much time uh focused on the president of the United States uh and uh a businessman Musk that have nothing to do with the content of the actual bill.
▶ 9:10:43Uh, and we've heard a lot of debate, a lot of discussion, almost none of it centered on the actual language in the bill. Um, a lot of solutions in search of problems uh that don't exist.
▶ 9:11:01uh and a failure to recognize the critical importance uh of having a regulatory framework, one federal standard, a uniform standard put in place to ensure that the United States uh and that our businesses, our companies are leaders and innovators in this critical technology.
▶ 9:11:31technology and digital currency. Uh and so I think uh legislation on the whole is important. I think this amendment uh would uh negatively impact the passage of this bill which is something that both parties have worked on over multiple congresses.
▶ 9:11:53It looks like we're still both parties have worked on to make sure that there was bipartisan buyin uh when it comes to uh this legislation. And in fact, we have three members across the aisle uh who are co-sponsors of this bill. Uh there is bipartisan support in the Senate. Uh so certainly this bill seems uh to have broad consensus.
▶ 9:12:21Uh and it's unfortunate that we wasted 10 hours on a on a whole lot of nonsense uh rather than actually advancing uh this bill forward uh and moving on to the other bills that are on the agenda uh today. And I would reiterate the point uh you know some of the amendments that were put forth today talked about the concern about bailing out stable coin companies and using taxpayer money to bail them out.
▶ 9:12:50And yet some of my colleagues on the other side of the aisle are going to be opposed to legislation that would prevent a central bank digital currency. Uh if ever there was something that would create concern about the impact on taxpayers, it would be a central bank digital currency. Uh so you know, we've had a a very hearty discussion today. Um Mr.
▶ 9:13:17Chairman, I don't know if you have any additional thoughts, but I would like to yield the remainder of my time to you. The the gentleman the gentleman yields to the gentleman from Texas. The gentleman from Texas, I think, has yielded to me. Um, thank you. I appreciate my my colleague from Texas. Um, Mr. Lawler, he said a lot.
▶ 9:13:41He said it before, but I but I think what what what what's so important here is the substance of the underlying bill and what we have seen distractions from the core context what we're trying to do which is put forward a legal framework for stable coins here in the United States to encourage innovation development to occur domestically.
▶ 9:14:09Uh we have heard a litany of a litany of amendments that have come forward. Some have not even been serious. Um some some have been of substance and I appreciate those of our colleagues who brought substance uh to the table. Um in an area where we want to make sure we're getting the regulations right. U the duplicative nature of some of the amendments brought forward um I don't think have moved us further in this discussion.
▶ 9:14:38We want to make sure that we're right sizing the regulation that the environment in the United States is inviting to really unleash the capital to deploy in web 3. As we think about the benefits uh that the United States has had uh from the development and innovation that's occurred domestically in web 2, we want to make sure that the United States is the home for web 3. We know we need this regulatory environment in the United States.
▶ 9:15:07Um, and I think at the end of the day, we're going to see a strong vote on the final underlying bill. Recognizing the time, I yield back. The gentleman's time is expired. Uh, is there further debate on the bill? The gentleman from Indiana, Mr. Stzman, is recognized for five minutes. Mr. Chairman, move to strike the last word. The gentleman is recognized to strike the last word. Uh, thank you, Mr.
▶ 9:15:32chairman and you know again first of all thank you you know to you and and the hard work that you've done um on the underlying bill uh I one of the things that I've noticed just in our conversation today and you know I know there's a lot of sloww walking the bill but that's what's happened over the past decade and we've seen a lot of u a lot of technology throughout the past 10 years and and how this industry continues to And I just
▶ 9:16:02feel like we can't just sit still and do nothing at this point and that we've we need to move forward. There's a lot I mean there's always going to be some unknowns and there's going to be concern uh but business moves quickly and u there's going to be other folks around the world particularly in China uh that uh are they're not sitting still they're not waiting for us to uh to move forward on some sort of framework uh for payment stable coins
▶ 9:16:33and I believe if we don't move that we uh we then will be left in a spot where we have to try to fix problems. So, I um I would just continue to encourage this committee to to move forward. We've sat here and listened through these uh amendments, but uh I believe that uh the work has been done and we know what we need to do. And with that, uh Mr. Chairman, I'll yield back the balance of my time. Gentleman from Indiana yields back.
▶ 9:17:03Who seeks recognition? The gentleman from Wisconsin is Thank you very much. Uh Mr. Chairman, um I I just want to talk real quick on the substance uh of the amendment as proposed because we've had a good solid conversation as we're here in the home stretch of this markup. But let me just go back uh and loop this back in on the substance of the underlying amendment as proposed by Mr. Lynch.
▶ 9:17:29Um and I I I oppose the removal of prop the of the provision in the stable act. The provision simply provides that where the federal payment stable coin regulator fails to render a decision on a complete application within the time period specified 120 days uh which is consistent with the timing of other federal services context such as FDIC application review. The application shall be deemed approved.
▶ 9:17:54uh the simple good governance where congressionally enacted law requires a federal agency uh to review a completed application must do so to be in incentivized to do so. So here's really the bottom line as it relates um to the amendment. We can't let a pocket veto become a means for operation choke point 3.0. Uh too many applications before regulators uh under other frameworks previously have been allowed to lapse without appropriate review.
▶ 9:18:23And so American businesses and consumers deserve efficient processing of applications to bring issuers within the regulated uh perimeter. Uh the least the government can do is process the applications uh in a time uh allotted by Congress. So I'd encourage my colleagues um to vote no uh on the amendment as proposed. Um as we are in the home stretches, let me just take one more minute because there's been some cross talk and some conversation.
▶ 9:18:49I just think it's worth um noting that the stable act creates a really robust framework for centralized payment stable coins backed by highquality real world fiat assets. We know that uh it should be noted is not our intention to sweep in nonpayment stable coins. So this includes decentralized stable coins. So non-payment stable coins have different use cases and risk profiles than centralized payment stable coins.
▶ 9:19:19Uh we'd want to address these novel risks. Uh if we want to address those novel risks, we'd need to do so um in separate legislation. We crafted the stable act to cultivate the innovation uh potential of payment stable coins so they can be used for payments in particular in the United States. The act is not intended to cut off a burgeoning blockchainbased product uh that is far different than the payment products we're seeking to legislate today.
▶ 9:19:48Uh in my final comments, we've had a robust conversation, a robust debate. Uh I appreciate uh the participation of everybody and what's now approaching a little over 9 hours of debate of amendments on the the text of the bill.
▶ 9:20:02Um I am of the firm belief that this is our opportunity to make sure that the US dollar remains the world reserve currency that blockchain technology uh is really unleashed and the innovation and development occurs here in the United States of America uh not abroad. I appreciate the robust conversation today. Uh Mr. Chairman uh I will now back. Gentleman yields back.
▶ 9:20:29Is there further amendment to uh Mr. on this on this amendment? Whose amendment is this? Mr. Lynch. Is there further debate on the amendment? If there's no further debate, the question now occurs on the amendment offered by Mr. Lynch. All those in favor, please say I. Any any opposed? Nay. Nay. In the opinion of the chair, the nays have it. The naysay have it. Amendment is not adopted.
▶ 9:21:00Recorded vote. A recorded vote has been All those in favor recorded vote raise hands. A sufficient number have raised their hands. A recorded vote is so ordered. Pursuant to section C5 of the committee, rule three of the committee rules. Further proceedings are postponed. Is there further amendment to Mr. Styles amendment in the nature of a The gentleman from Ohio. Mr. Chairman, I have an amendment at the desk.
▶ 9:21:30Gentlemen has amendment at the desk. We'll wait to have it distributed. This is his first one.
▶ 9:22:27offer you Yeah. Yeah. Yeah. I got you.
▶ 9:23:38Let's hear from the clerk. An amendment to the an amendment to the amendment in the nature of a substitute to HR2392 offered by Mr. Davidson of Ohio designated as 49. Uh the com the amendment will be considered as read and I now turn to the gentleman from Ohio for uh five minutes to talk about his amendment. I thank the chairman.
▶ 9:24:04Uh my amendment this amendment is not complicated and frankly it addresses a concern expressed by Mr. Meeks uh that this bill is not yet adequately protect state-based regulatory frameworks. In spite of substantial progress from where the Genius Act left off in the Senate, uh we still have some things that are missing. The New York the New York Department of Financial Services has the nation's most time-tested and proven regulatory framework for stable coins.
▶ 9:24:35Along with fiatbacked stable coins, they have approved commoditybacked stable coins for settlement purposes. Back in September of 2019, Paxos Gold became the first regulated goldbacked settlement token. One Paxos Gold token represents one troy ounce of gold. So, it's stable, but in a different way than a fiat backstable coin. Fiat stable coins or a payment stable coin represents $1 per token.
▶ 9:25:03This token represents physical custody of one ounce of gold. And that's in fact how the New York-based trust company is regulated. They have regular audits of one ounce of gold stored in a vault uh and you know monitored by the New York Department of Financial Services. It's a straight one toone backing of physical custody of gold. No derivatives, futures, leases or contracts.
▶ 9:25:26And if we let this landmark stable coin bill roll out without even a nod to the state-based regulated product uh which commodity backed stable co stable coins reflect. We're ignoring the reason that we're providing a federal regulatory framework in the first place. Uh gold has been used in conjunction with money for about as long as humans have understood the entire concept of money. So talk about stability. People trust gold.
▶ 9:25:52This is simply a secure way to use it at the speed of light just like other uh stable coins. I I believe this committee should remain serious about new payment technology including the recognition of already legal commodity back stable coins as regulated by the New York Department of Financial Services. I think first do no harm and the idea that we would skip the moment uh to create a federal regulatory framework is a big missed opportunity.
▶ 9:26:20So, let's not uh sleep on this opportunity to keep commodity bank uh settlement in play. I encourage all of our colleagues to support this amendment and I yield. Who seeks recognition? Thank you, member.
▶ 9:26:49Uh thank you very much uh Mr. Chairman. I was reading because this is the first time that I've seen Mr. Davidson's uh uh amendment and I think it has some value here. It has some interest certainly and I'd like to um if I may have a colloquy with Mr.
▶ 9:27:11Davidson so I can better understand uh what this attempt to do is a commodity back settlement token insurer may issue a commoditybacked settlement token consistent with regulation imposed by state communitybacked settlement token regulators. That sounds uh if it's um a sensible thing. Could I do a colloquy with you, Mr. Davidson?
▶ 9:27:42Certainly. Uh, as I understand it, this is something that you've been working on for quite some time, about three congresses now. And um, what is the greatest opposition uh to what you're attempting to do? Well, I've dialogued with uh Mr. Heimmes from Connecticut about it in the last Congress, and he didn't understand.
▶ 9:28:05I think initially people thought that because it's referred to as a commodity backed stable coin, people were viewing it as trying to stay stable as one dollar but backing it by gold. And of course, gold moves in value relative to dollars. You know, one ounce has gone up quite a lot over the past few years. Uh and it reflects inflation to that extent. Some people view gold as a better store of value in a lot of ways and and they've held physical gold. In this case, the gold is stored physically in vaults.
▶ 9:28:33New York Department of Financial Services audits those vaults and they either have the gold or they don't. So, frankly, you don't even have the kind of risk that's involved in treasuries where you have short-term treasuries. They're traded in markets and they too change in value. Uh, which requires all kinds of hedging strategies. Gold is really simple. You either have it or you don't. And if they say they have say 100,000 ounces of gold, they could issue 100,000 tokens. If they have 200,000 ounces of gold, they could issue 100,000 tokens.
▶ 9:29:03or they could issue up to 200,000, but it's all priced in the number of ounces of gold that is actually physically present. So, in that sense, the seven or so, six or seven years that it's been regulated in New York, the CFTC, Commodity Futures Trading Commission, has never engaged with it. Uh that's not to say there's been never been fraud in uh commodity back markets, but there's no derivatives contracts, there's no leases, there's no normal triggers for the commodities exchange act.
▶ 9:29:32It literally only counts physical custody uh for its stability and it represents, you know, one in the case of this token, one ounce of gold. I want to understand some definitions communitybacked settlement commodity backed settlement token and and frankly that was a a a term that we worked
▶ 9:30:02on with with Mr. Heimmes. I don't know that if he loves all of it yet. He's been busy with his Intel work. Uh but he was concerned that if we call it a payment stable coin, people would confuse that as the same thing people mean by a fiatbacked stable coin. And we're like, "Okay, fine. we'll call it something different. So we looked at the company that that is offering this already in the market since uh 2018 2019 and they refer to it for use as a settlement instrument.
▶ 9:30:31So we called it a settlement token. Uh how many uh commoditybacked stable coins have deped? Well, I don't think it's possible to dep. Uh, this is the only one that I know of that's that's regulated in the United States. Um, and they've always passed their audits. They have physical custody of it.
▶ 9:30:59So, like I say, you either have the gold or you don't and and the auditors go audit the Uh, you said something about the gold other commodities other than goldities. Okay, we've been talking over here. We want to know what other commodities are backing uh stable coins other than gold.
▶ 9:31:28I don't know currently, but if you could imagine a future token, um the United States for example has a strategic petroleum reserve. Lots of companies have have um gold once the US US was on the gold standard for much of the US financial history.
▶ 9:31:44We dep from gold back in August of of 1971 and part of the logic was a there's just too much liquidity demand for to maintain a true goldbacked US dollar and do but it was backed by pro is essentially the pro dollar. I'll yield your time has Who seeks recognition? I do, Mr. Chairman. Uh, the gentleman from New York's recognized. I yield to the ranking member.
▶ 9:32:14General woman yields to the ranking member. Um, Mr. Davidson, uh, do you have the support of any of the members on your side of the aisle? Well, I believe u most of the members on my side of the aisle supported. I haven't spoken to every single one of them. They know I've worked on it for a long time. Um, and I do believe I have support from one or more members on your side of the aisle, but I'd love to have this be adopted by unanimous consent.
▶ 9:32:46Well, there there's still a lot of discussion to be done. How do these coins interact with commodity futures? Well, they would be different because they're not uh they're regulated as stable coins. So, a company that was offering this as a a regulated stable coin doesn't accidentally go to a regulator and say, "Hey, I want to offer a stable coin backed by gold." But you could envision a future where just like we're we may have tokenized securities.
▶ 9:33:14uh we will have tokenized commodities and you could pick any commodity on the exchange uh you know corn, wheat, soybeans, uh cotton and there will probably be tokenized commodities and the Chicago Board of Trade would regulate that you know presumably CFTC would provide oversight of tokenized commodities.
▶ 9:33:34This does not trip the commodities exchange act and in fact includes a provision at the end uh to say that nothing in this uh amendment um limits the commodity futures trading commission. And when do they normally get tripped on something that involves physical custody is market manipulation and that doesn't affect the stable coin nature of it. Somebody obviously has to buy the gold to be able to put it in the vaults for it to be audited.
▶ 9:34:03Whoever is buying that gold could engage in market manipulation. In that case, CFTC would engage with with that and enforce the law there. But the stable coin issuer stores it in a vault and seeks to be regulated as a stable coin issuer. So, it's very clear that it's distinct from a a tokenized Well, let me just uh even, you know, maybe wrap this up with uh I understand that you have been interacting uh with uh the regulators.
▶ 9:34:34What do they think about these co? Well, they they've had it's again, it's not entirely hypothetical. It's been in existence in the New York DFS as a trust company since uh 2019. So, it's proven. It It's been truly stable. you've never audited this and found that well they don't actually have the gold. Uh they actually conduct the audits and you know New York isn't known for its light touch regulatory approach.
▶ 9:35:01Uh so in that sense as I've talked with uh folks from state-based regulatory frameworks they certainly don't want to blow up something that already exists and if we are providing a um a state pathway um we we wouldn't want to limit what states have said is safe for their uh consumers and I say historically gold has been viewed as as a a safe haven. So in that sense, it's the most stable of the stable coin ideas.
▶ 9:35:31So Tether is backed by gold. Does this exempt Tether? Uh I think Tether might have a gold product, but Tether isn't regulated in the United States. And by the bill, if Tether, whether their fiatback stable coin, Tether, uh US dollar Tether, or their goldback stable coin, were to want to be offered inside the United States, they would have to comply with the US regulatory framework.
▶ 9:35:54And if they decide to be regulated somewhere that the United States ultimately deems as an equivalent regulatory framework, well then the Secretary of Treasury could deem them that way. But it would be the same in the sense that unless you come into compliance with the US law, um then it wouldn't be able to be offered to US citizens. Well, that's what I was wondering if you could, you know, um explain how other countries regulate these coins. That's what I kind of wanted to understand.
▶ 9:36:25Yeah. I mean, similar to uh New York DFS is my understanding. They basically audit it and you either have physical custody or you don't. Um so in that sense, like I say, it's the only real way you can mess up a a gold back stable coin is to say you have this many ounces of gold and you don't. And there's no because it doesn't, you know, if the gold price went up or down, your claim is to the ounces of gold, not to the dollar value of the gold.
▶ 9:36:54Well, thank you so very much for uh taking the time to answer some of these questions. I wish I'd had more opportunity to talk with you about this. I think that uh you've put a lot of time in on um this issue and other issues relative to crypto and I respect uh that you have not only become very expert at uh this entire subject of crypto and stable coins in particular and so I um I wish that we had had more
▶ 9:37:24time uh to deal with it. Thank you very much. Gentleoman gents back who seeks recognition there. No, no more. I'll recognize myself for five minutes. So, I want to thank Representative Davidson for his continued work over several years to uh commit that commodity backed stable coins have the ability to operate and continue to do so in the United States.
▶ 9:37:50As he noted, the New York bit license has permitted this since 2019. And this issue has been of importance to particularly our representatives on the committee from the state of New York. Uh Mr. Davidson, if you could answer some questions. Um it's my understanding that uh this language is is not fully vetted and signed off on in your proposed amendment from the House A Committee. Is that your understanding, too?
▶ 9:38:19Yeah, we engaged in a long-term dialogue. We provided the disclaimer saying nothing limits your jurisdiction. I think the chairman's at a point where he's willing to get there, but there are some staff concerns that they want to be certain that that just as the chair as the ranking member uh mentioned that the settlement in in a payment stable coin or a settlement token uh isn't confused as a tokenized commodity, which would clearly be in in the ad committee's jurisdiction here in Congress.
▶ 9:38:50And you know, I think that we've satisfied that. I think that some of the a committee members think that it's satisfied, but I do think the staff still has some lingering concerns. Yeah, I I that's my uh concern, and I know we've had Democratic engagement on this side of the aisle to work with you on language too in this area. Is that also your understanding? Yeah, I my understanding is that one or more Democrats is prepared to support the amendment. Um but, you know, the ranking member says, "Hey, you know, maybe we'd benefit from more education there." Yeah.
▶ 9:39:19So, for anybody that's like first hearing about a commodity backstable coin, I I appreciate it because, you know, even Mr. Heims who's, you know, pretty proficient on fiat backstable coins didn't understand that it wasn't pegged to the dollar. It was really a token that was matching the ounces of gold. That that's uh helpful to me. I would because of this trying to get this language right with the agriculture committee.
▶ 9:39:46I'd ask you if you'd consider withdrawing the amendment and working with me to get it to the right way with the committee of jurisdiction and I also want it's clear to me there's significant engagement here on the Democratic side from the ranking members questions. Is that something you'd consider? Uh, chairman, especially based on the dialogue I've had with you, with AG, and now with the ranking member, and frankly a number of colleagues on the other side of the aisle, I'd love to see it make the final passage and adopted into the framework.
▶ 9:40:13I I'd be happy to by unanimous consent withdraw this amendment. The gentleman withdraws the amendment. We are committed to working on this. It's an important issue. It's an important component of uh this, and I think the ad committee's uh concerns are legitimate, but easily explained. And I want to thank the the member as the ranking member did for his passion and support. Is there additional amendment to Mr. Styles amendment in the nature of a substitute? Chairman, I have another amendment at the desk. Mr.
▶ 9:40:45Davidson. We'll pause while the amendment's distributed.
▶ 9:41:26That's the one.
▶ 9:42:11All right, the clerk will report an amendment to the amendment in the nature of a substitute to HR239 2 offered by Mr. Davidson of Ohio designated as 43. Uh the amendment without objection will be considered as read and I now ask the gentleman from Ohio to spend five minutes describing his amendment. I thank the chairman. Uh, this amendment uh protects self- custody.
▶ 9:42:39It's modeled after my bill, the Keep Your Coins Act, which has massive support throughout the DeFi and crypto community. My amendment explicitly protects self-custody of an individual's assets and their right to engage in self-directed transactions.
▶ 9:42:53Uh section one of President Trump's executive order signed on January 23rd uh states in section one subp paragraph one it says uh it is therefore the policy of the administration to support the responsible growth and use of digital assets including by protecting and promoting the ability to transact with other persons without unlawful censorship and to maintain self-custody of digital assets. Mr.
▶ 9:43:21Chairman, the right to transact is not granted to us by any government. Throughout human history, individuals willfully traded, bartered, and transacted with each other, not because they were granted permission by anyone else. So why should a different standard apply to any other currency? Uh I believe that the underlying bill must explicitly protect property rights and the right to transact.
▶ 9:43:44Further, self-custody embodies the core principles and the core promise of decentralized finance or DeFi, empowering individuals with direct control over their own assets free from inter intermediaries who can freeze, seize, or otherwise censor them. an account-based system by contrast which uh is the concern here that we'll only wind up with an account-based system without this protection uh limits the future without adoption of this amendment.
▶ 9:44:14I fear that we'll have a repeat of what's gone on uh where you know accountbased gatekeepers, banks, exchanges, bureaucrats, regulators can unilaterally dictate access. Those who oppose self- custody are saying they don't really trust you with your own money, but they want custody to be limited to a third party who can effectively be controlled by them. Moreover, there's a very real recent history of over overregulation and the consequences that show my concern isn't hypothetical.
▶ 9:44:44It's already been happening. In January, the Consumer Financial Protection Bureau rushed a a rule trying to limit self-custody and claim jurisdiction for their agency. Or take the Fininsen guidance in 2020 where unhosted wallet rule was proposed and hold it only after 65,000 comments slammed it for threatening privacy and innovation with burdensome requirements.
▶ 9:45:08Then of course there's Operation Chokepoint and Elizabeth Warren's foolish anti-crypto army which was soundly rejected in the last election. These aren't hypotheticals. They're documented assaults on crypto's potential proving that self-custody is a necessary shield against a rigged system. I encourage the adoption of my amendment protecting law-abiding individuals and their ability to have transactions. That I ask uh adoption of this amendment and I yield back.
▶ 9:45:37Gentleman yields back. Chairman, I'm going to recognize myself uh for uh opening comments on this particular matter and then I'll turn to my friend, the ranking member. I really, and Mr. Davidson knows this professionally and personally. I really appreciate his consistent leadership on digital assets uh issues over gosh, I guess the whole time we've served in in Congress together.
▶ 9:46:03And as the ranking member said, he is clearly a crypto policy member who's done his homework and worked hard on this issue um long before we had a a president that was supportive of stable coin bills and market structure legislation. And self-custody is an important part of our agenda in this Congress and it's certainly something that's recognized as pre as uh Mr.
▶ 9:46:29Davidson noted it's in noted explicitly in the president's executive order and I know it's it's something that's being looked at by the regulatory agencies. I was proud to work on language that Mr. Davidson helped author in the last Congress when we did our market structure bill FIT 21 that pro protected America's ability to uh the ANS of Mr.
▶ 9:46:56style today uh absolutely ensures that selfhosted wallet providers are not considered custodians. It's specifically carved out of this bill and in that regard this draft is superior to the work in the 118th Congress and that of the Senate bill. So I would argue that we've made progress.
▶ 9:47:22We had self- custody outlined in the market structure bill that passed the house with 71 Democratic votes in the last Congress and Mr. Styles amendment in the nature of a substitute that we are considering today and amending today has clearly uh enshrined in the document that self-host hosted wallet providers are not considered custodians.
▶ 9:47:47So self- custody will be, in my view, a better fit in our market structure bill that the House will start considering next week when Mr. Style holds his first hearing on it. Are we voting? And we're currently drafting it.
▶ 9:48:01So I look forward to working with my colleague to incorporate self-custody language in our FIT 21.0 0 bill in working with chairman style as the subcommittee begins to address that uh concept next week with a hearing and then taking in views from both Democrats and Republicans over the month of of April.
▶ 9:48:24But I do believe that it best fits in market structure and therefore um and with the progress we made and I appreciate his help, but I'm going to oppose this amendment. Gentlewoman, uh, ranking members recognized the strike last word, Mr. Davidson, I understand that this amendment is definitely intended to protect privacy. Is that right?
▶ 9:48:55U, it is intended to protect privacy, but frankly, if everything stays account-based, a lot of the unbanked and underbanked people will still not be served. It it truly is meant to be similar to cash and that's exactly why it's important that it's in the stable coin bill because that is a means of payment in the market structure bill. Uh that bill deals with securities or commodities or utility tokens.
▶ 9:49:18Those things aren't used as payment instruments and the unbanked and underbanked in a digital age will use these kinds of self-custody to the same way people use cash today. I think that's why we have to protect Um I think um when I had an opportunity uh to raise some questions with you, I asked about regulators.
▶ 9:49:41Uh and I'd like to hear you talk about what you have found out from the regulators. What has the interaction been uh on this issue? Well, thank you for the question. Uh the concern has been that some regulators have tried in the name of protecting consumers said we don't want you to have access to that.
▶ 9:50:03They they feel comfortable with an account-based future and account-based future that a lot of people have drawn to the crypto industry because they don't like the account-based present. They want to be able to direct their own payments uh in a digital age the same way they do with cash. They're the reason they're not always participating in the current financial system. And if all we do is create a digital replica of the current financial system, frankly, the space isn't even that interesting. It doesn't change things for the individual.
▶ 9:50:33Uh the if if people can use self-custody as a means of payment, uh small businesses could settle directly with that consumer and not have an intermediary charging them fees like Visa and Mastercard do. So your interchange fees and your payments and that's why the industry that has the status quo has spent so much effort lobbying for years to kill this very provision.
▶ 9:50:57Uh they they want to kill the industry and if they can't completely kill it, they want to keep it accountbased because they they want to make the money that they're making by being intermediaries today. You don't disrupt that if you keep it account-based. You only disrupt that if you let people direct their own So how is this issue dealt with with other nations? Well, in other nations it's protected and I mean that's why when you look at Tether, Tether is 90% of the transaction volume in stable coins today.
▶ 9:51:27Part of the reason we're trying to create a federal regulatory framework for stable coins is that we have a US-based regulatory framework that counters what Tether's doing. It's great that Tether's US dollar token, US dollar Tether is backed by US treasuries. That's real progress. There was a time I referred to Tether as a time bomb because they weren't disclosing what they were backing their token by. Now they're backing it by US treasuries, but they're not backing it by a US regulatory regime.
▶ 9:51:56Part of the reason we're trying to do this federal regulatory regime is so that we do have a trusted US dollar settlement instrument. And my point is a lot of people want to interact with that in a way where they control their money, not some account that they're sitting there working with the same way that they're rejecting banks today. They're rejecting that account-based future in the crypto world. That's where self custody is. And the reality is that's never going to be the majority of the market.
▶ 9:52:24The majority of people want their money kept safe by some other custodian at a bank account or something similar to that. But they will want to control some of it. And this is exactly what this amendment So let me just put the question to you. Are you asking for support? Yes, ma'am. You would like support? I would love unanimous support. I I understand the chairman isn't yet ready to provide it. But candidly, part of the reason he isn't as he fears that he would lose support from Democrats.
▶ 9:52:54Thank you very much. I yield back. Gentleman yields back. Others seek uh recognition. Mr. Licardo from California recognized to strike the last word. Thank you. Strike last word. Um thank you for the uh the uh amendment, Mr. Davidson, and I know you're very thoughtful.
▶ 9:53:18Uh, and I appreciate your passion for self-hosted wallets and and the ability they give individuals to engage um in in this very important industry in in a way that is on their own terms.
▶ 9:53:35Um my concern is the breadth of the language as we look at uh the terms may not issue any rule or order that would impair and I know how courts are going to interpret something that broad and I think that's really broad particularly in a post- chevron world u and I think no matter how imperative the need for regulation might be for something we might all agree about for example around cyber security for example or national security or systemic
▶ 9:54:06financial soundness or or fraud prevention. Uh or even just someone invents a mechanism to help somebody's got a self-hosted wallet and they've lost their key and they can somehow get their key back. We've all heard about those disaster stories. I, you know, I appreciate that there are limits here that only apply to lawful uses, but my concern is first because they're self-hosted wallets, there's no means for a regulator to detect what is a lawful use.
▶ 9:54:33But even if we assume every use is lawful, of course it's not going to be, but let's say it is. Uh there are lots of lawful purposes uh that may still create a lot of systemic risk and we may still really need some regulation. So I I'm just concerned about signing on to something this broad. Uh and I appreciate Would the gentleman yield? Uh certainly. Yes. I think the imperial language is important because frankly when I was first introducing the Keep Your Coins Act, which is a standalone bill.
▶ 9:55:01Um the the Canadian truckers were being blocked from accessing their bank accounts in Canada because they were protesting CO. Now Canada doesn't have the same bill of rights that we have in America, but we did see people filtered and censored and frankly surveiled in ways. And that's exactly why the word is used is to say, look, you can't basically come up with your own way to impair it. But you can go after illegal things.
▶ 9:55:27So if if the United States had passed a law that says you can't do this, well then of course it can be shut down. And wallet providers can already shut down addresses. So no transactions. That's how they comply with sanctions. might retain my time. I I appreciate the point. However, as I mentioned, I'm very concerned that uh sensibly lawful uses can still pose systemic risk. I understand that reason I won't support it. Thank you.
▶ 9:55:57The gentleman yields The gentleman yields back. Who seeks recognition? Uh the chairman of the of the committee, Mr. Styles, recognized. Strike the last word. Thank you very much, Mr. Chairman. Uh just want to echo uh my comments. I I align myself with your comments, uh, Chairman Hill. Um, but want to reiterate, um, uh, in in the in the full room, my commitment to work with, uh, my my friend and colleague, Mr.
▶ 9:56:24Davidson on this, in particular, as we enter uh, the robust conversation I know is in front of us uh, in the market structure bill. Um, I think there's some real opportunities to make sure that we uh, get this language uh, right. Uh, I think self- custody there's a an absolutely uh important role that it plays. Um, and I'm committed to continuing working with you although um I won't be supporting this amendment uh here tonight. Would the gentleman yield? I I yield to the chair. Yeah.
▶ 9:56:52Let me just add one other point that my friend from Ohio certainly knows which is uh he's recognized the improvement we made in your draft, Mr. chairman about um an important component that is a change which was that self uh hosted wallet providers are not custodians and I just would offer to both of you that if you have uh additional language changes within the context of what we're talking about today that's you know more narrow but at the same time moving in the right direction
▶ 9:57:23uh that you heard from Mr. Licardo and others. We're open to hearing that as well. So, I yield back to the gentleman from Wisconsin. And I I'll yield back to the chair. Gentleman yields back. Who else seeks recognition on Mr. Davidson's amendment on self-custody? If there's no further debate, the question now occurs on the amendment offered by the gentleman from Ohio.
▶ 9:57:51All those uh in favor please say I. Those opposed say nay. Nay. Uh in the opinion of the chair the naysay have it. The nays have it and the amendment is ask for recorded vote please. Gentleman from Ohio requests a recorded vote. All those in favor of recorded vote raise your hands. A sufficient number have raised their hands. A recorded vote is so ordered. Pursuant to subsection C5 of rule three of the committee rules, further uh proceedings on that amendment are postponed.
▶ 9:58:20Is there another amendment to Mr. Styles uh amendment in the nature of a substitute? Seeing no further amendments, without objection, the previous question on the substitute is ordered and recorded votes on the pending amendments have been postponed. Once those amendments are taken, the committee will immediately vote on the adoption of the amendment and the nature of a substitute and then excuse me, then we'll consider the question to report the measure. We'll now move to consider our next bill.
▶ 9:58:48Pursuant to notice, I call up HR 2384, the Financial Technology Protection Act, introduced by the gentleman from Io, Iowa, Mr. Nun. The clerk will report the bill, copies of which were distributed in advance. 2384 to establish an independent financial technology working group to combat terrorism and illicit finance and for other purposes. Without objection, the bill is considered read and open to amendment at any time. For what purposes, a gentleman from Iowa seek recognition? Thank you, Mr. Mr.
▶ 9:59:18Chairman, I have an amendment in the nature of a substitute at the desk. The gentleman has an amendment in the nature of a substitute, copies of which were also distributed in advance. The clerk will report the amendment. An amendment in the nature of a substitute to HR2384, offered by Mr. Nun of Iowa. Without objection, the amendment in the nature of a substitute is considered read and will serve as the base text for purposes of amendment. The gentleman's now recognized for five minutes on his Well, thank you, Mr. Chairman.
▶ 9:59:47And given the nature of the fact that we are talking about the future of America's not only stable coin but uh the role that digital assets will play and given the nature of the night we will be expeditious in this uh run through. First of all I want to thank everyone who has been a partner in moving financial technology protection act of HR2384 forward. It's a privilege to lead it but I know this is done with a lot of work on both sides of the aisle. Let's be clear, blockchain technology and digital assets are here to stay.
▶ 10:00:17The US can be a leader in this. We therefore must create an environment where our innovators can both thrive here domestically in the United States without being exploited by our adversaries abroad. The transparent and traceable nature of blockchain enhances our law enforcement's ability to combat both cyber crimes as well as recover funds that may be stolen from those in our community and those that might actually fuel through illicit means our enemies.
▶ 10:00:46These capabilities have already led to massive forfeitures, seizures of illicit funds, and highprofile prosecutions. In fact, Mr. chair. Just last week, the US Department of Justice used blockchain technology to disrupt money intended for Hamas, an Iranianbacked terrorist organization to the tune of $200,000.
▶ 10:01:07What more, in recent months, the US using blockchain participated in an international effort to dismantle a Russian mon moneyaundering network, resulting in over $22 million seized. Certainly money that would have been used against US national interests.
▶ 10:01:27Unfortunately, as someone who serves as a counter intelligence officer, I've seen firsthand how many times terrorists and adversaries have exploited technology for the purpose of elicit money laundering. And that's why today we introduce the Financial Technology Protection Act. So what does this do?
▶ 10:01:46First of all, it is the result of bipartisan effort to establish working groups of key federal agencies, intelligence experts, private organizations, private sector leaders, academics, and others who can work to combat terrorism and elicit financing on a digital platform using the best possible technologies and practice procedures in place to drive this at the cutting edge.
▶ 10:02:11Together, these professionals will help develop legislation and offer a regulatory proposal to strengthen anti-money laundering efforts and address security risk to prevent illicit financing activities in the United States. Now, these efforts are essential in protecting not only our financial system, but also in holding those bad actors who are also competing in the space, whether they be in Moscow, Beijing, Pyongyang, or Toron.
▶ 10:02:36Passing this bill is vital to enhancing America's national security, protecting our digital assets, and ensuring that the next generation of financial uh technologies is developed here domestically in the United States and with our common allies. This is a common sense piece of legislation and last year I was very happy that it passed this unanimously. Now is the opportunity to seize on this momentum.
▶ 10:03:01I want to thank the groups that provided us with the technical assistance and the expertise to really drive this working group as a key best practice. Those include the blockchain association, the digital chamber, the crypto council for innovation and many others.
▶ 10:03:16I also appreciate the invaluable technical support from the US Department of Finally, and it is with great gratitude to my colleagues here that I extend my appreciation to my co-lead on this bill, the ranking member of the intelligence community and a longtime friend, Representative Jim Hemes.
▶ 10:03:34I'm proud to lead this important legislation and I urge my colleagues to support its final passage as this complements what we're aiming to do through the evolution of stable coins here in the United States and the promotion of digital asset innovation right here in America. With that, Mr. Chair, I yield my time. Thank the gentleman for his work. Gentleman yields back. Who seeks recognition? Mr. Style. Uh, Mr. Chair, I speak move to strike the last word.
▶ 10:04:05Recognized. Thank the chairman. Want to thank Representative Nun and Representative Hines for their continued leadership uh in combating illicit uh finance in financial services. I strongly support the bill and urge my colleagues to vote in favor of it. It's timely and it's pragmatic. The bill builds on important work uh that began back in the 115th Congress between then Representative now Senator Bud and Representative Lynch introduced uh they introduced the first iteration.
▶ 10:04:32Uh since then the legislation's gained uh strong bipartisan support uh because the threat is not theoretical. The threat's real. It's complex. It cuts across political and partisan lines. And today's updated legislation strengthens the original framework by establishing an independent financial technology working group to combat terrorism and elicit financing. Uh the working group uh represents a practical targeted uh mechanism.
▶ 10:04:59Uh and in particular from stable coins and tokenization decentralized finance and AI powered payment tools, emerging technologies are reshaping global finance and the illicit finance landscape in real time. The bill is not about micromanaging innovation. It's about giving our national security community knowledge, tools, coordination that they need to ensure the United States doesn't fall behind the bad actors exploiting gaps in our system.
▶ 10:05:25The working group will unite experts uh from across the board, private sector, leaders in blockchain analytics, fintech, cyber security, and together group will collaborate to navigate these transformative technologies and the novel threats they present.
▶ 10:05:38Present the goal the working group straightforward study emerging threats identify gaps in the current AML CFT framework uh and recommend smart targeted reforms report annually to Congress gives us clarity and ability to move forward uh in that doesn't uh grant sweeping new authorities or force emerging technologies and outdoor dated regulatory frameworks.
▶ 10:06:02Instead, it's recognizing really our greatest asset in combating new threats is far better uh where information uh and collaboration are stronger. By building on the foundation laid by previous iterations, uh this creates a clear, thoughtful, and forward-looking next steps to secure the future of American finance while preserving the innovative spirit that drives it. appreciate the work of Representative Nun, Representative Heimmes.
▶ 10:06:27Uh this kind of bipartisan, nonpartisan really work uh that's being done here to combat elicit finance uh is worthy of our uh cond of our support. Uh and I encourage my colleagues to vote in favor of the bill. Mr. Chairman, I'll back. Gentleman yields back.
▶ 10:06:49Is there anyone who seeks recognition to speak on the amendment and the nature of a substitute? Ranking member
▶ 10:07:56Okay, hearing none, we will move on to amendments. Uh, does anyone wish to offer an amendment to the substitute? Hearing none, the question now occurs on adoption of the amendment, the nature of a substitute offered by the gentleman from Iowa, Mr. or none. All those in favor shall signify by saying I. All those opposed shall signify by saying nay.
▶ 10:08:27The opinion of the chair, the eyes have The eyes have it. The amendment is the nature of a substitute is adopted. So moved.
▶ 10:10:25Okay. The question now occurs on ordering the bill HR 2384 as amended reported to the House of favorable recommendation. Those in favor shall signify by saying I. Those opposed are signify by saying nay. In your pen of the of the chair, the eyes have it.
▶ 10:10:52Recorded vote is requested and all those in favor recorded vote raise your hand. A sufficient number having raised their hand a recorded vote is ordered. persuant to subsection C5 of rule three of the committee rules the vote on the question is
▶ 10:11:27postponed ready Pursuant to notice uh uh I call up HR 976 1071 repeal to protect small business lending act introduced by myself Mr. Williams from Texas. The clerk will report the bill copies of which were distributed in advance. HR 976 to repeal the small business loan data collection requirements. Without objection, the bill is considered read and open to amendment at any point.
▶ 10:11:58Y I now recognize myself. I want to thank Chairman Hill for including my legislation in today's markup as well as all of my colleagues who who have co-sponsored this important effort. This critical legislation put a stop the excessive and unnecessary collection of personal information from small business loan applicants safeguarding entrepreneurs from intrusive reporting mandates. The CFPB's rule represents yet another overreach that harms Main Street.
▶ 10:12:26Rather than helping small business, it creates new barriers for both current owners and aspiring entrepreneurs trying to secure the capital they need to grow and and thrive. Section 1071 mandates that financial institutions collect and report sensitive personal details of small business loan applicants to the CFPB. There is a growing concern that this data potentially including information that could reveal the identity of individual applicants could be made public.
▶ 10:12:52These details belong in the hands of lenders and borrowers not published for broad access. Moreover, the implementation of section 1071 threatens to erode the foundation of relationship banking by pushing lenders towards a one-sizefits-all standardized loan process. To meet the rules requirements, banks and credit unions would be forced to gather extensive data such as race, ethnicity, and sex. Factors have that no bearing on credit worthiness.
▶ 10:13:20These burdensome mandates would divert time and resources away from serving customers, increasing compliance costs and ultimately make loans and more expensive and less accessible. We must not allow privacy and common sense to become afterthoughts in the small business lending process. As chairman of the House of Small Business Committee, I'm proud to sponsor a 1071 repeal to protect small business lending act to remove these burdensome requirements.
▶ 10:13:45I urge all of my colleagues support HR 976 and I yield back the balance of my time. I have an amendment in the nature of a substitute, copies of which have been distributed in advance. Clerk will report the amendment. An amendment in the nature of a substitute to HR 976 offered by Mr. Williams.
▶ 10:14:14Without objection, the amendment in the nature of a substitute is considered read and will serve as base text for the purpose amendment. Is there is there anyone who seeks recognition to speak on the amendment in the nature of a substitute? I uh gentle lady from Texas. I move to strike the last word. You're going to yield to this.
▶ 10:14:36This bill that seeks to repeal the Consumer Financial Protection Bureau's long overdue small business lending data rule is yet another attempt by Republicans to thwart necessary progress towards a more equitable and inclusive lending environment.
▶ 10:14:54CFPB's small business lending rule requires lenders, including banks, credit unions, and other non-bank lenders to collect and report certain data on small business loan applications. This critical CFPB rule was required by section 1071 of the DoddFrank Act, and I was pleased to work closely with ranking member Velasquez to ensure that section was included.
▶ 10:15:22We have seen how helpful the Home Mortgage Disclosure Act or HDA has been in providing transparency to the mortgage market, helping regulators to identify discriminatory practices like modern-day redlinining. So, we drafted section 1071 to provide similar transparency to the small business lending market.
▶ 10:15:43In the early days of the pandemic, we saw how the biggest banks prioritized their concier clients in the first round of the Paycheck Protection Act, that is the PPP, leaving millions of small business, especially those owned by women and people of color, out of the program.
▶ 10:16:03So I worked hard with ranking member Velasquez and former Treasury Secretary Minutuchin to secure a 60 billion set aside for community financial institutions including MDIs and CDFIs to ensure PPP loans reach these underserved businesses.
▶ 10:16:23Many more were helped, but recent research found the Fed found from the Fed found that blackowned small businesses were 9% less likely to receive a PPP loan compared to white-owned firms. Make no mistake, if we had this CFPB small business data rule in place before the pandemic, we would have had much more data on who was receiving support and who wasn't.
▶ 10:16:48and Congress should have taken additional measures to ensure underserved small businesses got the support they need. CFPB's rule is an important step towards transparency and fairness in small business lending. I appreciate that the CFPB is phasing this rule in giving community banks and credit unions adequate time to prepare to comply with the rule. But the arguments that this rule will stop small business lending is a red herring.
▶ 10:17:19Again, financial institutions have complied with HDA for decades and yet they continue to make mortgage loans. Greater transparency will promote diversity and ensure that all businesses have a fair chance to thrive. Republicans are fighting to repeal this rule, not because it burdens small lenders, but because the largest financial institutions don't want to collect this data. And let's be clear about why they don't want accountability.
▶ 10:17:47It's because they want to continue discriminating against black and brown business owners without consequences. If lenders weren't engaging in discriminatory practices, they wouldn't be afraid of reporting this data. Their resistance to transparency is itself evidence of the problem.
▶ 10:18:07If members of this committee truly care about small businesses and want them to have access to credit in a transparent, fair marketplace, then you must oppose this bill. I urge all members to vote no. And I yield back. Is there anyone else who would like to be recognized? Mr. Chairman. Mr. Mr. Chairman, gentleman from Kentucky move to strike the last word. Mr. Chairman, Mr.
▶ 10:18:35Chairman, uh thank you so much for your leadership on HR976, uh the 1071 repeal bill. Uh you are a business person. You understand the importance of access to credit. And so there's no one on this committee that understands the damage the damage that 1071 will do to small businesses and entrepreneurs than you do. And so I appreciate your leadership both on this committee and as chairman of the small business committee.
▶ 10:19:03And I urge my colleagues to support um uh Roger Williams bill HR976 the 1071 repeal to protect small business lending act. Small businesses as everyone hopefully knows here are the backbone of this country. We all need to work tirelessly to protect their privacy and access to banking services.
▶ 10:19:23Unfortunately, 1071 uh section of the DoddFrank Act introduces unnecessary regulatory burdens, compromising the privacy of small business owners and reducing access to affordable credit for small businesses. The federal government should not be mandating burdensome data collection that interferes with the relationship between financial institutions and the small businesses that they serve.
▶ 10:19:48Community financial institutions understand the small businesses in their local communities and they offer them loans that are highly customized to their financial needs. Much more customized by the way than uh than mortgages subject to the uh HDA law as was evidenced with the paycheck protection program. financial community, financial institutions uh are more uh more than pulling their weight in the small business lending marketplace and they do not need more red tape that interferes with this critical work.
▶ 10:20:17Furthermore, requiring financial institutions to collect detailed personal data on small business borrowers raises serious privacy cons concerns that section 1071 leaves largely to the discretion of the bureau. uh and the bureau under former director Chopra demonstrated in their final rule on SE 1071 that they will not adequately safeguard this da d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d da and ensure it cannot be used to identify small business owners and the loans they are receiving.
▶ 10:20:44This is very troubling given that the bureau had a massive data breach by one of their own employees. So the CFPB could not protect data that they did have and then went on to finalize a rule collecting even more data. Concerningly, the final rule implementing 1071 shows that wide data is collected will be abused by partisan administrations to further increase costs for lender.
▶ 10:21:09Former director Chopra circumvented the intent of Congress who statutoily required 13 data points and mandated the collection of 81 separate data fields. That's why there's a lawsuit and that's why uh this uh this law will likely be struck down in the in the courts and this regulation will be struck down in the courts. Forcing financial institutions to gather and report this unnecessary data means higher costs which are ultimately passed on to small businesses.
▶ 10:21:35uh as an American Bankers Association survey of banks uh said, onetime costs to implement the rule would range from 113,000 to as high as 7.5 million with ongoing compliance costs potentially as high as 2 million. Uh I want to thank Small Business Committee Chairman Roger Williams from Texas for his important work on this critical issue uh and urge my colleagues to support this important legislation. In the time remaining, u let me address uh my friend and colleague, the ranking member on what on what she said.
▶ 10:22:04And I I want the ranking member I want the ranking member to to hear this. And I I want the ranking member of the small business committee to hear this because uh what my friend from California said is just not true. What she said was it's a red herring that this is some kind of effort to protect big banks.
▶ 10:22:22I want to tell you a story of one of the smallest community banks in my district, about 200 million in assets, tiny community bank, and their niche, their focus, their expertise is small business lending. That's what they make their bread and butter on. And guess what? They serve minorityowned businesses in my district. They are the source of credit and capital for minority and womenowned businesses, veteranowned businesses in my district.
▶ 10:22:52They are proud of their service of minority owned businesses in my district. And you know what they told me about this regulation promulgated by former director Chopra? They said, "We're going to exit small business lending." And the minorityowned businesses, the womenowned businesses, the veteranowned businesses in my in our district in central Kentucky will no longer have access to the loans that we have provided to them for decades. For decades. Oh, please.
▶ 10:23:21So if you actually want to protect minority owned businesses, why are we doing what we thought we were getting rid of, which is raceconscious decisionmaking, gender conscious decisionmaking.
▶ 10:23:36We should be evaluating the creditworthiness of business owners based on the content of their character, based on their creditworthiness, not based on their race, not based on their gender, not based on their sexual orientation, based on their merit, based on the fact that they are proud, profitable minority owners. Would the gentleman yield? In a minute, in a minute, I think you'll have your time. Mhm.
▶ 10:24:05We should get away from race consciousness in America and we should repeal 1071 because of its race bias and we should protect the small community financial institutions like my constituent who supplies credit to those minority owned businesses based on their character. I yield back. Mr. Chairman chairman, I move to strike the last word. Is there anyone else who would like to be recognized? Yes, Mr. Chairman. I would like to strike the last word.
▶ 10:24:35Recognize the gentle lady from New York. Thank you, Mr. Chairman. Here we go again. Another Congress and another attempt by my my Republican colleagues to tear down section 1071. Last Congress, Republicans couldn't nullify this rule through a congressional review act. So, here they are attempting to block it through another means. this time through repealing the underlying statue altogether.
▶ 10:25:05As a conferee on the DotFrank Act and one of the central architects of this section, I understand better than most that this section what this section does and perhaps what more importantly what it doesn't.
▶ 10:25:22Through my time as both chair and ranking member of the House Small Business Committee and a senior member of this committee, I have seen for far too long women and minority owned small businesses experience obstacles in accessing capital. Indeed, today this morning, we held a hearing about access to capital in the small business committee. Right, Mr. Chairman? And what were we hearing from the witnesses there?
▶ 10:25:52The problem that they were having accessing capital. I have seen for far too long women and minority owned small businesses experience obstacle accessing capital. Part of the reason is the lack of data and transparency related to small business lending.
▶ 10:26:11The scant data that does exist continues to show that these businesses lacked the same access to external financing when compared to whiteowned firms. And during hard economic times, the barriers to accessing capillar are even greater. The paycheck protection program highlighted the disparities between whiteowned businesses and businesses of color.
▶ 10:26:41The Federal Reserve Bank of New York found that PPP loans only reach 20% of eligible firms in states with the highest densities of blackowned firms. And why do you think that chairman Minucci that the secretary Minucci set aside $60 billion?
▶ 10:27:04Because in the first two weeks of rolling out the PPP program, it showed that it went to the rest of the uh borrowers that have a pre-existing relationship with banks in this country. So in order to correct Iran, he decided to set aside at our request and then the numbers change.
▶ 10:27:34I dismiss the notion that under former director Chopra, the CFPB did not conduct outreach or failed to incorporate industries feedback. The CFPB conducted considerable outreach to small firms which included convening a subria panel in October 2020 to hear suggestions and recommendations for from small entity representatives.
▶ 10:28:03This was in addition to adhering to the required APA notice and comment process where the bureau considered thousands of public comments. The arguments in support of this legislation centers on the notion that the rule making is excessively burdensome for smaller institution.
▶ 10:28:24However, director Chopra appeared before this committee and told us that approximately 2,000 banks are exempted from the rules reporting requirements. So, I don't know what you're talking about. Just like the data requirements for home did not negatively impact the mortgage lending industry, this rule will not be detrimental to the small business lending market.
▶ 10:28:52On the small business committee, we have heard testimony that this rule will accomplish three things. First, this rule will help the market better address both the lack of access to affordable capital and the rise of irresponsible lending by enabling everyone in the financial services arena to see which financing models are successful.
▶ 10:29:16Second, it would allow lenders to help tailor their products and services to meet their battle's needs. And third, it will spur additional investment in small businesses without having to create another government program. It has been 15 years and we are still debating the merits of this section. And those 15 years included a lawsuit and a federal court order against the CFBB during the first Trump administration.
▶ 10:29:46I urge my colleagues to vote no on this legislation. I yield back. Gentle lady yields back. Is there anyone else who'd like to be recognized? Green from Mr. Chairman. Gentle lady from Texas is recognized. Mr. Chairman, I move to strike the last You can proceed. Thank you, Mr. Chairman.
▶ 10:30:11I want to start by reminding everyone what section 1071 of the DoddFrank Act is really about. It's about access to the American dream. About whether a woman in rural Texas, a Latino entrepreneur in Houston, or a first generation immigrant in San Antonio can walk into a bank and get a fair shot at a small business loan. That's what section 1071 was meant to protect.
▶ 10:30:39It's about fairness, transparency, and equal opportunity. It's about shining a light on who is being approved and who is being denied and why. Unfortunately, that has made some people uncomfortable. And that's obvious in some of the remarks haven't been made. Uncomfortable to the point they want to now do away with this rule.
▶ 10:31:02So now, instead of focusing our efforts on fixing disparities in lending, we're here today debating whether to repeal the very tool that helps us expose and address this disparities. Repealing 1071 doesn't help small businesses. It helps lenders hide the truth. I represent one of the most diverse districts in the country. I know firsthand how hard it is for many minority and womenowned businesses to get financing.
▶ 10:31:31And it's not because they don't have good ideas or a strong work ethic. It's because of barriers built over decades, biased, discrimination, and lack of access. I was born and raised in rural South Texas. I saw small businesses struggle to survive, not because they elect a ban, but because they simply couldn't get a loan. In many rural towns, there aren't banks and credit unions on every corner like there is in the big cities.
▶ 10:32:02Sometimes there's only one bank or none at all. You may have to go to the next town to do your banking. And even in Houston, where I live now, many small businesses during the pandemic couldn't even get a PPP loan. We had to go in and do a carveout to force the banks to provide loans to businesses. That's why section 1071 matters.
▶ 10:32:27It gives us the data we need to determine who is being left behind and to take action. A transparent market will be a competitive market. With transparency in lending, banks are driven to compete and offer better terms. We need to stop pretending that the status quo is neutral. Frankly, it's not. The data shows that minority owned businesses were less likely to receive loans during the pandemic. This has already been talked about.
▶ 10:32:57And that's not just a talking point that we're using. It's a fact proven by the data. Repealing 1071 is just another attempt to keep us in the dark. As I've said before, discrimination flourishes in the darkness. Transparency is what makes a market fair, competitive, and accountable.
▶ 10:33:20Let's call it what what this is, a backdoor attempt to undermine the Consumer Financial Protection Bureau and roll back protections for our most vulnerable entrepreneurs and communities. I urge my colleagues, please don't turn out the lights. Don't vote for secrecy. Don't abandon the small businesses who depend on us to stand up for fairness. I urge my colleagues to vote against this resolution. With that, Mr.
▶ 10:33:47Chairman, I yield my remaining time um to my colleague, Miss Velasquez, the chair of the the ranking member of small business, if she needs the time. Thank you uh for yielding. Mr. Chairman, sunlight is the best disinfectant. And if we want to understand why so many areas, including rural communities, are underserved, we must collect data to further understand the problem.
▶ 10:34:13It is incorrect and disingenuous to say that the final rule has 81 data fields that an applicant needs to complete. you are misconstring multiple selections or answers to a single question. An applicant can have multiple answers to a question but is still only one data point. You cannot count multiple answers as multi as multiple data sets. I yield back. Thank you.
▶ 10:34:42And again, I urge all my colleagues to vote against this amendment. It is about fairness. It is about opportunity. And it's about the American dream for all. Thank you. With that, I yield back, Mr. Chair. Gentle lady yields back. Is there anyone else who'd like to be recognized? Thank you, Mr. Chairman, and thank you for working on HR 976. Uh, this is really important to me. I've spent so much of my life working in community banking.
▶ 10:35:11I mean decades starting out in uh investing in a bank in the deep Mississippi delta towns like Wilmont Wilmont Arkansas population maybe 400 70% African-American Udora Arkansas maybe 1,400 people 90% African-American for years I worked in those communities I know how people in business and households manage their money, worked
▶ 10:35:41every day to put food on the table, how they used banking services, and I know from personal experience the problems in trying to 1071. You know, it wasn't a cakewalk. Uh the our great ranking member of the Small Business Committee and her in her advocacy for this bill said it right. It's been 15 years. It's because Mr. Obama didn't infor put this rule out. Mr. Richard Cordre didn't put this rule out.
▶ 10:36:10President Trump and his directors and those four years. He didn't put that rule out. It took a lawsuit against the CFPB from the left to get Roit Chopra to take on this rule because it's complicated and it's really tough and it has negative connotations on people trying to borrow money like my friend Mr. Bar outlined from personal experience in his district.
▶ 10:36:361071 was amended to require depository non-deport depository institutions to report data and the data points are all-encompassing 81. It's true. Sorry to say, it's 81 data points.
▶ 10:36:52And when you compare it to the Home Mortgage Disclosure Act, uh, which is used as its model on one to four family home loans, that's only about 40 data points, but it's absolutely one of the most expensive rules small banks try to compete with. But what's the difference, Mr. Chairman? There's a big difference. A home mortgage is a homogeneous product because of the federal secondary mortgage market.
▶ 10:37:21It's a cookie cutter product. The underwriting points are known. A small business loan is exactly the opposite. Every small business loan is different. Is it secured by commercial real estate? Is it secured by furniture and fixtures? Is it secured by They're all different.
▶ 10:37:44Whether it's an a small business loan, starting a new pizza restaurant, starting a homebased business, they're all different. And therefore, they're subject to a lot of different credit characteristics, but it's not based on race or gender. It's based on complexity of trying to do the underwriting in small business.
▶ 10:38:09It's very challenging and it's very different from the home mortgage disclosure act on a very cookie cutter thing called making a mortgage secured by a home. And if I traveled over the last three months, it's the single biggest concern of our community banks is 1071. I know Chairman Bar agrees. I know members have traveled and heard the same thing because they believe it will drive them out of the small business lending business.
▶ 10:38:38it will be too costly, too complicated. Borrowers will be turned off by it. And I know the the uh loyal opposition will say, "Well, this is just voluntary. You don't the the rule says you don't have to report it." But the rule also says if you don't report it and we find there's a pattern of your bank never reporting data because you say all the small businesses decline, they're going to presume they were coerced.
▶ 10:39:05making that relationship between the bank and the borrower even difficult. So, I really commend chairman of the Small Business Committee, Roger Williams, for saying we should not implement this rule. And I've urged the Trump administration, we should not implement this rule. It needs to be modified. Community banks will be driven out of the small business lending business. You'll have borrowers who will actually say it's not a small business loan.
▶ 10:39:34It's a real estate loan to avoid this disclosure. And finally, who will be the beneficiaries? Non, less regulated online small business lenders. And you'll take the last profitable community-based business away from the community banks. Community banks need every loan they can get to serve their community. And so, I'm supportive of Mr. Williams. I oppose this rule and I yield back the balance of my time. chairman yields back.
▶ 10:40:04Uh, is there anyone else who'd like to be recognized? Green from Texas. Recognize Congressman Green from Texas. Thank you, Mr. Chairman. I appreciate those who have spent their lives working with people of color. I've spent my life being a person color. I know what invidious discrimination looks like. I know what it feels like.
▶ 10:40:32I know what it smells like. Example, I and several of my colleagues upon graduating from law school decided that we would open up a business as lawyers. We went to a bank and we received a loan.
▶ 10:40:49We paid it back timely, never missed a and decided that we would get a second The loan officer looked at our documentation, knew that we paid back timely, never missed a payment, and the officer denied us the second loan. We made a plea. Why?
▶ 10:41:19The loan officer said, "Because you shouldn't have had the first loan. I know what invidious discrimination is like. Thank you for working with people of color. I've lived my life as a person of color. There is no one so blind as he who won't see, not he who can't see. You choose not to see the invidious discrimination that exists in this society. It is not a meritocracy.
▶ 10:41:50It is a society where skin color makes a difference. I've lived my life in this skin. You see a different world and you choose not to see the invidious discrimination. And not only do you choose not to see it, you choose not to allow the necessary empirical evidence that can present it to you in great clarity. You choose not to see that.
▶ 10:42:17You would do everything that you can to avoid having the empirical evidence presented. I dare you, dear brother, Mr. are. If you're serious about what you said, I dare you. Let us do some testing. Testing reveals the facts. Testing shows that persons of color who are imminently qualified, will get loans, and pay more points, get less money, imminently qualified than a white person. Mr.
▶ 10:42:46Bar, I dare you to to challenge me and let's do this. Let's do the testing. I also dare you to look at HR 166, the fair lending for all bill that passed this house under the leadership of the honorable Maxine Waters. That bill makes it a penalty to defraud a customer who is acquiring a loan. Currently, if you defraud the bank, there's a $1 million penalty that you can pay and you can go to prison.
▶ 10:43:14But if the bank defrauds the customer because of invidious discrimination, then you have a lawsuit. Mr. are you and I are friends. Nothing that I said was intended to degrade or demean you. It was intended to help you to see a world that you've never lived in that you you cannot understand because you never been there. And for you as a meritocracy, but it's not for us. I'm empirical evidence. It is not.
▶ 10:43:43So I beg you, let's let's do the testing. By the way, the president has issued an executive order that would embrace what you're talking about. The president is a person who seems to think that if you can uh if there's a problem, uh diversity, equity, and inclusion is at the root of it. Airplane crashes. Well, without getting any empirical evidence, the president concludes, "Oh, that's DEI.
▶ 10:44:14What an what an insane thing to say. This kind of fatuous folly ought not be tolerated by you, dear brother. You're an intellectual. Open your eyes. There is no one so blind as he who won't see. Not he who can't see because he doesn't have the vision to read or write, but he who for whatever reasons declines to see the empirical evidence.
▶ 10:44:42I'm going to yield my last 30 seconds to you until I claim back my time. I I thank my friend and I you know what we all have different experiences and I appreciate that. I appreciate that you absolutely have a had a different experience and I appreciate that your different perspective and we are friends and we learn from each other.
▶ 10:44:59Would the gentleman be willing to talk to the small bank in my district who is the creditor of many minority owned businesses who told me that if this regulation goes into effect, they're going to exit the business and they're never going to make another loan. Reclaiming my last 10 seconds.
▶ 10:45:23any business whether they're micro or not claiming the gentleman yield I would I would ask my friend I would ask my good friend would you be willing to hear the gentleman's time has expired I I believe the time belongs to me and I tried to reclaim it and you didn't acknowledge me the so I I expect more time I expect more time the gentleman's time expired the gentleman's time did not expire because the gentleman tried to reclaim his time and you would not recognize me I expect more time.
▶ 10:45:53The gentleman has 30 seconds. I thank the chairman. Uh, dear brother, and I say this because I have a deep abiding affinity for your humanity. Dear brother, I have bankers in my district. They are small banks because they are minority banks and they don't tell me what you're telling me. So, what I'm saying to you is this. Let's do the testing and get the empirical evidence.
▶ 10:46:19Let's send people into a bank, well-qualified black people, and let's send white people in who are less qualified. I'm using white and black because that's what this is, black and white. Let's do that, and let's see what the empirical evidence. Gentleman yields. What would the gentleman yield? The gentleman has only 10 seconds left. Well, just really quickly, I I would I would urge the gentleman to listen to different perspectives as as he's urged me to. And one of the different perspectives is that and the gentleman's time has expired again.
▶ 10:46:49We'll leave the business of lending to small businesses including gentleman's time has expired. I invite the gentleman to the gentleman someone to yield time to him. Who seeks recognition? Hearing none, we'll move on to amendments. Mr. Chair, Mr. Chair, Mr. Chair, Dr. Foster. Yeah. Like to be recognized. Gentleman's recognized. Yeah.
▶ 10:47:18Um, first off, you know, I have learned a heck of a lot in the last few minutes just watching watching the scars that have taken so long to heal. And Could you speak in your mic, please? Yeah. Okay. I I just I'm going to remember forever the last several minutes of watching, you know, good people just describe the scars that from and the the you know I my experience with small banks was a young kid. Excellent excellent experience.
▶ 10:47:48We just you know they came in they trusted us when we were not really that solid and and they were great and that enabled our company to grow. I never it never really occurred to me that maybe that was because of my race. I don't know. I just, you know, it just was never an issue in my mind. I I grew up in a in a university town in Madison, Wisconsin, and it wasn't an issue.
▶ 10:48:10There were lots of non-whites in that town, but they were all like university professors, and so that it was a different different Um so but I so I'd like to yield equal time to both of these two gentlemen to continue that discussion because we have a lot to learn from each other in this and so do you want to start first Andy and just say but try to split I think I I thank my friend the gentleman from Illinois and I I appreciate the conversation because it's true we all
▶ 10:48:40have different experiences and we do need to learn from each other. The point that I'm making is that what I am being told by my constituents who are small business lenders is that the burdens associated with the 1071 data collection rule will force them to exit small business lending.
▶ 10:49:02Now, these are the very same lenders that are the principal source of credit for minorityowned businesses in the community which I represent. My question to my friend who has a deep understanding of invidious discrimination and I I respect that and I respect his opinion about that. Why would the gentleman want that?
▶ 10:49:25Why would he want creditors, lenders, American dream providers of minority owned businesses to leave the market? To me, that is counterproductive to the goal, which is to defeat to defeat to defeat invidious discrimination. That's what we want. We want the American dream for every American based on the content of their character. Okay. All right.
▶ 10:49:54Now, that's what we want. I'd like to reclaim my time and and do it to Mr. Green. Thank you for yielding. Dear sir, it probably has not occurred to you that the banker that you're talking to has engaged in invidious discrimination. And it probably has not occurred to you that that very banker knows that if he produces the empirical evidence, it will expose him as a person who has not engaged in fair lending. This is what happens.
▶ 10:50:25And you've cultivated a climate in this country wherein all you have to do is indicate that this is going to cost us too much to handle paperwork when it's costing the persons who trying to get the loans a lack of a home to build equity in so that they can send children to college. It's costing the persons who can't get the loans to have the money necessary to pay bills that they might consolidate. They are suffering too, but they're suffering because of a lack of finance. And you're talking about paperwork.
▶ 10:50:53Well, there may be some paperwork involved, but it's not so much paperwork that it won't help some person to get a loan that probably will be denied. And I challenge you again. Well, all we have to do is do the testing. Will the gentleman yield? No, I won't yield just yet. Testing is the methodology by which we get the empirical evidence. You want to end the testing. That's the thing that makes the difference. So, so can can I can I I'll yield back to Mr. Foster my time and and you'll just real real quick.
▶ 10:51:21So, one of the one of the comments from one of these community banks was the way that Chopra wrote the rule was that the questionnaire has to be presented to the small business applicant first before underwriting starts. Before you get to the objective creditworthiness of the borrower, irrespective of the of these irrelevant immutable characteristics of the business owner that we all say we shouldn't care about.
▶ 10:51:47They have to fill out whether what the sexual orientation of the owner, what the race, what the national origin, what the gender is. And then then and only then do you get to the meritbased question of whether or not this small business should get the loan. Okay. What does it say to the heant? Here's what it says. Issues are here's what it says before the time expires because nobody else is going to yield to me. Here's what it says.
▶ 10:52:13It says that whenever you have the opportunity, at some point you see the skin color and at that point you make decisions either consciously or unconsciously about that person. It happens every day in this country. Not only in banking, it happens in institutions across the length and breadth of the country. And you if you're too blind to see simply because you choose not to, eliminating this evidence will help you to remain blind. Yeah. My gentleman's time is expired. I thank Dr.
▶ 10:52:44Foster for yielding the time and allowing our colleagues to have this discussion. Is there anyone else to be recognized? Hearing none, we'll move to amendments. Does anyone wish to make an amendment to the nature of Mr. Williams amendment in the nature of a substitute. Mr. Chairman, I have an amendment at the desk. The gentleman from New York has an amendment at the desk.
▶ 10:53:07We'll pause and let it be distributed.
▶ 10:53:20Need another water or The clerk
▶ 10:53:51will report the amendment. An amendment to the amendment in the nature of a substitute to HR 976 offered by Miss Velasquez of New York designated as two. The amendment will be considered as read. Mr. Chair, could I reserve a point of order? Uh the gentleman from Michigan reserves a point of order. Thank the gentleman. The gentleoman from New York is recognized for five minutes to discuss her amendment. Thank you, Mr. Chairman. My amendment is simple.
▶ 10:54:21It will delay the underlying legislation from taking effect for one year in order for the director of the CFPB to certify to Congress several important steps. One, that the small business lending market has become more transparent. Two large lenders are providing disclosures on loans to small businesses that are substantially similar disclosures by lenders under Tila.
▶ 10:54:51Three, the CFBB has gathered and made publicly available certification that terms associated with small business loan has become more transparent and four that no lenders are including a confessions of judgments as part of their origination terms.
▶ 10:55:10We have heard a lot of rhetoric here today about how small businesses lack access to capital, which is true, and how the underlying bill will help facilitate more loans to small businesses. Well, there's also a lot of information demonstrating the lack of proper disclosures and the use of confessions of judgments are reducing the availability of loans to small businesses as well.
▶ 10:55:38Research produced by the Federal Reserve has established that the small business disclosures used today in today's marketplace often leave business owners unable to make informed comparisons about the price of financing.
▶ 10:55:55This has significant consequences for small businesses as additional research has found that the average monthly payments charge small business owners to be almost double what these small businesses could afford to pay. In fact, one article published by Forbes has compared online small business lending to subprime mortgages that help fuel the financial crisis.
▶ 10:56:23Tila requires transparent disclosures in consumer finance but does not apply to small businesses. Transparent price disclosure is the foundation of free markets. Without it, market competition on price fails to occur effectively.
▶ 10:56:40California and New York have already passed legislation requiring these disclosures because they understand small businesses that are inhibited from making informed choices may overpay for credit impacting their ability to grow their business and hire more employees. Many of other states are passing similar legislation as well.
▶ 10:57:05Additionally, in recent years, small business lenders, including many community banks, that the other side argues are so overburdened by the section 1071 rule, have required borrowers to sign confessions of judgment just to receive their loan. Because cash flow is so vital to a business survival, many owners feel they have no choice but to sign away the right to serve to save their business.
▶ 10:57:34and provide for their employees by s by signing a confessions of judgment. Borrowers essentially wave their legal rights regarding any legal dispute that might arise and if one does arise, the lender can unilaterally declare a default and take actions against the small business owner.
▶ 10:57:57Moreover, by utilizing this confession of judgments, this lender has hijacked our courts by getting rubber stamped judgment from county clerks without notice or court hearings. Many times, small business borrowers only find only find out about a judgment against them after the lender begins sizing their bank accounts or other assets.
▶ 10:58:25In fact, lenders have used these confessions of judgments to win more than 32,000 judgments against small businesses in state courts. While confession of judgment have judged at the federal level since 1985 under Tila for consumer loans, it has not been extended to commercial loans.
▶ 10:58:49By ending confessions of judgment in commercial lending, we can stop some of the abuses that are crippling honest small business owners. So if you care about small businesses and their access to capital like so many on the other side of the Alp purple do, then should support transparency, efficient markets, and ending an outdated lending practice that is driving so many small businesses into bankruptcy.
▶ 10:59:19I yield back. The gentleoman yields back who seeks recognition. The gentleoman from Missouri, the chairman of the capital market subcommittee, Miss Wagner, is recognized to strike the last word. I move to strike the last word, Mr. Chairman, and I thank uh thank you for recognized me and I thank my colleague uh for her amendment, but it it simply, Mr. Chairman, is not necessary.
▶ 10:59:43There are many many ways to track the transparency of small business lending in our financial system. Uh banks already report data on loans made to small businesses in their consolidated reports of condition and income called the call reports as mandated by the federal financial institutions Specifically, schedule RC- C part two
▶ 11:00:13requires detailed information on bank loans to small businesses and small Therefore, small businesses and small farm lending data is also collected by federal banking regulators under their community reinvestment act, the CRA FDIC also periodically conducts the small business lending survey.
▶ 11:00:41It's SBLS, a nationally representative sample of US banks that offers important insights into their small business lending practices.
▶ 11:00:55All 12 Federal Reserve banks also jointly conduct an annual small business credit survey, the CBCS, that includes information on nondepository lenders.
▶ 11:01:13Section 1071 is duplicative of these data requirements and is an unnecessary burden on financial institutions given they already report and collect on lending to small businesses.
▶ 11:01:33The fact is, community banks and credit unions are essential pillars for supporting small businesses, not just in central Kentucky, but also in in uh in my second congressional district in Franklin County, in Warren County, in St. Charles County, and in St. Louis County.
▶ 11:01:56They are important for these small businesses and essential pillars that that foster local economic growth and I think this was especially evident during the pandemic and since it was brought up I just want to say that when small community financial institutions they played a pivotal role issuing some 60% of all paycheck protection program PO uh loans those PPP loans and by focusing on relationship
▶ 11:02:27relationshipbased lending. Community financial institutions were able to offer a more personalized a more responsive repro approach and enabling them to process loans more quickly and ensure small businesses received the vital funds that they needed, especially in the early critical states uh stages of the PPP roll out.
▶ 11:02:51Section 1071 misses the mark by failing to recognize the highly customized nature of small business lending. This approach risks undermining the very communities that they that rely on the flexibility and personalized service that community financial institutions offer.
▶ 11:03:15I've long been concerned that section 1071 would divert scarce resources away from core lending activities and customer service, pushing these institutions to focus on unnecessary and burdensome compliance requirements, further restricting their ability to support small businesses For these reasons, Mr.
▶ 11:03:42Chairman, I oppose the amendment and I urge my colleagues to support the underlying bill of Mr. Williams, our chairman of the small business committee, and I yield back. The gentleoman from Missouri, yields back. Who seeks recognition? The ranking member of the full committee, Miss Waters, is recognized to strike the last word. Um, I move to strike the last word. You're recognized.
▶ 11:04:03Uh I am so pleased and proud that Miss Velasquez um is here you know taking up this issue uh because of the long years that she had worked with small business administration and she went over what happened during co uh when uh the big banks took care of their concier clients created their own panels
▶ 11:04:33and we had to go back and work and we worked with Minutuchin until we got uh more money to make sure that we were putting it into small and minority banks. Now, Mr.
▶ 11:04:46bar gets all excited when he talks about these kinds of issues and I'm we're forever trying to educate him and to help him to understand what we go through in order uh to receive fairness, justice, and equality. You talk about merit. You talk about only receiving uh loans based on merit.
▶ 11:05:16Let me tell you what we know about merit and what we face every day of our lives. We unqualified, stupid, ignorant others get opportunities that we cannot have access to. Let me give you an example. This is not having to do right now or what we're doing with 10 uh what is it? 10 section 1071.
▶ 11:05:46Take a look at what's happening with this new administration. I'm looking at Matt Gats, the attorney general of the United States of America, who has all kinds of problems. Sex trafficking, alcohol, you name it.
▶ 11:06:06And I know a lot of blacks who are more qualified, have better backgrounds in education and everything that a Matt gets. But no, it's not about merit. It's about color. Look at Robert Kennedy. You don't get any crazier than that.
▶ 11:06:25His cousin sent us a well doumented memorandum, letter, whatever you want to call it, telling us how crazy he is and how he mix animals in blenders. And now we've got to deal with this crazy man and the fact that we're entering into maybe a measles epis epidemic. He doesn't believe in vaccines. Oh, but he got his own merit. Uh because he's smart.
▶ 11:06:55He's qualified. Give me a break. And then you've got Pete, what is his name? Hedge with the defense department. Uh oh, I don't want to talk about it because a lot of people get over their alcohol problems. I don't know about him. Oh, but he got his on merit. And then there's Linda M. man. All she knows about is those phony wrestling matches that she's in charge of that she owns.
▶ 11:07:25But guess what? She got to be the head of the Department of Education on merit. What the heck does those wrestling matches got to do with our children, PEL grants, and Title One loans that we need so much? Oh, but they got it on marriage. Oh, and then there's Mike Waltz, the national security advisor and former White House member.
▶ 11:07:52He added a reporter to group chat signal cuz he's on merit. He's so smart. He got this job because he absolutely understand how government works and classified information. So, we're going to give you another lesson about merit. We're going to talk to you again.
▶ 11:08:16And I want to tell you, you can't say, "Oh, maybe they're Republican." They got black smart Republicans who can't. We got one black in this administration over at HUD. We got plenty smack Republicans that get these jobs, but they can't get it on merit.
▶ 11:08:39But you got all of these stupid, ignorant, undeserving people who are now running the country. Wow. Don't talk to us about Mary. We go through this every day. Now, I want to ask you this, Mr. Bar. You are extending opportunities to expand banking. You said that we need to have more community banks. Did you include in that minority gentle woman's Did you include in that minority bank? I bet you didn't.
▶ 11:09:08The gentleoman's time is expired and the chair reminds all the members to honor the rules of decorum in the house when describing members of the cabinet. No. Yes. No. Yes. No. Yes. No. No. No. Well, Mr. bar keeps up with that kind of conversation about merit. We have to keep teaching him. The ranking member, we have to keep teaching him. Ranking member, I I really invite you to ask Mr.
▶ 11:09:38Bar out. Mr. I appreciate you so very much, but you tell Mr. Bar to stop this crap. I will I will have a special meeting with him after the session If there's if there's no further debate, the question now occurs on the amendment offered by the gentleoman from New York. All those in favor, please say I. I. I. Those opposed, please say nay. They want to qualify. In the in the opinion of the chair, the naysay have it.
▶ 11:10:09The nays have it. And the amendment is not adopted. A recorded vote has been requested. All those in favor record free, please raise your hands. a sufficient number having raised their hands. A recorded vote is so ordered pursuant to subsection C5 of rule three of the committee rules. Further proceeding on this amendment is postponed. Is there an additional amendment to Mr. Williams bill? Seeing no further amendments, without objection, the previous question, the substitute is ordered and recorded votes on the pending amendments have been postponed.
▶ 11:10:39Once those votes are taken, the committee will immediately vote on the adoption of the amendment in the nature of a substitute and then we'll consider the question to report the measure. We'll now move to the next consideration of the next bill. Pursuant to notice, I'll call up HR 1919, the CBDC Anti- Serveillance State Act, introduced by the gentleman from Minnesota, the majority whip, Mr. Emmer.
▶ 11:11:05The clerk will report the bill, copies of which were distributed in HR1919 to amend the Federal Reserve Act to prohibit the Federal Reserve banks from offering certain products or services directly to an individual to prohibit the use of central bank digital currency for mon monetary policy and for other purposes. Without objection, the bill is considered read and open to amendment at any point. For what purposes the gentleman from Minnesota seek recognition?
▶ 11:11:36Mr. Mr. Chairman, I have an amendment in the nature of a substitute at the desk. Uh, the gentleman in fact has an amendment in the nature of a substitute, copies of which were distributed in advance. The clerk will report this amendment. An amendment in the nature of a substitute to HR1919 offered by Mr. Emmer of Miss Without objection, the amendment in the nature of substitute is considered read and will serve as base text for the purposes of amendment.
▶ 11:12:02The gentleman from Minnesota, the majority whip, is now recognized for five minutes in support of his amendment. Thank you, Chairman Hill. Uh, today we are marking up the AntiCBDC Surveillance State Act, a bill and an issue I am proud to lead on because our government should never be in the business of creating tools for financial surveillance.
▶ 11:12:24Unlike decentralized cryptocurrencies such as Bitcoin, a CBDC is a digital form of sovereign currency that is issued, monitored, and managed by a central bank. In short, a CBDC is governmentontcont controlled programmable money that if designed without privacy protections of cash could give the federal government unilateral authority to surveil Americans transactions and restrict politically unpopular
▶ 11:12:54activity. We've already seen examples of governments weaponizing their financial system against their citizens. In China, the Communist Party is using a CBDC to track the spending habits of its citizens. Closer to home, in Canada, the Trudeau administration froze the bank accounts of citizens involved in the 2022 trucker protests.
▶ 11:13:19The Biden administration was actively researching a CBDC, and they would have gone ahead and created one if it weren't for such resounding opposition in Congress, evidenced by hundreds of members of Congress who have supported this bill. Power-hungry bureaucrats will stop at nothing in their quest to gain control over the very people they're supposed to be working for.
▶ 11:13:42President Trump recognizes this and accordingly, one of his first executive actions in office was to ban the United States federal government from ever creating a CBDC. We must codify this in law. Although the Biden administration was willing to trade Americans right to financial privacy for a surveillance style CBDC, the Trump administration and congressional uh Republicans surely are not.
▶ 11:14:08Last Congress, this bill passed out of the House of Representatives by a 216 to 192 vote. So far, this Congress, this bill has 114 co-sponsors and support from groups ranging from the Independent Community Bankers Association and the American Bankers Association to Club for Growth, Heritage Action, and the Blockchain Association.
▶ 11:14:31The anti-CBDC surveillance state act ensures that the United States digital currency policy is in the hands of the American people, not the administrative state. So it reflects our American values of privacy, individual sovereignty, and free market competitiveness.
▶ 11:14:51I'm grateful to my colleagues for working with me on this issue to ensure our federal government is never in the business of creating such an obvious tool for financial surveillance against its own citizens. And I thank the chairman for including my bill in this markup today. And Mr. Chairman, I yield back the balance of my time. Gentleman yields back. Who seeks recognition? Recognition. Thank you, member. Thank you very much, Mr. Chairman.
▶ 11:15:18I move to strike the last Uh among the various restrictions established by this legislation, this bill would prohibit the Federal Reserve banks from offering products or services directly to individuals researching, testing, or issuing a retail central bank digital currency or CBDC and prohibiting the Federal Reserve from using a
▶ 11:15:49retail CBDC C to implement monetary policy. What is most concerning, however, is that this bill includes new language that stipulates that the Fed lacks authority to issue any CBDC, which would harm efforts to test or issue a wholesale CBDC that could only be used by financial firms. For these reasons, I oppose this bill.
▶ 11:16:19It is critical that we distinguish between the two different types of CBDC's and their functions. For example, consumers could get retail CBDC's from the Fed or a financial institution and wholesale CBDC's would not be used by individual consumers and instead would only be used for transactions among financial institutions and the Fed.
▶ 11:16:46The Fed must be free to fully explore the potential benefits and challenges of CBDC's, especially wholesale CBDC's, which may allow for new technical capabilities and arrangements in interbank payments, clearing and settlement, including the use of tokenized platforms.
▶ 11:17:09In the past six years, most central banks throughout the world have started examining the issuance of CBDC's. According to research from the Atlantic Council, there are currently 134 countries exploring a CBDC with the United States trailing all of its G7 peers in simply researching and developing a CBDC.
▶ 11:17:37Now, rather than ensuring the United States wins the digital currency space race against powers like China, Republicans are making baseless attacks against the CBDC that does not even come close to existing. Republicans really care about consumer privacy.
▶ 11:17:57Where is their outrage at the fact that the big tech firms are vacuuming up data about every American or that unelected billionaires have seized access to consumer data through hostile takeovers of federal agencies. The Fed must continue to study CBDC's which we can design to balance consumer privacy, national security and innovation. Now, Mr.
▶ 11:18:26Chairman, I just kind of mentioned um you know Elon Musk and the billionaires and all the data collection that they're involved with. Why in um invading our agencies, the first thing they put their hands on is all of the data in the agency. I believe that the billionaires are intent on monetizing all of this.
▶ 11:18:50And I think the day will come when we were ruled the way the time that we had to pay attention and we did not. Uh and I will yield back the balance of my time unless Mr. Green wants to get at it again. I yield to Mr. Green. I yield back to you, Madam Chair. Excuse me. That's about a year and a half away. Gentle.
▶ 11:19:18The gentleman yields back to the to the ranking member who yields back. Back. Uh who seeks recognition? Mr. Davidson recognizes strike the last word. I thank the chairman. I thank Mr. Emmer for his bill. Uh frankly, the future of money is probably the most important policy debate going on in Western civilization. And that's at a time where there are lots of critical policy debates going on.
▶ 11:19:42The future of money could either be something that embraces freedom and privacy and opportunity for millions of if not billions of people around the world. But central bank digital currency represents the biggest threat to that. It is a dystopian future for money that corrupts money from a tool used as a means of exchange and a store of value into a tool for surve surveillance.
▶ 11:20:08surveillance that allows the central government, not an intermediary, but the central government to act uh not just as the spy and surveillor, but as the intermediary in every transaction. They could filter, cancel, shape everything about it. And some of the proponents of CBDC say that's a feature. They could issue you money that expires or has terms and conditions and they could stimulate or incentivize the economy in all sorts of ways.
▶ 11:20:36And the scary thing is Western governments around the world are are embracing this idea. Uh Andy Bar, Chairman Bar, led a a Kodell to Europe last year and we saw that the Bank of England was working on a central bank digital currency that they acknowledge isn't popular with the public. Nevertheless, they're working on it.
▶ 11:20:55the European Central Bank, maybe the biggest champion of this idea is Christine Lagarde, the their their central banker and they also acknowledge not popular within Europe. Nevertheless, they're working on it. They're building out architecture. The Bank of International Settlement in Basil, Switzerland is acting as the central banker to the central banks and they're trying to set up a framework that is interoperable with China.
▶ 11:21:23China is using it already and imposing it on a dystopian system of control that links it to social credit. And that's why you see many of the proponents of central bank digital currency saying that the way that you access this is with a digital ID. And they say it's just to keep you safe. But our founding fathers recognized the core premise here with the third amendment.
▶ 11:21:46you maybe you could keep every household safe if you put a garrison of soldiers on site, but that's not why they would be there. They would inherently be there to intimidate, to coers, to censor. And if the regime that implemented it was the most benevolent in the world, eventually human beings down the line would use it for its evil purposes.
▶ 11:22:11This system shouldn't be it should be studied and this bill doesn't prevent the study of it, but it shouldn't be designed or developed or tested. Allowing uh central banks to design and develop this is akin to in the Star Wars movies when the evil empire built the Death Star. As long as they promise not to turn it on, the trouble is once they turn it on, they've got all the power that it yields to them.
▶ 11:22:36We shouldn't let our own central bank design it, test it, build it, and we certainly shouldn't let them implement it. If someday there is a need for us to do that, Congress could vote on it, and we should reserve our power over this incredibly dangerous system that would become a an intermediary between every single person and their own property.
▶ 11:23:00Every dollar you make, every dollar that's given to you, every dollar that you spend or send to someone else would depend on a permissioned system where the government is the granter of that permission. The right to transact predates any government. The government doesn't give you the ability to transact. And in our system of government, the government doesn't give us the rights protected by the Bill of Rights.
▶ 11:23:27that simply says the government will not infringe on them without cause and due process. Frankly, this is linked to the same concept I'm trying to protect with self-custody because the reality is when you give the government the power to regulate your ability to transact, someone will abuse it. And we've seen that abuse over and over again with agency after agency. This is a dangerous bill.
▶ 11:23:55Every dystopian fiction that you read, Brave New World, 1984, you pick them, they all depict money in a future that is corrupted, this is the means of corrupting the money. The book of Revelation, which I consider scripture, as billions of people around the world do, depicts it as an evil system. And eventually, I believe it'll happen, but it's always depicted as evil. So, we should resist it. We should all support this bill and maybe even stronger language in the future.
▶ 11:24:23The future of money really is the most important policy debate we're having today and we have to be on the right side of it. I yield back. Gentleman yields back. Seeks recognition. Mr. Chairman, Mr. Chairman, excuse me. I was here in this room. No. some 412 hours ago when we began this markup. I can't take it up and I heard you very clear in talking about stablecoin when you said if you don't want to use it, you don't have to use it.
▶ 11:24:53So if it's if you like it, use it. If you don't like it, you don't use it. I would say the same thing about a central bank digital currency. If you don't like it, don't use it. There seems to be an apparent massive inconsistency here. We are told in with every crypto bill, my god, China's going to do it. We have to keep up with the competition. It we don't want to drive the crypto industry overseas.
▶ 11:25:23We've got to keep up with these other countries and what they're doing. And then when it comes to a central uh bank digital currency, we're told, my god, Europe is doing it, China's doing it. we can't possibly follow them. They're wrong. Don't do what the other countries are doing.
▶ 11:25:41Now, this appeared to be an inconsistency until I realized that both comments are absolutely true to the guiding principle, which is if anything helps the crypto bros make billions, it's good. And if anything might be compete with cryptocurrency, it must be stopped. seen in that light. The policy of the crypto industry is very consistent. But they come to us and they say crypto is going to help the unbanked.
▶ 11:26:11It's going to be electronic. It's going to be so convenient. It's not now. It's incredibly expensive to use. I, you know, imagine trying to buy a sandwich if all you owned was a Bitcoin. But here we have something that's going to be electronic and be what everybody wants, which is US dollars. And it is blocked. And again, that is not an inconsistency. It's true to their primary principle.
▶ 11:26:38If it doesn't make money for the crypto bros, it must be stopped, particularly if it competes against them. So, uh, we are told all the time, you got to vote for crypto if you believe in innovation. This is a bill solely for the purpose of blocking innovation. Um, then you look at how the bill is drafted because I was just describing what the proponents are trying to do.
▶ 11:27:02And although they've added new language a little bit at the end of the bill from the way they drafted it last time, this bill still, if you read it carefully, is a word salad of anti-government procryptobo buzzwords that would prohibit the the Federal Reserve from doing anything with electricity. It takes us back to the 19th century.
▶ 11:27:27Today, if the Fed is going to buy a hundred billion dollars of Treasury bills from JP Morgan, they do it electronically. They are paying for those with a digital liability of the Federal Reserve. They're wiring them the money. Well, that's prohibited by this bill.
▶ 11:27:46Instead, you have to hire a fleet of Brinks trucks and pay for those the way you would do before there was there was any electricity at the Federal Um, so, uh, I hope very much that the bill is interpreted, uh, if, god forbid, it becomes law, the way the, uh, proponents describe it rather than the way they've written it.
▶ 11:28:09Now, we're told that because Canada froze the bank accounts of antivax truckers, I don't know if they did or not, uh we should have a payment system that makes it impossible for the American government to freeze the bank accounts of uh sex of uh traffickers, convicted tax evaders, drug dealers, and charlatans of various parts uh various types. Uh I can only describe this bill as patriotic anarchism.
▶ 11:28:40Those who want a strong America while destroying the powers of the federal government to be strong in any way. um, we, uh, we have a bill here that makes it impossible for the Fed to come into the century because that might take profits away from the crypto bros.
▶ 11:29:09And earlier um, just 400 hours ago, we began discussion of a bill designed to help the crypto folks make money. So, um, I look forward to working toward a better payment system that allows people to pay in dollars and to receive dollars, which is what they want to do. And uh if uh instead we have a bill that takes the Fed back to the 18th century.
▶ 11:29:40I yield back. Gentleman yields back. Who seeks recognition? Chairman of the committee. Uh Mr. Style of Wisconsin. Strike the last word. Thank you very much, Mr. Chairman. Um I support HR1 1919. Um, for several years, Whip Emmer has been at the forefront of championing uh legislation that safeguards uh the privacy and financial freedom of every American. And I commend uh Whip Emmer for his leadership in this regard.
▶ 11:30:08At its core, this bill sends a strong and unambiguous message. The federal government should have absolutely no role in developing or issuing a US central bank digital currency that could be used to track, control, or monitor the financial lives of American citizens.
▶ 11:30:25The introduction of a US CBDC would grant the US government unprecedented access to Americ's most private financial details, from what they purchased to when, where, and potentially even why. This is a fundamental shift in the relationship between the government and its people. One that should be deeply concerning to all who value liberty. It's not a typical scenario.
▶ 11:30:50We've already witnessed dangerous consequences of China's digital yawn, which embodies surveillance tools and ties financial access to government compliance. That model is not only incompatible with our United States Constitution, but is also a direct threat to our freedoms. Emmer's bill is a critical step in protecting that right, ensuring that unelected bureaucrats at the Federal Reserve impose a CBDC behind closed doors.
▶ 11:31:18This legislation or it cannot impose if not noted there cannot impose a CBDC behind closed doors. This legislation affirms that any decision of such monumental consequence must go through the proper channel of Congress, full transparency, accountability of the American people. Let me be clear, bill doesn't stifle innovation or halt the development of digital financial technologies uh as was previously suggested. On the contrary, it's protecting America's rights to use digital assets freely without the looming threat of every transaction being monitored by the United States government.
▶ 11:31:48American economy thrives on choice, thrives on competition, and on liberty, not on coercion and control. That's what is truly at stake here. Fortunately, the private sector is already leading the way in bringing the US dollar into the digital age. Uh from stable coins, other innovative financial technologies that are thriving uh to a US CBDC that are rooted in free market or alternatives to the US CBDC that are rooted in free market principles.
▶ 11:32:16These innovations are transforming global finance, making payments faster, cheaper, and more accessible. Uh they're also uh financial advancements Congress should support, not a tool uh for centralized control over money and individual behavior. So I encourage my colleagues uh to support the anti-CBDC surveillance act. Send a clear message. The United States is going to lead in financial innovation, but we will not sacrifice individual liberty in the process. Thank you, Mr. Chairman. I yield back.
▶ 11:32:46Gentleman yields back. Who seeks recognition on uh Mr. ANS Mr. Lynch recognized the strike. Last word. Thank Thank you very much, Mr. Chairman. Look, Mr.
▶ 11:33:01Sherman was correct when he said the the reason that this bill is going forward to ban a central bank digital currency is because it would compete with uh private stable coin uh issuers. There's a direct parallel to what we're going through right now and what happened after the after the civil war.
▶ 11:33:26After the civil war when the United States faced it its war debt at that time there were probably 300 different currencies in circulation. Most of them script from big companies, railroads, hotels, individual states and and state banks all generated their own their own form of currency.
▶ 11:33:49But once the greenback was passed, once the precursor to the dollar was passed and Americans knew that they could trust that that currency, all those other scripts, all those other currencies went to zero, they were out of circulation in a matter of a few years because trust was the thing. Trust. People trusted that their money was secure. Everybody had the same type of currency.
▶ 11:34:17The value was consistent across products and that's why the dollar gained dominance in this country. What's happening right now is 200 stable coins out there of all different the Dogecoin, the you you name it. If we allow the Federal Reserve Bank to develop a trusted digital currency, all those wacky stable coins will go to zero.
▶ 11:34:47And that's why this bill is on the floor is is going to the floor. It's to protect to protect the stable coin issuers, plain and simple. The other thing that I want to put a lie to is there are there's talk about total surveillance. I got news for you.
▶ 11:35:06allowing private industry and the private crypto market to and people like Elon Musk and and Zuckerberg to vacuum up all the personal information that Americans have and they give them every day.
▶ 11:35:21And then giving them the power to issue a stable coin allows them allows them the opportunity to to target customers right down to their last purchase and know exactly what what their their living situation is. And here's the thing.
▶ 11:35:40Because of the third party doctrine that is ingrained in our constitution and is and it prevails right now and is supported by the Court, the government has direct access because the information you give to the private companies, these stable coin companies and Musk and the others is no longer private. Because once you put your information out in public, it doesn't it doesn't have the right to privacy attached to it.
▶ 11:36:11So once you once you put all your information out there in private hands, it is discoverable by the government and they do it all the time. So, this is a that's a that's a false premise that you're going to protect people by allowing them to give all their information to private companies, especially to to digital platforms like X and and Meta.
▶ 11:36:38The government in the past has has seized information from Meta, seized information from individual platforms whenever it needed to. So the whole idea that that uh you're protecting privacy is is is a facade. This is this is strictly to help the crypto bros and to eliminate any type of competition that the Federal Reserve might pose to that to that that effort.
▶ 11:37:08Would the gentleman yield? I would. Uh the gentleman's point uh is completely invalidated if you protect self- custody because the data doesn't go to the crypto bros or anyone else. If you've got self-custody, it is your data. So I would encourage the gentleman to vote yes on my bill to protect self custody which would be relevant for all reclaiming my time. You bet.
▶ 11:37:31So So every time you press I agree on your phone for an app, you're allowing them to vacuum up your information. If you ever took a moment to to read the 600page uh you know cooperation agreement that most of these apps require you to I would encourage the gentleman to co-sponsor my it's your data act or the fourth amendment. Reclaiming my time. Reclaiming my time. It just puts the lie to everything that that that you're here.
▶ 11:38:00It'd be nice if we protected the American people for a change instead of crypto. Gentleman yields back. Who seeks recognition? Seeing no further recognition, I'll recognize myself for five minutes. I rise in support of Majority Whip Emmer's bill HR1 1919, the anti-CBDC surveillance state act.
▶ 11:38:26This committee strongly believes that any US central bank digital currency must be authorized by Congress. The Constitution grants Congress the sole power to coin money and this shall not be altered for a US CBDC. Since the 117th Congress, committee Republicans have voiced significant concerns about a US CBDC.
▶ 11:38:48Committee Republicans have published principles emphasizing a potential Fedissued digital currency must maintain the dollars the reserve currency and the preeminence of the US payment system, not impede the ongoing development of stable coins, promote private sector innovation and foster competition and address privacy and security protections.
▶ 11:39:12After spending the past two congresses examining a potential US CBDC through the lens of these principles, I believe that many of the needed improvements in the US payment system can be achieved through updates to the existing payments infrastructure and innovations led by the private sector. In fact, these improvements are already well underway. Payment stable coins have seen explosive growth.
▶ 11:39:37FinTechs are offering custom user centric payment solutions and artificial intelligence is being marshaled to improve fraud, fraud detection and prevention in real time. Pursuing a US CBDC on the other hand would drastically change the structure of the US financial system and alter how the Federal Reserve conducts monetary policy.
▶ 11:40:00Moreover, there's significant and concerning risk associated with the CBDC that cannot be A CBDC enables the government overreach and undermines the foundational liberties that make our country free. As member of Congress, we cannot allow this. That's why I'm pleased that we've the opportunity to advance the anti-CBDC surveillance state act here tonight.
▶ 11:40:25I want to extend my sincere gratitude to the majority whip Tom Emmer his staff who've worked with my team for years and several other members of this committee certainly including Mr. Davidson Mr. Ogals and others to ensure that we clarify any ambiguity around the Federal Reserve's existing authorities.
▶ 11:40:45By integrating ideas from many members efforts, we've crafted safeguards to prevent the US from replicating China's attempted surveillance state through its digital yuan. While still leaving room to innovate our payment system in a way that's aligned with American values. Because of this, I urge my colleagues to vote in favor of the ANCBDC surveillance state act. I yield back the balance of my time. Who else seeks recognition?
▶ 11:41:14Hearing none, we'll move to amendments. Does anyone wish to offer an amendment to Mr. Emmer's ANS? Hearing none, the question now occurs on the adoption of the amendment in the nature of a substitute offered by the gentleman from Minnesota, Mr. Emmer. All those in favor shall signify by saying I.
▶ 11:41:32I all those opposed shall signify by saying nay in the opinion chair the eyes have it the eyes have it the amendment is in the nature of a substitute is adopted requesting the question now occurs on ordering the bill 1919 as amended reported to the house with a favorable recommendation those in favor shall signify by saying I I those opposed shall signify by saying nay in the opinion of the chair the eyes
▶ 11:42:03vote. A recorded vote has been requested. Please raise your hand if you seek a recorded vote. Sufficient number having been raised. Uh a recorded vote is so ordered. Pursuant to section C5 of rule three, the committee rules a vote on this question is postponed.
▶ 11:42:40Pursuant to notice, I call up HR478, the Promoting New Bank Formation Act, introduced by the gentleman from Kentucky, Mr. Bar, the chairman of our financial institutions subcommittee. The clerk will report the bill. HR478 to require the appropriate federal banking agencies to establish a three-year phasein period for the denovo financial institutions to comply with federal capital standards to provide relief for the for denovo rural community banks and for other purposes.
▶ 11:43:10Without objection, the bill is considered read and open to amendment at any point. For what purposes the gentleman from Kentucky seek recognition? I move to strike the last word. Is does the gentleman have an amendment at the desk? Uh yes, I do have an amendment in the nature of substitute uh that was distributed in advance. The clerk will report the amendment. An amendment in the nature of a substitute to HR478 offered by Mr. Bar of Kentucky.
▶ 11:43:34Without objection, the amendment in the nature of a substitute is considered read and will serve as the base text for purposes of an amendment. The chairman of the financial institution subcommittee is now recognized for five minutes to describe his amendment. Thank you, Mr. chairman and thank you uh for your uh making community banks great again agenda for your leadership on advocacy for community banks and for including uh this legislation in uh today's markup.
▶ 11:44:01Community banks um as I think members on both sides of the aisle would agree are the lifeblood of main street America and the backbone of the US economy. However, an almost complete halt of denovo bank formation along with consolidation stemming from increased compliance cost ballooning capital requirements and banking regulators negative posture on healthy mergers and acquisitions has led to an increase in banking deserts in the United States, especially
▶ 11:44:31in rural areas. Only 60 new banks have been chartered in the past decade. In contrast, more than 2,000 new banks were formed from 1990 to 2008. Shockingly, from 2002 to 2022, the number of FDICins insured banks declined by nearly half. These concerning statistics largely stem from burdensome regulations that make it nearly impossible to form a denovo bank.
▶ 11:44:59That's why I introduced the Promoting Access to Capital Act, which takes steps to do exactly that by providing flexibility to promote denovo formation. I've reintroduced the bill as the Promoting New Bank Formation Act. This legislation provides for a three-year phasein period for denovo financial institutions to meet meet federal capital requirements. It lowers the community bank leverage ratio or the CBLR for rural community banks to 8.0%.
▶ 11:45:280% from 9.0% during the first three years of operations. It requires the federal banking agencies to promulgate rules setting the CBLR lower for the first two years of operation to allow for a phasein period. It removes some restrictions to allow federal savings associations to make agricultural loans and it requires the federal banking agencies to conduct a joint study on trends in denovo financial institutions.
▶ 11:45:56Banking deserts lead to many Americans being kept out of the banking system, harming their financial well-being and ability to achieve economic prosperity. Small financial institutions serve the most small businesses in the country and families in local communities. We must foster an environment where these institutions can form, restoring dynamism and competition in the US banking system.
▶ 11:46:21My colleagues on both sides of the aisle have recognized in the past how important small community financial institutions are for our communities and our economy. To promote their creation and longevity, I urge my colleagues to support this legislation. And I would note uh in conclusion that uh members of both sides of the aisle of this committee have talked a lot about their support for community banks, for community financial institutions.
▶ 11:46:48I would submit that um financial stability is served by the diversity of our banking sector and when you have a lack of small bank new bank formation and you have more concentration in larger banks and you don't have the counterweight of a of a vibrant dynamic community bank ecosystem that creates systemic risk that fosters the too big to fail bank
▶ 11:47:19uh uh uh dominance that people talk about. Uh if members are concerned about systemic risk, if they're concerned about too big to fail, if they're concerned about a lack of diversity within the banking sector, then I submit this is the solution.
▶ 11:47:37help us alleviate the regulatory barriers, the barriers to entry for new bank formation so that we can have that diverse dynamic community bank ecosystem that will serve as a counterweight to large banks, systemic banks. This is uh the way to get new business formation rolling in this country and deal with financial inclusion needs of our of our communities. With that, I I yield back. Gentleman yields back.
▶ 11:48:06Who seeks Mr. Lynch, recognize strike. Last word. Thank you. Uh it's ironic and I think it's counterintuitive to on the one hand support a stable coin bill that creates more favorable conditions and in a in a more permissive regulatory scheme that will compete unfairly with small
▶ 11:48:36community banks and then in the next breath say how we need to protect community banks. the the the more than just diversity of of banks. I think what our community banks suffer from is lack of a level playing field. Lack of a level playing field.
▶ 11:49:03They've faced competition from fintech platforms and and now they'll face competition from uh from stable coin issuers and others uh that will have a a more permissive regulatory environment to operate in and as a result I think these smaller banks will find it harder to compete.
▶ 11:49:31I wish I wish your theory was sound and and because I do agree, you know, in in my towns, like in a lot of towns in America, it's that local community bank that's contributing to little league and and you know, the the local efforts and if somebody's house burns down, you know, it's always that local bank that's out there trying to help families out and and with fintech, which was, you know, sort of the the nose under the
▶ 11:50:02uh it became less personal you know people people started you know especially this younger generation I don't blame them you know it's just that just the way they grew up but um you know my two girls I think have been to the bank twice for spring break so they could get travelers checks that's about it everything else they do on on you know electronic platforms right off their phone that you know they say that's progress but but I I worry about I worry worry about the same institutions that the gentleman
▶ 11:50:32from Kentucky worries about. I understand, you know, I've lived at times in farming communities. I know how important that is uh for for for our farmers, especially small farmers. But I I do believe in the previous act we we did damage to the chances of those smaller banks surviving.
▶ 11:50:51and uh while you know I'll probably vote for this bill for your bill uh and and you know hope for the best but I I do think we're we're also uh doing some things here that are detrimental to the survival of these small banks and the creation of of new banks that you'd like to accomplish. So uh that's all I got to say. I'll yield back. Thank you. Gentleman of Massachusetts yields back.
▶ 11:51:17Who seeks screen of Texas. You seek recognition. we're still on the base. Ranking member. Yes. On the base text. Thank you very much. We all support community banks and would like to see more new banks form or what we call the Innovo banks.
▶ 11:51:48Unfortunately, instead of working with Democrats on how best to support the creation of new banks, Representative Bar is offering his partisan bill once again that focuses only on deregulation. The research suggests that the number of new banks formed every year is impacted much more by broader economic dynamics than regulatory hurdles.
▶ 11:52:12For example, a Fed study showed that the number of new banks is strongly correlated to the Fed funds rate and interest rates in general. Moreover, an FDIC study concluded that most denovo banks do not fail during their early years if they have higher capital relative to established banks, but they fail more frequently when they don't.
▶ 11:52:38Instead of promoting safety and soundness to ensure new banks can thrive, this bill will actually lower capital requirements for denovo banks, phasing those in for the first three years. This approach raises safety and soundness concerns, and at the end of the day, it's not even clear that this approach would actually result in more new banks. While the bill focuses on new banks, I would further note the bill does nothing to support the creation of new credit unions.
▶ 11:53:09Of course, we're having this debate after President Trump's regulators are shrinking their examiner workforce and after Trump put a target on the back of community development financial institutions that CDFIS. I don't know why he's seeking to minimize their work despite the strong support Republicans and Democrats have provided to CDFIS over the years, including $12 billion in capital and grants we provided during Trump's first term.
▶ 11:53:36We should be working together to ensure the administration doesn't clip the wings of CDFIs and work to create new CDFI banks and credit unions instead of deregulating setting banks up. Let me just say this. First of all, we've had bipartisan support on um community banks and CDFIs and what we talked about during co uh when we got the extra money after the big banks had created their own portals and uh took care of their concier clients.
▶ 11:54:06We worked together and the small banks and the credit unions all got new capital by which they could make available to small businesses. Now, I support the idea of expanding community banks. I do believe uh that they relate to the community. Uh these relationships help them to understand the community better and I believe that's good for everybody.
▶ 11:54:28But if you are really serious about expanding um these banks, one of the things you would not do is put them in jeopardy by not making sure they have enough capital and city of I don't know why Trump is under, you know, have them under attack. I think this is another way that he thinks he's getting at diversity, equity, and inclusion, which is outrageous. I would work with you on expanding Mr. Bar. Listen to me.
▶ 11:54:55Don't be talking to him while I'm talking to you, okay?