GM, Joanna here.

If the Senate flips Republican in November, stablecoin laws will be a layup for the GOP. 

It’s early to call who will win the election.

However, pundits say the upper chamber of Congress may well flip to Republicans if hotly-contested Senate seats change hands. 

“As the Republicans feel more empowered, particularly after the presidential debate, there’s less motivation to strike a deal in the short term,” Candace Kelly, chief legal officer at blockchain nonprofit Stellar Development Foundation, told me. 

House Financial Services Committee chair Patrick McHenry and the committee’s top Democrat Maxine Waters have been haggling over stablecoin rules for years. 

Each side has compromised — McHenry even once called the bill an “ugly baby.”

Every so often, Waters or McHenry teases that a bipartisan version is coming, but nothing happens. 

A Republican version passed out of committee last summer. 

That was never going to make it through the Democrat-led Senate Banking committee, however.

Republicans and Democrats can’t agree on one very important aspect of the rules — who would primarily regulate stablecoin issuers?

Republicans favour leaving it to state regulators, while Democrats say it should be the Federal Reserve. 

Should Republicans take the White House, the House and Senate, there’d be no more need to negotiate, and a bill could be passed immediately. 

MiCA Competition 

Stablecoins issued by both centralised and decentralised operators are proliferating. 

Among others, payments giant PayPal launched a dollar-backed stablecoin on Solana recently. 

It’s challenging for smaller players to launch in the US, however, Kelly said. 

Issuers must obtain a money transmitter licence from each state, and each state has slightly different rules, creating a compliance headache. 

All this complexity, plus the EU’s finalised stablecoin rules, will fuel urgency to get US laws completed once election chaos has died down.

The stablecoin rules in the EU’s Markets in Crypto-Assets regulation have been live for a week. 

Circle, the company behind the world’s second largest stablecoin, and banking giant Societe Generale’s Forge are among issuers that are now compliant with MiCA.

The US is still the dominant stablecoin territory, because the dollar is so important to global finance and trade. 

But with other countries putting regulation in place that favours stablecoins in their own currencies, that’s a threat to dollar dominance. 

“MiCA has some Eurocentric aspects, it favours euro stablecoins,” Kelly said. 

“The US is going to have to recognise that inaction is undermining the power of the dollar and our ability to have our own say in how these rules should be promulgated.” 

Reach out to [email protected].

ICYMI

• Silvergate will pay $63 million to settle charges that top brass at the now-defunct crypto-friendly bank failed to detect $9 billion in suspicious transactions by exchange FTX.

• The US Securities and Exchange Commission is targeting crypto venture capital firms in a slew of new investigations, according to one investor.

• Senator Debbie Stabenow is reportedly planning a hearing on crypto regulation for July 11. The House may reconsider a bill to overturn SAB 121.

Story of the Week

Nigerian central bank official testifies Binance operated illegally in money laundering trial

Osato Avan-Nomayo has closely followed the fate of Binance exec Tigran Gambaryan. Gambaryan has been jailed in Nigeria since February, and is suffering from malaria. In the latest development, prosecutors told a court that Binance operated illegally in the West African nation. 

Post of the Week

Comment of the Week

DL News is an independent news organisation that provides original, in-depth reporting on the largely misunderstood world of cryptocurrency and decentralised finance. From original stories to investigations, our journalism is accurate, honest and responsible.

Forwarded by a friend? subscribe here.