[Congressional Record Volume 169, Number 125 (Thursday, July 20, 2023)]
[House]
[Pages H3878-H3879]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                              {time}  1130
                        STABLECOIN STATE PATHWAY

  The SPEAKER pro tempore (Ms. Lee of Florida). Under the Speaker's 
announced policy of January 9, 2023, the gentleman from Nebraska (Mr. 
Flood) is recognized for 60 minutes as the designee of the majority 
leader.
  Mr. FLOOD. Madam Speaker, I rise today because we are at a crossroads 
in banking, FinTech, and finance.

[[Page H3879]]

  Blockchain is a revolutionary technology that is going to change the 
way Americans do business. The question today in front of us is whether 
we would like America to lead that change or let somebody else take the 
reins.
  We are planning on marking up two bills next week in the Financial 
Services Committee: one on digital assets market structure and the 
other on stablecoins. I am going to focus my remarks today on 
stablecoins.
  I am not new to this subject. In the Nebraska legislature, I wrote 
and passed a bill that allows for banks in Nebraska to issue 
stablecoins--State chartered banks. This is an issue that I have worked 
on and cared about for years.
  Since 2017, stablecoins have grown to $130 billion in market cap. 
That is the size of a multinational institution like Deutsche Bank.
  We are not dealing with a theoretical conversation about stablecoins 
here. Stablecoins have already arrived. Whether you like them or not is 
irrelevant, Madam Speaker. They are here, and the question of the day 
is how to regulate them, not whether to regulate them at all.
  Now that we have covered the basic need for this legislation, let's 
discuss a specific issue in the bill: how to treat State-regulated 
institutions that want to issue a stablecoin.
  Our dual banking system is the envy of the world. It allows us to 
provide true regulatory tailoring, particularly for small community 
banks, in our country. Were we to move away from the dual banking 
system, were we to essentially gut the power and authority of the State 
banking regulators, like the Nebraska Department of Banking, it would 
be an absolute tragedy for our community banks.
  I do not think there is a banker around that wouldn't stand up for 
the dual banking system. If you are a small bank in rural Nebraska, 
Madam Speaker, you shouldn't receive the same scrutiny as a GSIB, and 
if you are a small bank in rural Nebraska, you probably shouldn't share 
the same primary regulator as a GSIB either.
  The dual banking system lowers burdens on banks, but it also ensures 
that our small institutions have a line of communication to the entity 
that regulates them. If every bank had to be regulated by the OCC, I 
don't know that the OCC would have the bandwidth to ensure every 
single, small bank in rural America gets the attention it needs 
relative to larger institutions. That is not a knock on the OCC, it is 
just reality.
  Now that brings us back to stablecoins. Chairman McHenry's bill 
currently has a State pathway for stablecoin issuance. Shockingly, some 
of the same banking organizations that hail the dual banking system 
seem to have a different opinion when it comes to stablecoins.
  Let me be very clear, if the Federal Reserve becomes the de facto 
regulator for all State regulated stablecoin issuers, it will prevent 
small and midsized banks across the United States from getting into the 
stablecoin market. It would fly in the face of regulatory tailoring, 
the very concept that has promoted our current system that allows for 
community banks to literally exist.
  Our State regulators are more than capable of taking on this role. 
Those who argue for regulatory arbitrage miss the point; we already 
have a system in place that does this work. There is no reason for a 
State chartered bank in Nebraska that issues stablecoins to be 
regulated directly by the Federal Reserve when the Nebraska Department 
of Banking is equipped to do the job.
  Further, the bill establishes a robust floor for stablecoin issuance. 
The most important part of that floor is the reserves. Under the bill--
and listen to this, Madam Speaker--under the bill, issuers must back a 
stablecoin with reserves one to one.
  Let's think about that for a moment. If a consumer has one stablecoin 
at $1, the issuer must hold exactly $1 in reserve on that same 
stablecoin.
  In other words, Madam Speaker, your money isn't going anywhere. The 
issuer cannot lend out your money, and they cannot invest it in risky 
assets for their own gain. They must hold it in reserve as ordered by 
this bill that is in front of the Financial Services Committee.
  That requirement alone should go a long way to ease any anxieties 
over instability. The system itself has reserve requirements that 
aren't present in other parts of the financial market.
  We are truly at a historic moment in the House. It is not often that 
we get the opportunity to build a new regulatory system from scratch. 
Regulating stablecoins is just that kind of opportunity.
  It is imperative that we get it right so both the State charters and 
the Federal charters can issue stablecoins.
  Madam Speaker, I yield back the balance of my time.

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