[House Report 118-492]
[From the U.S. Government Publishing Office]


118th Congress }                                               {   Report
                        HOUSE OF REPRESENTATIVES
 2d Session    }                                               {  118-492

======================================================================



 
              CLARITY FOR PAYMENT STABLECOINS ACT OF 2023

                                _______
                                

  May 7, 2024.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

 Mr. McHenry, from the Committee on Financial Services, submitted the 
                               following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 4766]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 4766) to provide for the regulation of payment 
stablecoins, and for other purposes, having considered the 
same, reports favorably thereon with an amendment and 
recommends that the bill as amended do pass.

                                CONTENTS

                                                                   Page
Purpose and Summary..............................................    11
Background and Need for Legislation..............................    11
Related Hearings.................................................    16
Committee Consideration..........................................    17
Committee Votes..................................................    17
Committee Oversight Findings.....................................    23
Performance Goals and Objectives.................................    23
Congressional Budget Office Estimates............................    23
New Budget Authority, Entitlement Authority, and Tax Expenditures    23
Federal Mandates Statement.......................................    23
Advisory Committee Statement.....................................    23
Applicability to Legislative Branch..............................    23
Earmark Identification...........................................    23
Duplication of Federal Programs..................................    24
Section-by-Section Analysis of the Legislation...................    24
Minority Views...................................................    28

    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Clarity for Payment Stablecoins Act of 
2023''.

SEC. 2. DEFINITIONS.

  In this Act:
          (1) Bank secrecy act.--The term ``Bank Secrecy Act'' means--
                  (A) section 21 of the Federal Deposit Insurance Act 
                (12 U.S.C. 1829b);
                  (B) chapter 2 of title I of Public Law 91-508 (12 
                U.S.C. 1951 et seq.); and
                  (C) subchapter II of chapter 53 of title 31, United 
                States Code.
          (2) Board.--The term ``Board'' means the Board of Governors 
        of the Federal Reserve System.
          (3) Comptroller.--The term ``Comptroller'' means the 
        Comptroller of the Currency.
          (4) Corporation.--The term ``Corporation'' means the Federal 
        Deposit Insurance Corporation.
          (5) Digital asset.--The term ``digital asset'' means any 
        digital representation of value which is recorded on a 
        cryptographically-secured distributed ledger.
          (6) Distributed ledger.--The term ``distributed ledger'' 
        means technology where data is shared across a network that 
        creates a public digital ledger of verified transactions or 
        information among network participants and the data is linked 
        using cryptography to maintain the integrity of the public 
        ledger and execute other functions.
          (7) Federal qualified nonbank stablecoin issuer.--The term 
        ``Federal qualified nonbank stablecoin issuer'' means a nonbank 
        entity approved by the primary Federal payment stablecoin 
        regulator, pursuant to section 5, to issue payment stablecoins.
          (8) Institution-affiliated party.--With respect to a 
        permitted payment stablecoin issuer, the term ``institution-
        affiliated party'' means any director, officer, employee, or 
        person in control of, or agent for, the permitted payment 
        stablecoin issuer.
          (9) Insured depository institution.--The term ``insured 
        depository institution'' means--
                  (A) an insured depository institution, as defined in 
                section 3 of the Federal Deposit Insurance Act (12 
                U.S.C. 1813); and
                  (B) an insured credit union, as defined in section 
                101 of the Federal Credit Union Act (12 U.S.C. 1752).
          (10) Monetary value.--The term ``monetary value'' means a 
        national currency or deposit (as defined under Section 3 of the 
        Federal Deposit Insurance Act) denominated in a national 
        currency.
          (11) National currency.--The term ``national currency'' means 
        a Federal Reserve note, (as the term is used in the first 
        undesignated paragraph of section 16 of the Federal Reserve Act 
        (12 U.S.C. 411)), money issued by a central bank, and money 
        issued by an intergovernmental organization pursuant to an 
        agreement by one or more governments.
          (12) Nonbank entity.--The term ``nonbank entity'' means a 
        person that is not an insured depository institution or 
        subsidiary of an insured depository institution.
          (13) Payment stablecoin.--The term ``payment stablecoin'' 
        means a digital asset--
                  (A) that is or is designed to be used as a means of 
                payment or settlement;
                  (B) the issuer of which--
                          (i) is obligated to convert, redeem, or 
                        repurchase for a fixed amount of monetary 
                        value; and
                          (ii) represents will maintain or creates the 
                        reasonable expectation that it will maintain a 
                        stable value relative to the value of a fixed 
                        amount of monetary value; and
                  (C) that is not--
                          (i) a national currency; or
                          (ii) a security issued by an investment 
                        company registered under section 8(a) of the 
                        Investment Company Act of 1940 (15 U.S.C. 80a-
                        8(a)).
          (14) Permitted payment stablecoin issuer.--The term 
        ``permitted payment stablecoin issuer'' means--
                  (A) a subsidiary of an insured depository institution 
                that has been approved to issue payment stablecoins 
                under section 5;
                  (B) a Federal qualified nonbank payment stablecoin 
                issuer that has been approved to issue payment 
                stablecoins under section 5; or
                  (C) a State qualified payment stablecoin issuer.
          (15) Person.--The term ``person'' means an individual, 
        partnership, company, corporation, association (incorporated or 
        unincorporated), trust, estate, cooperative organization, or 
        other entity.
          (16) Primary federal payment stablecoin regulator.--
                  (A) In general.--The term ``primary Federal payment 
                stablecoin regulator'' means--
                          (i) with respect to an insured depository 
                        institution (other than an insured credit 
                        union) or a subsidiary of an insured depository 
                        institution (other than an insured credit 
                        union), the appropriate Federal banking agency 
                        of such insured depository institution (as 
                        defined under section 3 of the Federal Deposit 
                        Insurance Act (12 U.S.C. 1813));
                          (ii) with respect to an insured credit union 
                        or a subsidiary of an insured credit union, the 
                        National Credit Union Administration;
                          (iii) with respect to a Federal qualified 
                        nonbank payment stablecoin issuer that is not a 
                        national bank, the Board; and
                          (iv) with respect to any entity chartered by 
                        the Comptroller, the Comptroller.
                  (B) Primary federal payment stablecoin regulators.--
                The term ``primary Federal payment stablecoin 
                regulators'' means the Comptroller, the Board, the 
                Corporation, and the National Credit Union 
                Administration.
          (17) Registered public accounting firm.--The term 
        ``registered public accounting firm'' has the meaning given 
        that term under section 2 of the Sarbanes-Oxley Act of 2002 (15 
        U.S.C. 7201).
          (18) State.--The term ``State'' means each of the several 
        States, the District of Columbia, and each territory of the 
        United States.
          (19) State qualified payment stablecoin issuer.--The term 
        ``State qualified payment stablecoin issuer'' means an entity 
        that--
                  (A) is legally established and approved to issue 
                payment stablecoins by a State payment stablecoin 
                regulator; and
                  (B) issues a payment stablecoin in compliance with 
                the requirements under section 4.
          (20) State payment stablecoin regulator.--The term ``State 
        payment stablecoin regulator'' means a State agency that has 
        primary regulatory and supervisory authority in such State over 
        entities that issue payment stablecoins.
          (21) Subsidiary of an insured credit union.--With respect to 
        an insured credit union, the term ``subsidiary of an insured 
        credit union'' means--
                  (A) an organization providing services to the insured 
                credit union that are associated with the routine 
                operations of credit unions, as described under section 
                107(7)(I) of the Federal Credit Union Act (12 U.S.C. 
                1757(7)(I)); and
                  (B) a credit union service organization, as such term 
                is used under part 712 of title 12, Code of Federal 
                Regulations, with respect to which the insured credit 
                union has an ownership interest or to which the insured 
                credit union has extended a loan.

SEC. 3. LIMITATION ON WHO MAY ISSUE A PAYMENT STABLECOIN.

  It shall be unlawful for any person other than a permitted payment 
stablecoin issuer to issue a payment stablecoin for use by any person 
in the United States.

SEC. 4. REQUIREMENTS FOR ISSUING PAYMENT STABLECOINS.

  (a) Standards for the Issuance of Payment Stablecoins.--
          (1) In general.--Permitted payment stablecoin issuers shall--
                  (A) maintain reserves backing the issuer's payment 
                stablecoins outstanding on an at least one to one 
                basis, with reserves comprising--
                          (i) United States coins and currency 
                        (including Federal reserve notes);
                          (ii) funds held as insured demand deposits or 
                        insured shares at insured depository 
                        institutions, subject to limitations 
                        established by the Corporation and the National 
                        Credit Union Administration, respectively, to 
                        address safety and soundness risks of such 
                        insured depository institutions;
                          (iii) Treasury bills with a maturity of 90 
                        days or less;
                          (iv) repurchase agreements with a maturity of 
                        7 days or less that are backed by Treasury 
                        bills with a maturity of 90 days or less; or
                          (v) central bank reserve deposits;
                  (B) publicly disclose the issuer's redemption policy;
                  (C) establish procedures for timely redemption of 
                outstanding payment stablecoins; and
                  (D) publish the monthly composition of the issuer's 
                reserves on the website of the issuer, containing--
                          (i) the total number of outstanding payment 
                        stablecoins issued by the issuer; and
                          (ii) the amount and composition of the 
                        reserves described under subparagraph (A).
          (2) Prohibition on rehypothecation.--Reserves described under 
        paragraph (1)(A) may not be pledged, rehypothecated, or reused, 
        except for the purpose of creating liquidity to meet reasonable 
        expectations of requests to redeem payment stablecoins, such 
        that reserves in the form of Treasury bills may be pledged as 
        collateral for repurchase agreements with a maturity of 90 days 
        or less, provided that either--
                  (A) the repurchase agreements are cleared by a 
                central clearing counterparty that is approved by the 
                primary Federal payment stablecoin regulator; or
                  (B) the permitted payment stablecoin issuer receives 
                the prior approval of the primary Federal payment 
                stablecoin regulator.
          (3) Monthly certification; examination of reports by 
        registered public accounting firm.--
                  (A) In general.--A permitted payment stablecoin 
                issuer shall, each month, have the information 
                disclosed in the previous month-end report required 
                under paragraph (1)(D) examined by a registered public 
                accounting firm.
                  (B) Certification.--Each month, the Chief Executive 
                Officer and Chief Financial Officer of a permitted 
                payment stablecoin issuer shall submit an certification 
                as to the accuracy of the monthly report to--
                          (i) the primary Federal payment stablecoin 
                        regulator; or
                          (ii) in the case of a State qualified payment 
                        stablecoin issuer, to the State payment 
                        stablecoin regulator.
                  (C) Criminal penalty.--Any person who submits a 
                certification required under subparagraph (B) knowing 
                that such certification is false shall be subject to 
                the criminal penalties set forth under section 1350(c) 
                of title 18, United States Code.
          (4) Capital, liquidity, and risk management requirements.--
        The primary Federal payment stablecoin regulators shall, 
        jointly, issue--
                  (A) capital requirements applicable to permitted 
                payment stablecoin issuers, which may not exceed what 
                is sufficient to ensure the permitted payment 
                stablecoin issuer's ongoing operations;
                  (B) liquidity requirements applicable to permitted 
                payment stablecoin issuers, which may not exceed what 
                is sufficient to ensure the financial integrity of the 
                permitted payment stablecoin issuer and the ability of 
                the issuer to meet the financial obligations of the 
                issuer, including redemptions; and
                  (C) risk management requirements applicable to 
                permitted payment stablecoin issuers, tailored to the 
                business model and risk profile of the permitted 
                payment stablecoin issuer.
          (5) Treatment under the bank secrecy act.--A permitted 
        payment stablecoin issuer shall be treated as a financial 
        institution for purposes of the Bank Secrecy Act.
          (6) Limitation on activities.--A permitted payment stablecoin 
        issuer may only issue payment stablecoins, redeem payment 
        stablecoins, manage related reserves (including purchasing and 
        holding reserve assets), provide custodial or safekeeping 
        services for payment stablecoins or private keys of payment 
        stablecoins, and undertake other functions that directly 
        support the work of issuing and redeeming payment stablecoins.
  (b) Rulemaking.--
          (1) In general.--The primary Federal payment stablecoin 
        regulators may issue such orders and regulations as may be 
        necessary to administer and carry out the requirements of this 
        section, including to establish conditions, and to prevent 
        evasions thereof.
          (2) Joint issuance of regulation.--All regulations issued to 
        carry out this section shall be issued jointly by the primary 
        Federal payment stablecoin regulators.
          (3) Rulemaking deadline.--Not later than the end of the 180-
        day period beginning on the date of enactment of this Act, the 
        Federal payment stablecoin regulators shall issue regulations 
        to carry out this section.

SEC. 5. APPROVAL OF SUBSIDIARIES OF INSURED DEPOSITORY INSTITUTIONS AND 
                    FEDERAL QUALIFIED NONBANK PAYMENT STABLECOIN 
                    ISSUERS.

  (a) In General.--
          (1) Application.--
                  (A) In general.--Any insured depository institution 
                that seeks to issue payment stablecoins through a 
                subsidiary and any nonbank entity (other than a State 
                qualified payment stablecoin issuer) that seeks to 
                issue payment stablecoins shall file an application 
                with the primary Federal payment stablecoin regulator.
                  (B) Timing.--With respect to an application filed 
                under this paragraph, the primary Federal payment 
                stablecoin regulator shall inform the applicant whether 
                the applicant has submitted a complete application 
                within 45 days of receiving the application.
                  (C) Completion of application.--With respect to an 
                application filed under this paragraph, once the 
                primary Federal payment stablecoin regulator has 
                informed the applicant that the application is 
                complete, such application shall be deemed to be 
                complete unless the primary Federal payment stablecoin 
                regulator determines that a significant change in 
                circumstances requires otherwise.
          (2) Evaluation of applications.--A complete application 
        received under paragraph (1) shall be evaluated by the primary 
        Federal payment stablecoin regulator using the factors 
        described in paragraph (3).
          (3) Factors to be considered.--The factors described in this 
        paragraph are the following:
                  (A) The ability of the applicant (or, in the case of 
                an applicant that is an insured depository institution, 
                the subsidiary of the applicant), based on the 
                financial condition and resources, to meet the 
                requirements set forth in section 4.
                  (B) The general character and fitness of the 
                management of the applicant.
                  (C) The risks presented by the applicant and benefits 
                provided to consumers.
          (4) Timing for decision; grounds for denial.--
                  (A) Timing.--The primary Federal payment stablecoin 
                regulator shall render a decision on an application no 
                later than 120 days after informing the applicant that 
                the application is complete.
                  (B) Denial of application.--
                          (i) Grounds for denial.--The primary Federal 
                        payment stablecoin regulator may only deny a 
                        complete application received under paragraph 
                        (1) if the regulator determines that the 
                        activities of the applicant would be unsafe or 
                        unsound based on the factors described in 
                        paragraph (3).
                          (ii) Explanation required.--If the primary 
                        Federal payment stablecoin regulator denies a 
                        complete application received under paragraph 
                        (1), the regulator shall provide the applicant 
                        with written notice explaining such denial, 
                        including all findings made by the regulator 
                        with respect to all identified material 
                        shortcomings regarding the application, 
                        including recommendations on how the applicant 
                        could address the identified material 
                        shortcomings.
                          (iii) Opportunity for hearing; final 
                        determination.--
                                  (I) In general.--Not later than 30 
                                days after the date of receipt of any 
                                notice of the denial of an application 
                                under this subsection, the applicant 
                                may request, in writing, an opportunity 
                                for a written or oral hearing before 
                                the primary Federal payment stablecoin 
                                regulator to appeal the denial.
                                  (II) Timing.--Upon receipt of a 
                                timely request, the primary Federal 
                                payment stablecoin regulator shall 
                                notice a time (not later than 30 days 
                                after the date of receipt of the 
                                request) and place at which the 
                                applicant may appear, personally or 
                                through counsel, to submit written 
                                materials or provide oral testimony and 
                                oral argument).
                                  (III) Final determination.--Not later 
                                than 60 days after the date of a 
                                hearing under this clause, the primary 
                                Federal payment stablecoin regulator 
                                shall notify the applicant of the final 
                                determination of the primary Federal 
                                payment stablecoin regulator, which 
                                shall contain a statement of the basis 
                                for that determination, with specific 
                                findings.
                                  (IV) Notice if no hearing.--If an 
                                applicant does not make a timely 
                                request for a hearing under this 
                                clause, the primary Federal payment 
                                stablecoin regulator shall notify the 
                                applicant, not later than 10 days after 
                                the date by which the applicant may 
                                request a hearing under this clause, in 
                                writing, that the denial of the 
                                application is a final determination of 
                                the regulator.
                  (C) Failure to render a decision.--If the primary 
                Federal payment stablecoin regulator fails to render a 
                decision on a complete application within the time 
                period specified in subparagraph (A), the application 
                shall be deemed approved.
                  (D) Right to reapply.--The denial of an application 
                under this subsection shall not prohibit the applicant 
                from filing a subsequent application.
          (5) Report on pending applications.--Each primary Federal 
        payment stablecoin regulator shall annually report to Congress 
        on the applications that have been pending for 6 months or 
        longer since the date of the initial application filed under 
        paragraph (1) where the applicant has been informed that the 
        application remains incomplete, including providing 
        documentation on the status of the application and why the 
        application has not yet been approved.
          (6) Rulemaking.--The primary Federal regulatory agencies 
        shall, jointly, issue rules necessary for the regulation of the 
        issuance of payment stablecoins, but may not impose 
        requirements inconsistent with the requirements specified under 
        section 4.
  (b) Effective Date.--
          (1) In general.--This section shall take effect on the 
        earlier of--
                  (A) 18 months after the date of enactment of this 
                Act; or
                  (B) the date that is 120 days after the date on which 
                the primary Federal payment stablecoin regulators issue 
                final regulations implementing this section.
          (2) Authority to issue regulations and process 
        applications.--The primary Federal payment stablecoin 
        regulators may, before the effective date described under 
        paragraph (1)--
                  (A) issue regulations to carry out this section; and
                  (B) pursuant to regulations described under 
                subparagraph (A), accept and process applications 
                described under this section.
          (3) Notice to congress.--Each of the primary Federal payment 
        stablecoin regulators shall notify Congress once beginning to 
        process applications described under this section.
          (4) Safe harbor for pending applications.--The primary 
        Federal payment stablecoin regulator may waive the application 
        of the requirements of this section for a period not to exceed 
        12 months beginning on the effective date described under 
        paragraph (1), with respect to--
                  (A) a subsidiary of an insured depository 
                institution, if the insured depository institution has 
                an application pending for the subsidiary to become a 
                permitted payment stablecoin issuer on the effective 
                date described under paragraph (1); or
                  (B) a nonbank entity with an application pending to 
                become a Federal qualified nonbank stablecoin issuer on 
                the effective date described under paragraph (1).

SEC. 6. SUPERVISION AND ENFORCEMENT WITH RESPECT TO SUBSIDIARIES OF 
                    INSURED DEPOSITORY INSTITUTIONS AND FEDERAL 
                    QUALIFIED NONBANK STABLECOIN ISSUERS.

  (a) Supervision.--
          (1) Subsidiary of an insured depository institution.--
                  (A) In general.--Each permitted payment stablecoin 
                issuer that is a subsidiary of an insured depository 
                institution shall be subject to supervision by the 
                primary Federal payment stablecoin regulator in the 
                same manner as such insured depository institution.
                  (B) Gramm-Leach-Bliley act.--For purposes of title V 
                of the Gramm-Leach-Bliley Act (15 U.S.C. 6801 et seq.) 
                each permitted payment stablecoin issuer that is a 
                subsidiary of an insured depository institution shall 
                be deemed a financial institution.
          (2) Federal qualified nonbank payment stablecoin issuer.--
                  (A) Submission of reports.--Each Federal qualified 
                nonbank payment stablecoin issuer shall, upon request, 
                submit reports to the primary Federal payment 
                stablecoin regulator as to--
                          (i) the Federal qualified nonbank payment 
                        stablecoin issuer's financial condition, 
                        systems for monitoring and controlling 
                        financial and operating risks; and
                          (ii) compliance by the Federal qualified 
                        nonbank payment stablecoin issuer (and any 
                        subsidiary thereof) with this Act.
                  (B) Examinations.--The primary Federal payment 
                stablecoin regulator may make examinations of a Federal 
                qualified nonbank payment stablecoin issuer and each 
                subsidiary of a Federal qualified nonbank stablecoin 
                issuer in order to inform the regulator of--
                          (i) the nature of the operations and 
                        financial condition of the Federal qualified 
                        nonbank stablecoin issuer;
                          (ii) the financial, operational, and other 
                        risks within the Federal qualified nonbank 
                        stablecoin issuer that may pose a threat to--
                                  (I) the safety and soundness of the 
                                Federal qualified nonbank stablecoin 
                                issuer; or
                                  (II) the stability of the financial 
                                system of the United States; and
                          (iii) the systems of the Federal qualified 
                        nonbank payment stablecoin issuer for 
                        monitoring and controlling the risks described 
                        in clause (ii).
                  (C) Requirement to use existing reports.--In 
                supervising and examining a Federal qualified nonbank 
                payment stablecoin issuer, the primary Federal payment 
                stablecoin regulator shall, to the fullest extent 
                possible, use existing reports and other supervisory 
                information.
                  (D) Avoidance of duplication.--The primary Federal 
                payment stablecoin regulator shall, to the fullest 
                extent possible, avoid duplication of examination 
                activities, reporting requirements, and requests for 
                information in carrying out this Act with respect to a 
                Federal qualified nonbank payment stablecoin issuer.
                  (E) Gramm-Leach-Bliley act.--For purposes of title V 
                of the Gramm-Leach-Bliley Act (15 U.S.C. 6801 et seq.) 
                each Federal qualified nonbank stablecoin issuer shall 
                be deemed a financial institution.
  (b) Enforcement.--
          (1) Suspension or revocation of registration.--The primary 
        Federal payment stablecoin regulator may prohibit a permitted 
        payment stablecoin issuer from issuing payment stablecoins, if 
        the primary Federal payment stablecoin regulator determines 
        that such permitted payment stablecoin issuer, or an 
        institution-affiliated party of the permitted payment 
        stablecoin issuer, is--
                  (A) violating or has violated this Act or any 
                regulation or order issued under this Act; or
                  (B) violating or has violated any condition imposed 
                in writing by the primary Federal payment stablecoin 
                regulator in connection with a written agreement 
                entered into between the permitted payment stablecoin 
                issuer and the primary Federal payment stablecoin 
                regulator or a condition imposed in connection with any 
                application or other request.
          (2) Cease-and-desist proceedings.--If the primary Federal 
        payment stablecoin regulator has reasonable cause to believe 
        that a permitted payment stablecoin issuer or any institution-
        affiliated party of a permitted payment stablecoin issuer is 
        violating, has violated, or is attempting to violate this Act, 
        any regulation or order issued under this Act, or any written 
        agreement entered into with the primary Federal payment 
        stablecoin regulator or condition imposed in writing by the 
        primary Federal payment stablecoin regulator in connection with 
        any application or other request, the primary Federal payment 
        stablecoin regulator may, by provisions that are mandatory or 
        otherwise, order the permitted payment stablecoin issuer or 
        institution-affiliated party of the permitted payment 
        stablecoin issuer to--
                  (A) cease and desist from such violation or practice;
                  (B) take affirmative action to correct the conditions 
                resulting from any such violation or practice; or
                  (C) take such other action as the primary Federal 
                payment stablecoin regulator determines to be 
                appropriate.
          (3) Removal and prohibition authority.--The primary Federal 
        payment stablecoin regulator may remove an institution-
        affiliated party of a permitted payment stablecoin issuer from 
        their position or office or prohibit further participation in 
        the affairs of the permitted payment stablecoin issuer or all 
        permitted payment stablecoin issuers by such institution-
        affiliated party, if the primary Federal payment stablecoin 
        regulator determines that--
                  (A) the institution-affiliated party has, directly or 
                indirectly, committed a violation or attempted 
                violation of this Act or any regulation or order issued 
                under this Act; or
                  (B) the institution-affiliated party has committed a 
                violation of any provision of subchapter II of chapter 
                53 of title 31, United States Code.
          (4) Procedures.--
                  (A) In general.--If the primary Federal payment 
                stablecoin regulator identifies a violation or 
                attempted violation of this Act or makes a 
                determination under paragraph (1), (2), or (3), the 
                primary Federal payment stablecoin regulator shall 
                comply with the procedures set forth in subsections (b) 
                and (e) of sections 8 of the Federal Deposit Insurance 
                Act (12 U.S.C. 1818).
                  (B) Judicial review.--A person aggrieved by a final 
                action under this subsection may obtain judicial review 
                of such action exclusively as provided in section 8(h) 
                of the Federal Deposit Insurance Act (12 U.S.C. 
                1818(h)).
                  (C) Injunction.--The primary Federal payment 
                stablecoin regulator may, in the discretion of the 
                regulator, follow the procedures provided in section 
                8(i)(1) of the Federal Deposit Insurance Act (12 U.S.C. 
                1818(i)(1)) for judicial enforcement of any effective 
                and outstanding notice or order issued under this 
                subsection.
                  (D) Temporary cease-and-desist proceedings.--If the 
                primary Federal payment stablecoin regulator determines 
                that a violation or attempted violation of this Act or 
                an action with respect to which a determination was 
                made under paragraph (1), (2), or (3), or the 
                continuation thereof, is likely to cause insolvency or 
                significant dissipation of assets or earnings of a 
                permitted payment stablecoin issuer, or is likely to 
                weaken the condition of the permitted payment 
                stablecoin issuer or otherwise prejudice the interests 
                of the customers of the permitted payment stablecoin 
                issuer prior to the completion the proceedings 
                conducted under this paragraph, the primary Federal 
                payment stablecoin regulator may follow the procedures 
                provided in section 8(c) of the Federal Deposit 
                Insurance Act (12 U.S.C. 1818(c)) to issue a temporary 
                cease-and-desist order.
          (5) Civil money penalties.--
                  (A) Failure to be approved.--Any person who issues a 
                payment stablecoin and who is not a permitted payment 
                stablecoin issuer, and any institution-affiliated party 
                of such a person who knowingly participates is issuing 
                such a payment stablecoin, shall be liable for a civil 
                penalty of not more than $100,000 for each day during 
                which such payment stablecoins are issued.
                  (B) First tier.--Except as provided in subparagraph 
                (A), a permitted payment stablecoin issuer or 
                institution-affiliated party of such permitted payment 
                stablecoin issuer that violates this Act or any 
                regulation or order issued under this Act, or that 
                violates any condition imposed in writing by the 
                primary Federal payment stablecoin regulator in 
                connection with a written agreement entered into 
                between the permitted payment stablecoin issuer and the 
                primary Federal payment stablecoin regulator or a 
                condition imposed in connection with any application or 
                other request, shall be liable for a civil penalty of 
                up to $100,000 for each day during which the violation 
                continues.
                  (C) Second tier.--Except as provided in subparagraph 
                (A), and in addition to the penalties described under 
                subparagraph (B), a permitted payment stablecoin issuer 
                or institution-affiliated party of such permitted 
                payment stablecoin issuer who knowingly participates in 
                a violation of any provision of this Act, or any 
                regulation or order issued thereunder, is liable for a 
                civil penalty of up to an additional $100,000 for each 
                day during which the violation continues.
                  (D) Procedure.--Any penalty imposed under this 
                paragraph may be assessed and collected by the primary 
                Federal payment stablecoin regulator pursuant to the 
                procedures set forth in section 8(i)(2) of the Federal 
                Deposit Insurance Act (12 U.S.C. 1818(i)(2)).
                  (E) Notice and orders after separation from 
                service.--The resignation, termination of employment or 
                participation, or separation of an institution-
                affiliated party (including a separation caused by the 
                closing of a permitted payment stablecoin issuer) shall 
                not affect the jurisdiction and authority of the 
                primary Federal payment stablecoin regulator to issue 
                any notice or order and proceed under this subsection 
                against any such party, if such notice or order is 
                served before the end of the six-year period beginning 
                on the date such party ceased to be an institution-
                affiliated party with respect to such permitted payment 
                stablecoin issuer.
          (6) Non-applicability to a state qualified payment stablecoin 
        issuer.--This subsection shall not apply to a State qualified 
        payment stablecoin issuer.

SEC. 7. STATE QUALIFIED PAYMENT STABLECOIN ISSUERS.

  (a) In General.--A State payment stablecoin regulator shall have 
supervisory, examination, and enforcement authority over a State 
qualified payment stablecoin issuer of such State.
  (b) Authority To Enter Into Agreements With the Board.--A State 
payment stablecoin regulator may enter into a memorandum of 
understanding with the Board, by mutual agreement, under which the 
Board may carry out the supervision, examination, and enforcement 
authority with respect to the State qualified payment stablecoin 
issuers of such State.
  (c) Sharing of Information.--A State payment stablecoin regulator and 
the Board shall share information on an ongoing basis with respect to a 
State qualified payment stablecoin issuer of such State, including a 
copy of the initial application and any accompanying documents.
  (d) Rulemaking.--The Board shall issue orders and rules under section 
4 applicable to State qualified payment stablecoin issuers to the same 
extent as the primary Federal payment stablecoin regulators issue 
orders and rules under section 4 applicable to permitted payment 
stablecoin issuers that are not a State qualified payment stablecoin 
issuers.
  (e) Board Enforcement Authority in Exigent Circumstances.--
          (1) In general.--In exigent circumstances, the Board may, 
        after no less than 48 hours prior written notice to the 
        applicable State payment stablecoin regulator, take an 
        enforcement action against a State qualified payment stablecoin 
        issuer or an institution-affiliated party of such issuer for 
        violations of this Act.
          (2) Rulemaking.--Not later than the end of the 180-day period 
        beginning on the date of enactment of this Act, the Board shall 
        issue rules to set forth those exigent circumstances in which 
        the Board may act under this subsection.
  (f) Gramm-Leach-Bliley Act.--For purposes of title V of the Gramm-
Leach-Bliley Act (15 U.S.C. 6801 et seq.) a State qualified payment 
stablecoin issuer is deemed a financial institution.
  (g) Effect on State Law.--The provisions of this section do not 
preempt any law of a State and do not supersede any State licensing 
requirement.

SEC. 8. CUSTOMER PROTECTION.

  (a) In General.--A person may only engage in the business of 
providing custodial or safekeeping services for permitted payment 
stablecoins or private keys of permitted payment stablecoins, if the 
person--
          (1) is subject to--
                  (A) supervision or regulation by a primary Federal 
                payment stablecoin regulator or a primary financial 
                regulatory agency described under subparagraph (B) or 
                (C) of section 2(12) of the Dodd-Frank Wall Street 
                Reform and Consumer Protection Act (12 U.S.C. 
                5301(12)); or
                  (B) supervision by a State bank supervisor, as 
                defined under section 3 of the Federal Deposit 
                Insurance Act (12 U.S.C. 1813) or a State credit union 
                supervisor, as defined under section 6003 of the Anti-
                Money Laundering Act of 2020, and such state bank 
                supervisor or state credit union supervisor makes 
                available to the Board such information as the Board 
                determines necessary and relevant to the categories of 
                information under subsection (d); and
          (2) complies with the segregation requirements under 
        subsection (b), unless such person complies with similar 
        requirements as required by a primary Federal payment 
        stablecoin regulator, the Securities and Exchange Commission, 
        or the Commodity Futures Trading Commission.
  (b) Segregation Requirement.--A person described in subsection (a) 
shall--
          (1) treat and deal with the payment stablecoins, private 
        keys, cash, and other property of a person for whom or on whose 
        behalf the person receives, acquires, or holds payment 
        stablecoins, private keys, cash, and other property 
        (hereinafter in this section referred to as the ``customer'') 
        as belonging to such customer; and
          (2) take such steps as are appropriate to protect the payment 
        stablecoins, private keys, cash, and other property of a 
        customer from the claims of creditors of the person.
  (c) Commingling Prohibited.--
          (1) In general.--Payment stablecoins, cash, and other 
        property of a customer shall be separately accounted for by a 
        person described in subsection (a) and shall not be commingled 
        with the funds of the person.
          (2) Exception.--Notwithstanding paragraph (1)--
                  (A) the payment stablecoins, cash, and other property 
                of a customer may, for convenience, be commingled and 
                deposited in an omnibus account holding the payment 
                stablecoins, cash, and other property of more than one 
                customer at an insured depository institution or trust 
                company;
                  (B) such share of the payment stablecoins, cash, and 
                other property of the customer that shall be necessary 
                to transfer, adjust, or settle a transaction or 
                transfer of assets may be withdrawn and applied to such 
                purposes, including the payment of commissions, taxes, 
                storage, and other charges lawfully accruing in 
                connection with the provision of services by a person 
                described in subsection (a); and
                  (C) in accordance with such terms and conditions as 
                the Board may prescribe by rule, regulation, or order, 
                any customer payment stablecoin, cash, and other 
                property described in this subsection may be commingled 
                and deposited in customer accounts with payment 
                stablecoins, cash, and other property received by the 
                person and required by the Board to be separately 
                accounted for, treated, and dealt with as belonging to 
                customers.
  (d) Regulatory Information.--A person described under subsection (a) 
shall submit to the Board information concerning the person's business 
operations and processes to protect customer assets, in such form and 
manner as the Board shall determine.
  (e) Exclusion.--The requirements of this section shall not apply to 
any person solely on the basis that such person engages in the business 
of providing hardware or software to facilitate a customer's own 
custody or safekeeping of the customer's payment stablecoins or private 
keys.

SEC. 9. INTEROPERABILITY STANDARDS.

  The primary Federal payment stablecoin regulators, in consultation 
with the National Institute of Standards and Technology, other relevant 
standard setting organizations, and State governments, shall assess 
and, if necessary, may, pursuant to section 553 of title 5 and in a 
manner consistent with the National Technology Transfer and Advancement 
Act of 1995 (Public Law 104-113), prescribe standards for payment 
stablecoin issuers to promote compatibility and interoperability.

SEC. 10. MORATORIUM ON ENDOGENOUSLY COLLATERALIZED STABLECOINS.

  (a) Moratorium.--During the 2-year period beginning on the date of 
enactment of this Act, it shall be unlawful to issue, create, or 
originate an endogenously collateralized stablecoin not in existence on 
the date of enactment of this Act.
  (b) Study by Treasury.--
          (1) Study.--The Secretary of the Treasury, in consultation 
        with the Board, the Comptroller, the Corporation, and the 
        Securities and Exchange Commission, shall carry out a study of 
        endogenously collateralized stablecoins.
          (2) Report.--Not later than 365 days after the date of the 
        enactment of this Act, the Secretary shall provide to the 
        Committee on Financial Services of the House of Representatives 
        and the Committee on Banking, Housing, and Urban Affairs of the 
        Senate a report that contains all findings made in carrying out 
        the study under subsection (a), including an analysis of--
                  (A) the categories of non-payment stablecoins, 
                including the benefits and risks of technological 
                design features;
                  (B) the participants in non-payment stablecoin 
                arrangements;
                  (C) utilization and potential utilization of non-
                payment stablecoins;
                  (D) nature of reserve compositions;
                  (E) types of algorithms being employed;
                  (F) governance structure, including aspects of 
                decentralization;
                  (G) nature of public promotion and advertising; and
                  (H) clarity and availability of consumer notices 
                disclosures.
  (c) Endogenously Collateralized Stablecoin Defined.--In this section, 
the term ``endogenously collateralized stablecoin'' means any digital 
asset--
          (1) in which its originator has represented will be 
        converted, redeemed, or repurchased for a fixed amount of 
        monetary value; and
          (2) that relies solely on the value of another digital asset 
        created or maintained by the same originator to maintain the 
        fixed price.

SEC. 11. REPORT ON RULEMAKING STATUS.

  Not later than 6 months after the date of enactment of this Act, the 
primary Federal payment stablecoin regulators shall provide a status 
update on the development of the rulemaking under this Act to the 
Committee on Financial Services of the House of Representatives and the 
Committee on Banking, Housing, and Urban Affairs of the Senate.

SEC. 12. AUTHORITY OF BANKING INSTITUTIONS.

  (a) Rule of Construction.--Nothing in this Act may be construed to 
limit the authority of a depository institution, Federal credit union, 
State credit union, or trust company to engage in activities 
permissible pursuant to applicable State and Federal law, including--
          (1) accepting or receiving deposits and issuing digital 
        assets that represent deposits;
          (2) utilizing a distributed ledger for the books and records 
        of the entity and to affect intrabank transfers; and
          (3) providing custodial services for payment stablecoins, 
        private keys of payment stablecoins, or reserves backing 
        payment stablecoins.
  (b) Treatment of Custody Activities.--The appropriate Federal banking 
agency (as defined under section 3 of the Federal Deposit Insurance Act 
(12 U.S.C. 1813)), the National Credit Union Administration (in the 
case of a credit union), and the Securities and Exchange Commission may 
not require a depository institution, national bank, Federal credit 
union, State credit union, or trust company, or any affiliate thereof--
          (1) to include assets held in custody as a liability on any 
        financial statement or balance sheet, including payment 
        stablecoin custody or safekeeping activities;
          (2) to hold additional regulatory capital against assets in 
        custody or safekeeping, except as necessary to mitigate against 
        operational risks inherent with the custody or safekeeping 
        services, as determined by--
                  (A) the appropriate Federal banking agency;
                  (B) the National Credit Union Administration (in the 
                case of a credit union);
                  (C) a State bank supervisor (as defined under section 
                3 of the Federal Deposit Insurance Act (12 U.S.C. 
                1813)); or
                  (D) a State credit union supervisor (as defined under 
                section 6003 of the Anti-Money Laundering Act of 2020);
          (3) to recognize a liability for any obligations related to 
        activities or services performed for digital assets that the 
        entity does not own if that liability would exceed the expense 
        recognized in the income statement as a result of the 
        corresponding obligation.
  (c) Definitions.--In this section:
          (1) Depository institution.--The terms ``depository 
        institution'' has the meaning given that term under section 3 
        of the Federal Deposit Insurance Act.
          (2) Credit union terms.--The terms ``Federal credit union'' 
        and ``State credit union'' have the meaning given those terms, 
        respectively, under section 101 of the Federal Credit Union 
        Act.

SEC. 13. CLARIFYING THAT PAYMENT STABLECOINS ARE NOT SECURITIES OR 
                    COMMODITIES.

  (a) Investment Advisers Act of 1940.--Section 202(a)(18) of the 
Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a)(18)) is amended by 
adding at the end the following: ``The term `security' does not include 
a payment stablecoin issued by a permitted payment stablecoin issuer, 
as such terms are defined, respectively, in section 2 of the Clarity 
for Payment Stablecoins Act of 2023.''.
  (b) Investment Company Act of 1940.--Section 2(a)(36) of the 
Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(36)) is amended by 
adding at the end the following: ``The term `security' does not include 
a payment stablecoin issued by a permitted payment stablecoin issuer, 
as such terms are defined, respectively, in section 2 of the Clarity 
for Payment Stablecoins Act of 2023.''.
  (c) Securities Act of 1933.--Section 2(a)(1) of the Securities Act of 
1933 (15 U.S.C. 77b(a)(1)) is amended by adding at the end the 
following: ``The term `security' does not include a payment stablecoin 
issued by a permitted payment stablecoin issuer, as such terms are 
defined, respectively, in section 2 of the Clarity for Payment 
Stablecoins Act of 2023.''.
  (d) Securities Exchange Act of 1934.--Section 3(a)(10) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(10)) is amended by 
adding at the end the following: ``The term `security' does not include 
a payment stablecoin issued by a permitted payment stablecoin issuer, 
as such terms are defined, respectively, in section 2 of the Clarity 
for Payment Stablecoins Act of 2023.''.
  (e) Securities Investor Protection Act of 1970.--Section 16(14) of 
the Securities Investor Protection Act of 1970 (15 U.S.C. 78lll(14)) is 
amended by adding at the end the following: ``The term `security' does 
not include a payment stablecoin issued by a permitted payment 
stablecoin issuer, as such terms are defined, respectively, in section 
2 of the Clarity for Payment Stablecoins Act of 2023.''.

                          PURPOSE AND SUMMARY

    Introduced on July 20, 2023, by Representative Patrick 
McHenry, H.R. 4766, the Clarity for Payment Stablecoins Act of 
2023, provides a clear federal regulatory framework for issuing 
payment stablecoins intended to be used as a means of payment. 
The bill balances customer protection with innovation by 
establishing a framework that allows new entrants into the 
marketplace.

                  BACKGROUND AND NEED FOR LEGISLATION

    Stablecoins are a digital asset designed to offer price 
stability to enable them to be used in a similar manner to 
currency. Stablecoins seek to be less volatile than other 
digital assets by being pegged to another asset's value. Today, 
stablecoins are primarily used in the United States to 
facilitate trading, lending, or borrowing of other digital 
assets, predominantly on or through digital asset trading 
platforms. Stablecoins provide protection for individuals 
because they allow individuals to enter and exit the digital 
asset markets efficiently.
    Currently, there is no federal regulatory framework for 
stablecoin issuers. Most states have yet to create regulatory 
frameworks for digital asset businesses, forcing potential 
stablecoin issuers to leverage existing state money transmitter 
statutes. But most state money transmitter statutes were not 
crafted to address digital asset businesses, including payment 
stablecoin issuers and related activities. New York is an 
example of one state that has established a strong regulatory 
framework specific to firms engaged in virtual currency 
activities. The framework sets forth baseline requirements 
focused on the backing and redeemability of the payment 
stablecoin, reserves, and attestations. New York State 
Department of Financial Services (NYDFS) evaluates a range of 
additional risks prior to authorizing a regulated virtual 
currency entity to issue a stablecoin, including but not 
limited to cybersecurity; Bank Secrecy Act/anti-money-
laundering (BSA/AML) and sanctions compliance; consumer 
protection; and safety and soundness of the issuing entity, 
among others. House Financial Services Committee (Committee) 
Republicans believe that while payment stablecoins hold promise 
as a potential cornerstone of a modern payment system, they 
must be issued under a clear regulatory framework.
    Committee Republicans are not alone in recognizing the 
tremendous potential for payment stablecoins and the need for a 
federal regulatory framework. In November 2021, the President's 
Working Group on Financial Markets, the Federal Deposit 
Insurance Corporation, and the Office of the Comptroller of the 
Currency released its Report on Stablecoins (PWG Report), which 
included a proposed federal regulatory framework to address 
existing and potential risks of stablecoins. The PWG Report 
identified several potential risks and benefits while 
recommending that Congress act promptly to enact legislation 
ensuring stablecoins are subject to a federal prudential 
regulatory framework. Specifically, the PWG Report recommended 
that Congress enact legislation requiring stablecoins to be 
issued only by insured depository institutions.
    During the 117th Congress, following the PWG Report's 
release, the Committee began developing legislation to 
establish a federal framework for issuing payment stablecoins 
for both banks and nonbanks. During this process, Committee 
Republicans developed a framework, hosted numerous roundtables, 
and participated in two hearings focused on the aspects of 
payment stablecoin legislation.
    At a hearing in December 2021, Paxos's CEO and Co-Founder, 
Charles Cascarilla, highlighted existing issues within the 
United States' payment system and potential benefits of 
stablecoins:

          ``At any given time, there are trillions of dollars' 
        worth of capital held up in transactions that have not 
        yet settled. Remittance recipients and other payees 
        don't have access to their funds. Money that could help 
        others or be productively deployed is unnecessarily 
        trapped in limbo. Whole industries have developed to 
        take advantage of these delays, often to the detriment 
        of those who can least afford it. How many overdraft 
        fees could have been avoided if people received their 
        money immediately after it was sent? [. . .]Digital 
        assets, and the blockchains they're built on, offer a 
        better alternative.''

    During the same hearing, Stellar Development Foundation CEO 
and Executive Director, Denelle Dixon, highlighted a pilot 
program that Money Gram International was testing on the 
Stellar network to demonstrate that stablecoins are actively 
solving the issues Mr. Cascarilla raised in his testimony. 
Several witnesses also highlighted the disparities between the 
United States' approach to regulation compared to other 
jurisdictions.
    At a hearing in February 2022, the Department of the 
Treasury (Treasury) also highlighted the risks of Congress not 
enacting a comprehensive federal regulatory framework for 
payment stablecoin issuers. The Under Secretary of the Treasury 
for Domestic Finance, Nellie Liang, emphasized that:

          ``Stablecoins are not subject to standards to address 
        concerns about run risk, payment system risk, or 
        concentration of economic power. Some of the largest 
        stablecoin issuers operate with limited regulatory 
        oversight, raising significant questions about whether 
        these stablecoins are adequately backed and other 
        aspects of their operations. The regulatory frameworks 
        that apply to stablecoin issuers and service providers 
        are inconsistent, creating opportunities for regulatory 
        arbitrage and uncertainty among stablecoin users.''

    The Financial Stability Oversight Council (FSOC) also 
recognizes the need for legislation. At a hearing in May 2022, 
Treasury Secretary Janet Yellen testified before the Committee 
in her capacity as Chair of FSOC and underscored the urgency of 
stablecoin legislation, explaining that FSOC is ``eager to work 
with [the Committee] to ensure that payment stablecoins and 
their arrangements are subject to a federal prudential 
framework on a consistent and comprehensive basis.'' FSOC 
emphasized this point in its October 2022 Report on Digital 
Asset Financial Stability Risks and Regulation, recommending 
that ``Congress pass legislation that would create a 
comprehensive federal prudential framework for stablecoin 
issuers that also addresses the associated market integrity, 
investor and consumer protection, and payment system risks.''
    During the 118th Congress, the Committee held three 
hearings and several member roundtables focused on payment 
stablecoins. Through these hearings and roundtables, the 
Committee received feedback and input from Republican and 
Democratic members. This feedback resulted in the introduction 
of H.R. 4766, the Clarity for Payment Stablecoins Act of 2023.
    The Clarity for Payment Stablecoins Act sets minimum 
standards for a potential issuer to be authorized to issue 
payment stablecoins in the United States. The bill includes 
multiple pathways--not just through banks--for payment 
stablecoin issuers to obtain approval to issue a payment 
stablecoin. It is important for there to be pathways for 
nonbanks to obtain approval. Former Chief Policy Officer at the 
Blockchain Association, Jake Chervinsky, testified before the 
Committee on April 19, 2023, and explained, ``forcing all 
stablecoin issuers to obtain bank charters would severely 
restrict innovation without any attendant regulatory benefit, 
since stablecoins issued by properly regulated non-bank firms 
will be equally safe and sound as those issued by banks.''
    The bill provides three pathways to obtain Federal approval 
to issue payment stablecoins. First, banks and credit unions 
may obtain approval from their appropriate Federal banking 
agency or the National Credit Union Administration Board 
(NCUA), as appropriate, to issue a payment stablecoin through a 
subsidiary. Second, non-bank entities chartered by the Office 
of the Comptroller of the Currency (OCC) may obtain approval 
from the OCC to issue a payment stablecoin. Third, non-banks, 
non-OCC chartered entities, may obtain approval from the 
Federal Reserve to issue a payment stablecoin.
    In addition, the bill provides a state pathway for 
obtaining approval to issue payment stablecoins. Given that 
some states have enacted robust regulatory frameworks for 
payment stablecoins, and others may in the future, the Clarity 
for Payment Stablecoins Act of 2023 preserves a state pathway. 
During a hearing before the Committee on June 13, 2023, the Co-
Founder, Chairman, and CEO of Circle, Jeremy Allaire, explained 
that ``in the U.S., the states have been the laboratory of 
fintech innovation for the past 25 years, and we should 
celebrate that fact. Indeed, the innovations that we are 
addressing today became possible only through our broad-based 
state regulatory system.'' NYDFS Superintendent Adrienne Harris 
likewise testified that:

          ``The best path forward is to build on the well-
        established dual banking regulatory system--where state 
        and federal regulators share supervisory and regulatory 
        authority. The dual banking system takes advantage of 
        the comparative strengths of federal and state 
        regulators. Federal regulators are able to 
        comprehensively address macroprudential considerations 
        and establish foundational consumer and market 
        protections. Meanwhile, states can act more nimbly to 
        respond to industry developments and support 
        responsible innovation given their ability to modernize 
        regulations more quickly and leverage their more 
        immediate understanding of consumer needs.''

    The Clarity for Payment Stablecoins Act preserves the state 
pathway for payment stablecoin issuers by emulating core 
aspects of the United States' dual-banking system. Under the 
state pathway, an entity that has received approval from a 
state agency with regulatory and supervisory authority over 
payment stablecoin issuers may issue payment stablecoins 
provided that it meets certain minimum standards established in 
the bill. These ``state qualified payment stablecoin issuers'' 
are subject to oversight by the Federal Reserve to ensure that 
they comply with the minimum standards.
    As the PWG report, testimonies from Secretary Yellen and 
Undersecretary Liang, and the testimonies of several other 
witnesses have made clear, there is a need for uniform 
standards for payment stablecoin issuers in the United States. 
The Clarity for Payment Stablecoins Act addresses this need by 
establishing requirements for reserves, redemption, 
attestations, and examinations, as well as minimum standards 
for capital, liquidity, and risk management. The bill further 
establishes, at a minimum, that payment stablecoin issuers must 
disclose and submit, at least monthly, a certification 
regarding the reserves. The Committee encourages further 
development in this area to promote greater transparency on 
reserves, including using developing technology such as zero 
knowledge proofs, which may eventually allow for real-time 
verification of reserves.
    In the absence of legislation and clear jurisdictional 
boundaries, there will continue to be substantial regulatory 
uncertainty. First, under the status-quo, payment stablecoins 
and activities involving payment stablecoins may fall under the 
jurisdiction of several federal regulators depending on the 
composition of the stablecoin reserve assets and the range of 
activities in which an issuer engages. For example, the 
Securities and Exchange Commission (SEC) Chairman Gary Gensler 
has asserted that ``stablecoins may have attributes of 
investment contracts,'' which would subject stablecoins to SEC 
oversight. Yet, Commodity Futures Trading Commission (CFTC) 
Chairman Rostin Benham has asserted that stablecoins are 
commodities under existing law and regulation, thereby 
subjecting them to CFTC oversight. As Columbia Business School 
Adjunct Professor Austin Campbell testified in an April 19, 
2023, Committee hearing:

          ``Someone attempting to launch or manage a stablecoin 
        in the United States doesn't know if they can issue on 
        a public blockchain, doesn't know if they can get 
        banking relationships, and doesn't know if they have to 
        answer to a state financial regulator, a federal 
        banking regulator, or the SEC, who all often have 
        mutually contradictory answers as to 
        responsibilities.''

    The Clarity of Payment Stablecoins Act resolves this 
uncertainty by establishing a clear prudential regulatory 
framework for payment stablecoins. The Clarity for Payment 
Stablecoins Act also addresses the market confusion and 
disruption that resulted from the SEC Staff Accounting Bulletin 
No. 121 (SAB 121). SAB 121 upends precedent regarding the 
accounting treatment of custodial assets for banks and makes it 
much more difficult for financial institutions to provide 
custodial services for digital assets, including payment 
stablecoins, by requiring certain entities to record on their 
balance sheet a liability and a corresponding asset at the fair 
value of the digital assets that they are safeguarding and 
includes certain disclosure requirements. As Davis Polk & 
Wardwell LLP Partner Zachary Zweihorn testified in an April 27, 
2023, Committee hearing, ``the interaction of SAB 121 and the 
broker-dealer capital rules also make broker-dealer custody of 
digital assets economically infeasible--similar to concerns 
raised with regard to custody by banks.'' The Clarity for 
Payment Stablecoins Act resolves this market disruption by 
prohibiting Federal agencies from implementing SAB 121 in its 
current form.
    As Treasury Under Secretary Liang testified, ``if 
stablecoins are backed by high-quality assets, their risk is 
quite low, and they can form a building block--a cornerstone--
of a payment system.'' The Clarity for Payment Stablecoins Act 
establishes robust standards that will ensure the integrity of 
payment stablecoin in the U.S. This comprehensive framework 
will enable further development of stablecoin uses, many of 
which will have great benefit for our financial system.

                            RELATED HEARINGS

    Pursuant to clause 3(c)(6) of rule XIII, the following 
hearings were used to develop H.R. 4766:

118th Congress

    The Committee on Financial Services held a hearing on March 
8, 2023, titled ``The Federal Reserve's Semi-Annual Monetary 
Policy Report.''
    The Subcommittee on Digital Assets, Financial Technology 
and Inclusion of the Committee on Financial Services held a 
hearing on March 9, 2023, titled ``Coincidence or Coordinated? 
The Administration's Attack on the Digital Asset Ecosystem.''
    The Committee on Financial Services held a hearing on April 
18, 2023, titled ``Oversight of the Securities and Exchange 
Commission.''
    The Subcommittee on Digital Assets, Financial Technology 
and Inclusion of the Committee on Financial Services held a 
hearing on April 19, 2023, titled ``Understanding Stablecoins' 
Role in Payments and the Need for Legislation.''
    The Committee on Financial Services held a hearing on May 
16, 2023, titled ``Oversight of Prudential Regulators.''
    The Subcommittee on Digital Assets, Financial Technology 
and Inclusion of the Committee on Financial Services held a 
hearing on May 18, 2023, titled ``Putting the `Stable' in 
`Stablecoins:' How Legislation Will Help Stablecoins Achieve 
Their Promise.''
    The Committee on Financial Services held a hearing on June 
13, 2023, titled ``The Future of Digital Assets: Providing 
Clarity for the Digital Asset Ecosystem.''
    The Committee on Financial Services held a hearing on June 
21, 2023, titled ``The Federal Reserve's Semi-Annual Monetary 
Policy Report.''

117th Congress

    The Subcommittee on Oversight and Investigations held a 
hearing on June 30, 2021, titled ``Will the Crypto Frenzy Lead 
to Financial Independence and Early Retirement or Financial 
Ruin?''
    The Committee on Financial Services held a hearing on 
December 8, 2021, titled ``Digital Assets and the Future of 
Finance: Understanding the Challenges and Benefits of Financial 
Innovation in the United States.''
    The Committee on Financial Services held a hearing on 
February 8, 2022, titled ``Digital Assets and the Future of 
Finance: The President's Working Group on Financial Markets' 
Report on Stablecoins.''
    The Committee on Financial Services held a hearing on March 
2, 2022, titled ``Monetary Policy and the State of the 
Economy.''
    The Committee on Financial Services held a hearing on May 
26, 2022, titled ``Digital Assets and the Future of Finance: 
Examining the Benefits and Risks of a U.S. Central Bank Digital 
Currency.''
    The Committee on Financial Services held a hearing on June 
23, 2022, titled ``Monetary Policy and the State of the 
Economy.''

116th Congress

    The Committee on Financial Services held a hearing on July 
27, 2019, titled ``Examining Facebook's Proposed Cryptocurrency 
and Its Impact on Consumers, Investors, and the American 
Financial System.''
    The Committee on Financial Services held a hearing on 
October 23, 2019, titled ``An Examination of Facebook and Its 
Impact on the Financial Services and Housing Sectors.''

115th Congress

    The Subcommittee on Capital Markets held a hearing on March 
14, 2018, titled ``Examining the Cryptocurrencies and ICO 
Markets.''
    The Subcommittee on Monetary and Trade held a hearing on 
July 18, 2018, titled ``The Future of Money: Digital 
Currency.''

                        COMMITTEE CONSIDERATION

    The Committee on Financial Services met in open session on 
July 27, 2023, and ordered H.R. 4766 to be reported favorably 
to the House as amended by a recorded vote of 34 ayes to 16 
nays (Record vote no. FC-86), a quorum being present. Before 
the question was called to order the bill favorably reported, 
the Committee adopted an amendment in the nature of a 
substitute offered by Mr. McHenry by a recorded vote of 34 ayes 
to 16 nays (Record vote no. FC-85).

                            COMMITTEE VOTES

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the order to report legislation and amendments thereto. H.R. 
4766 was ordered reported favorably to the House as amended by 
a recorded vote of 34 ayes to 16 nays (Record vote no. FC-86), 
a quorum being present.
    An amendment offered by Mr. Foster, no. 1, was not agreed 
to by a recorded vote of 21 ayes to 28 nays, a quorum being 
present (Record vote no. FC-82).
    An amendment offered by Mrs. Beatty, no. 4, was not agreed 
to by a recorded vote of 21 ayes to 29 nays, a quorum being 
present (Record vote no. FC-83).
    An amendment by Mr. Sherman, no. 5, was not agreed to by a 
recorded vote of 16 ayes to 34 nays, a quorum being present 
(Record vote no. FC-84).


                      COMMITTEE OVERISGHT FINDINGS

    Pursuant to clause 3(c) of rule XIII of the Rules of the 
House of Representatives, the findings and recommendations of 
the Committee, based on oversight activities under clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
are incorporated in the descriptive portions of this report.

                    PERFORMANCE GOALS AND OBJECTIVES

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the goal of H.R. 4766 is to ensure a 
clear regulatory framework for the issuance of payment 
stablecoins that are designed to be used as a means of payment, 
while protecting customers and fostering innovation by 
establishing a clear framework to allow new entrants into the 
marketplace.

                 CONGRESSIONAL BUDGET OFFICE ESTIMATES

    The Committee has requested but not received a cost 
estimate from the Director of the Congressional Budget Office. 
However, pursuant to clause 3(d)(1) of House rule XIII, the 
Committee will adopt as its own the cost estimate by the 
Director of the Congressional Budget Office once it has been 
prepared.

   NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX EXPENDITURES

    The Committee has requested but not received an estimate 
from the Director of the Congressional Budget Office. However, 
pursuant to clause 3(c)(2) of rule XIII of the Rules of the 
House of Representatives, once an estimate has been prepared by 
the Director of the Congressional Budget Office, as required by 
section 402 of the Congressional Budget Act of 1973, the 
Committee will adopt as its own the estimate of new budget 
authority, entitlement authority, or tax expenditures or 
revenues contained in the cost estimate.

                       FEDERAL MANDATES STATEMENT

    The Committee has requested but not received an estimate 
from the Director of the Congressional Budget Office of the 
Federal mandates pursuant to section 423 of the Unfunded 
Mandates Reform Act. The Committee will adopt the estimate once 
it has been prepared by the Director.

                      ADVISORY COMMITTEE STATEMENT

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                  APPLICABILITY TO LEGISLATIVE BRANCH

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

                         EARMARK IDENTIFICATION

    With respect to clause 9 of rule XXI of the Rules of the 
House of Representatives, the Committee has carefully reviewed 
the provisions of the bill and states that the provisions of 
the bill do not contain any congressional earmarks, limited tax 
benefits, or limited tariff benefits within the meaning of the 
rule.

                    DUPLICATION OF FEDERAL PROGRAMS

    Pursuant to clause 3(c)(5) of rule XIII of the Rules of the 
House of Representatives, the Committee states that no 
provision of the bill establishes or reauthorizes a program of 
the Federal Government known to be duplicative of another 
Federal program, including any program that was included in a 
report to Congress pursuant to section 21 of the Public Law 
111-139 or the most recent Catalog of Federal Domestic 
Assistance.

             SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title

    This section states H.R. 4766 is the ``Clarity for Payment 
Stablecoins Act of 2023.''

Section 2. Definitions

    Section 2 defines various terms, including digital asset, 
distributed ledger, payment stablecoin, permitted payment 
stablecoin issuer, and primary federal payment stablecoin 
regulator, among others. A permitted payment stablecoin issuer 
is one that has been approved under one of the pathways made 
available under the bill.

Section 3. Limitation on who may issue a payment stablecoin

    Section 3 prohibits the issuance of payment stablecoins for 
use by any person in the United States by any entity other than 
those approved as a permitted stablecoin issuer under the bill.

Section 4. Requirements for issuing payment stablecoins

    Section 4 establishes minimum standards that all payment 
stablecoin issuers must comply with, regardless of the path 
that they choose. Payment stablecoin issuers must maintain 
reserves on a one-to-one basis with assets comprised of coins 
and currency, deposits held at insured depository institutions, 
short-term Treasury bills, short-term repurchase agreements, 
and central bank reserve deposits.
    Such reserves may not be rehypothecated except for limited 
purposes. Payment stablecoin issuers must establish and 
publicly disclose policies and procedures regarding redemption. 
Issuers must also publish the composition of their reserves 
monthly, which must be examined monthly by a registered public 
accounting firm and provide monthly certifications from the 
Chief Executive Officer and Chief Financial Officer to the 
primary regulator as to the accuracy of these reports. 
Additionally, payment stablecoin issuers are treated as 
financial institutions for purposes of the Bank Secrecy Act and 
must adhere to all requirements.
    This section also places limitations on the activities of a 
payment stablecoin issuer and requires the primary federal 
payment stablecoin regulators to issue joint rulemakings 
establishing capital, liquidity, and risk management standards, 
as well as other rules necessary to carry out this section.

Section 5. Approval of subsidiaries of insured depository institutions 
        and federal qualified nonbank issuers

    Section 5 establishes a process for payment stablecoin 
issuers that seek to gain approval through a primary federal 
payment stablecoin regulator to issue payment stablecoins. The 
bill enables depository institutions to issue a payment 
stablecoin through a subsidiary that is approved by the 
appropriate Federal banking agency or the NCUA, as appropriate. 
Entities chartered by the OCC may issue a payment stablecoin if 
approved by the OCC. Lastly, a nonbank entity may be deemed a 
Federal qualified nonbank payment stablecoin issuer, if 
approved by the Federal Reserve.
    This section requires the primary Federal payment 
stablecoin regulator to render a decision on the application 
within a certain timeframe. If the primary Federal payment 
stablecoin regulator fails to issue a decision within the 
timeframe, the application is deemed approved. Factors that the 
primary Federal payment stablecoin regulator may consider when 
assessing the application include the payment stablecoin 
issuer's ability to meet the standards established in Section 4 
of the bill, the character and fitness of the payment 
stablecoin issuer's management team, and the risks presented by 
the applicant and benefits provided to consumers. The regulator 
may only deny an application if it determines the activities of 
the applicant would be unsafe or unsound based on these factors 
and must provide a written explanation for the denial that 
includes the shortcomings of the application and 
recommendations on how those shortcomings could be addressed.
    The payment stablecoin issuer is permitted to appeal the 
denial through a process established under the bill. The 
primary Federal payment stablecoin regulators must report to 
Congress on payment stablecoin issuer applications that have 
been pending for 6 months or more. This section shall take 
effect the earlier of 18 months following enactment or 120 days 
after final regulations are issued. The primary Federal payment 
stablecoin regulator shall notify Congress once beginning to 
process applications. Additionally, the primary Federal payment 
stablecoin regulator may waive the application requirements for 
12 months if the entity has an application pending.

Section 6. Supervision and enforcement with respect to subsidiaries of 
        insured depository institutions (IDIs) and federal qualified 
        nonbank stablecoin issuers

    Section 6 establishes supervision and enforcement standards 
for payment stablecoin issuers under the oversight of a primary 
Federal payment stablecoin regulator. Subsidiaries of IDIs are 
subject to supervision by the primary Federal payment 
stablecoin regulator in the same manner as such IDI.
    Federal qualified nonbank stablecoin issuers are required 
to submit reports on financial condition and compliance with 
this Act to their primary federal regulator upon request and 
are subject to examinations. Both Federal qualified nonbank 
payment stablecoin issuers and subsidiaries of IDIs that issue 
payment stablecoins must comply with the requirements of the 
Gramm-Leach Bliley Act.
    The enforcement provisions are similar to the enforcement 
powers under the Federal Deposit Insurance Act (12 U.S.C. 1818) 
and provides federal payment stablecoin regulators authority to 
pursue suspension and prohibition actions, cease-and-desist 
actions, and civil money penalties against a payment stablecoin 
issuer or institution-affiliated party of a permitted payment 
stablecoin issuer if the primary Federal payment stablecoin 
regulator determines that such permitted payment stablecoin 
issuer or an institution-affiliated party is violating or has 
violated this Act or any regulation or order issued under this 
Act.

Section 7. State qualified payment stablecoin issuers

    Section 7 establishes that state payment stablecoin 
regulators can continue to charter and supervise state 
qualified payment stablecoin issuers that meet the requirements 
of section 4.
    The state regulator will retain their supervisory, 
examination, and enforcement authority over state qualified 
payment stablecoins issuers. State regulators may enter into 
memorandums of understanding with the Federal Reserve by mutual 
agreement and must share information with the Federal Reserve.
    The Federal Reserve has enforcement authority, as specified 
in section 6, over the state qualified payment stablecoin 
issuers or an institution-affiliated party of such issuer for 
violations of the Act under certain circumstances. State 
qualified payment stablecoin issuers must comply with the 
requirements of the Gramm-Leach Bliley Act. The provisions of 
this section do not preempt any State law and do not supersede 
any State licensing requirement.

Section 8. Customer protection

    Section 8 establishes standards for entities that provide 
custodial services for payment stablecoins. Entities must treat 
customer property as belonging to the customer and take steps 
to protect the property from claims of creditors as well as 
segregate customer assets from assets belonging to the 
custodian and are prohibited from commingling.
    These custodians must be regulated by a federal regulator 
or subject to supervision by a state bank supervisor that 
shares information with the Federal Reserve and meets certain 
standards, including segregation requirements and the 
prohibition on commingling. Finally, the entities must submit 
information, in such form as the Federal Reserve determines, to 
the Federal Reserve on their business operations and processes 
to protect customer assets.
    The requirements of this section shall not apply to any 
entity solely on the basis that such person engages in the 
business of providing hardware or software to facilitate a 
customer's own custody or safekeeping of the customer's payment 
stablecoins or private keys.

Section 9. Interoperability standards

    Section 9 requires the primary federal payment stablecoin 
regulators to work with the National Institute of Standards and 
Technology, other relevant standard setting organizations, and 
State governments to consider standards for compatibility and 
interoperability of payment stablecoins.

Section 10. Moratorium on endogenously collateralized stablecoins

    Section 10 imposes a two-year moratorium on the creation or 
issuance of endogenously collateralized stablecoins and 
requires Treasury to conduct a study on endogenously 
collateralized stablecoins and report to the relevant 
Committees within one year. An endogenously collateralized 
stablecoin is any digital asset in which its originator has 
represented will be converted, redeemed, or repurchased for a 
fixed amount of monetary value; and that relies solely on the 
value of another digital asset created or maintained by the 
same originator to maintain the fixed price.

Section 11. Report on rulemaking status

    Section 11 requires the primary federal payment stablecoin 
regulators to provide the relevant Committees with an update on 
the status of rulemakings required under this Act within 6 
months.

Section 12. Authority of banking institutions

    Section 12 clarifies the authority of depository 
institutions and trust companies, as appropriate, to tokenize 
deposits, utilize distributed ledger for books and records, and 
provide custodial services for payment stablecoins.
    Additionally, this section prevents federal agencies from 
requiring entities to account for assets held in custody on 
their balance sheet; hold additional regulatory capital against 
these assets, except as necessary to mitigate against 
operational risks inherent with the custody or safekeeping 
services, as determined by the appropriate federal banking 
agency, NCUA, state bank supervisor, or state credit union 
supervisor; or recognize a liability for any obligations 
related to activities or services performed for digital assets 
that the entity does not own if that liability would exceed the 
expense recognized in the income statement as a result of the 
corresponding obligation. This section overturns SEC SAB 121.

Section 13. Clarifying that payment stablecoins are not securities

    Section 13 clarifies that the term ``security'' under the 
securities laws does not include a payment stablecoin issued by 
a permitted payment stablecoin issuer.

                             MINORITY VIEWS

    Ranking Member Waters worked closely with Chair McHenry 
over several months, and in particular the weeks leading up to 
the July markup to achieve a bipartisan bill on stablecoins. 
Unfortunately, Chair McHenry abruptly ended those negotiations 
and blamed the White House for derailing ongoing discussions. 
He, instead, decided to move forward with H.R. 4766, which is 
lacking in several ways that are outlined below.
    Stablecoins are a specific type of cryptocurrency that 
tries to peg its value to another asset like the dollar, the 
imprimatur of the federal government. Bipartisan negotiations 
on legislation began in part in response to a Report on 
Stablecoins (PWG Report) issued in November 2021 by the 
President's Working Group on Financial Markets (PWG) along with 
the Office of the Comptroller of the Currency (OCC), and the 
Federal Deposit Insurance Corporation (FDIC), urging Congress 
to pass legislation to improve oversight and regulation of 
stablecoins.\1\ The Financial Stability Oversight Council 
(FSOC)'s report on digital assets also reaffirmed concerns 
regarding certain regulatory gaps in crypto-asset activities 
and recommendations for Congress.\2\ These reports, in addition 
to subsequent testimony from Federal officials noted that a 
strong Federal framework was needed to oversee stablecoins, 
with robust reserve requirements. And given that stablecoins 
represent the issuance of a new form of money, Federal 
guardrails are integral, as our central bank, the Federal 
Reserve handles monetary policy and our money supply. When the 
PWG called on Congress to pass legislation to improve the 
oversight and regulation of stablecoins, they emphasized the 
need for Federal, not state, prudential authority over 
stablecoins to address risks like stablecoin runs, systemic 
risk, and concentration of economic power. Nevertheless, H.R. 
4766 would hand the keys to addressing these national risks to 
the states, and a key issue with this bill would be the 
patchwork of state regulation that would promote a race to the 
bottom.
---------------------------------------------------------------------------
    \1\President's Working Group on Financial Markets, FDIC, and OCC, 
Report on Stablecoins, at 1 (Nov. 2021).
    \2\FSOC, Report on Digital Asset Financial Stability Risks and 
Regulation (Oct. 3, 2022).
---------------------------------------------------------------------------
    As it stands, the current Republican bill does not have the 
support of the White House, the U.S. Treasury, or the Federal 
Reserve and falls short in the following ways:
           McHenry's bill promotes a race to the bottom 
        by creating 58 different licenses with Federal 
        regulatory approval and robust oversight over only 2 of 
        the licenses, which are the licenses for banks and Fed-
        approved nonbanks. Moreover, this legislation allows 
        individual states to preempt each other. Texas, for 
        example, would have no ability to stop coins from being 
        issued in their state from New York.
           The bill allows all commercial entities like 
        Amazon, Walmart, or Facebook to create their own 
        stablecoins, or affiliate with a stablecoin issuers. 
        Facebook, with its own coin, could become effectively a 
        global bank with 2 billion customers overnight. We have 
        already begun to see corporations launching their own 
        stablecoin while there is still no Federal framework 
        for regulation, oversight, and enforcement of these 
        assets. For example, only a few days after the markup, 
        PayPal launched its own U.S. dollar-denominated 
        stablecoin, PayPal USD (PYUSD) issued by Paxos Trust 
        Company, and made available on Venmo and various crypto 
        exchanges.\3\ By allowing commercial entities to engage 
        in what is essentially financial services, the bill 
        undermines a prohibition against such activities dating 
        back to the 1930s and the passage of Glass Stegall, and 
        would allow for the creation of super monopolies with 
        dangerous amounts of economic and political power.
---------------------------------------------------------------------------
    \3\See PayPal, PayPal Launches U.S. Dollar Stablecoin (Aug. 7, 
2023); see also House Committee on Financial Services, Ranking Member 
Waters' Statement on PayPal's Launch of U.S. Dollar Stablecoin (Aug. 9, 
2023); and Rep. Sean Casten, Letter to Daniel H. Schulman President and 
Chief Executive Officer of PayPal (Aug. 14, 2023). In September 20, 
PayPal announced the PYUSD stablecoin is available on Venmo. See also, 
PayPal's PYUSD stablecoin is now available on Venmo, TechCrunch (Sept. 
20, 2023). PayPal, with 435 million customers globally, exceeds the 
number of online accounts at all of the megabanks combined. Due to 
PayPal's size and reach, Federal oversight and enforcement of its 
stablecoin operations are critical in ensuring consumer protection and 
addressing financial stability concerns.
---------------------------------------------------------------------------
           While the sponsors suggest that state-
        regulated non-bank issuers would still have oversight 
        by the Federal Reserve, the bill provides no 
        supervisory or regulatory authority to the Federal 
        Reserve. Simply stating that the Fed has 
        ``supervisory'' authorities does not make such 
        authorities so. The bill, for example, does not 
        describe the authority to examine, the authority to 
        issue cease and desist orders, or to even levy a 
        penalty. Any non-bank entity would easily prove in 
        court that the Fed has no authority to do anything 
        related to it. Notably, given the direct connection of 
        stablecoins to the money supply and the conduct of 
        monetary policy, no other global regime undermines 
        their central bank's authority.
           With respect to enforcement, the bill 
        generally stipulates that the Fed can take enforcement 
        action in exigent circumstances, but again, it grants 
        no actual enforcement authority to the Fed with respect 
        to state-licensed entities.
           Despite extensive testimony and public 
        statements by stablecoin issuers and crypto firms about 
        the promise that crypto would promote a fair and 
        equitable financial system, Republicans excluded all 
        references to ``diversity and inclusion'' consistent 
        with their culture wars, and rejected an amendment by 
        Rep. Beatty to correct such deficiencies in the bill.
           The bill's framework to oversee stablecoins 
        departs dramatically from regulatory frameworks of 
        comparable activities. For example, the dual banking 
        system requires Federal regulatory pre-approval and 
        robust oversight of state-chartered banks. While there 
        have been concerns raised about how robust the 
        regulation and oversight of money transmitters are, 
        even money transmitters must get a license in each 
        state they operate. In the bill, however, a stablecoin 
        issuer would only have to get a license in one state, 
        but its stablecoins could freely be exchanged in all 
        states.
           H.R. 4766 does not authorize Federal 
        oversight of third-party vendors of payment stablecoin 
        issuers (other than custodial wallets to a limited 
        degree), even though such vendors may be critical to 
        ensuring the functioning and stability of the 
        stablecoin. For comparison, banking regulators do have 
        such oversight authority of the vendors of traditional 
        banks.
           The bill does not include any financial 
        resource requirements to ensure custodial wallets are 
        resilient, while exempting many wallet providers given 
        the way state regulatory frameworks are automatically 
        deemed to be comparable to the Federal framework for 
        wallet providers. For comparison, banks are required to 
        maintain minimum levels of capital and liquidity to 
        ensure they can handle any withdrawals from their 
        customers.
           Despite the urging of the PWG and FSOC to 
        address the systemic risks of stablecoins, the bill 
        does not mandate that regulators consider financial 
        stability when approving payment stablecoins.
           While Gramm-Leach-Bliley's cybersecurity and 
        data privacy requirements apply to federally regulated 
        stablecoin issuers, those standards are not applied to 
        state-regulated issuers.
           The bill only provides a weak application of 
        Bank Secrecy Act/Anti-Money Laundering laws and states 
        have limited capacity and inclination to oversee 
        compliance with such laws.
           H.R. 4766 does not require regulatory 
        approval for mergers and acquisitions of payment 
        stablecoin issuers, rendering the already weak initial 
        application process moot if the entity can be sold to 
        other ownership groups.
    The following Democratic amendments were rejected by 
Republicans or withdrawn:
           Rep. Foster's amendment would strike 
        provisions that exempt self-hosted wallets from 
        regulations. Specifically, it would strike a provision 
        in the bill that excludes hardware or software 
        providers for self-custody from customer protections. 
        It would also strike a provision that would stop 
        regulators from taking action to restrict the use of 
        self-hosted wallets.
           Rep. Beatty's amendment would add language 
        requiring diversity and inclusion data reporting by 
        payment stablecoin issuers.
           Rep. Sherman's amendment classifies all 
        stablecoins as securities and stablecoin exchanges as 
        securities exchanges under the jurisdiction of the SEC.
           Rep. Velazquez's amendment was withdrawn 
        after the Chair indicated he would work with the Member 
        on the amendment. It would grant the primary Federal 
        payment stablecoin regulators, in consultation with 
        FinCEN, the ability to establish additional standards 
        for permitted stablecoin issuers operating in high-risk 
        money laundering and related financial crimes areas.
           Rep. Casten's amendment was withdrawn after 
        Rep. Hill committed to working on the amendment before 
        the bill is brought to the floor. His amendment directs 
        each primary Federal payment stablecoin regulator to 
        issue regulations prohibiting the employment of 
        manipulation, deceptive devices, and price 
        manipulation.
    Finally, this bill is opposed by the following groups: 
Americans for Financial Reform (AFR), Action on Race and the 
Economy (ACRE), Center for LGBTQ Economic Advancement & 
Research (CLEAR), Center for Responsible Lending, Demand 
Progress National Fair Housing Alliance, National Community 
Reinvestment Coalition (NCRC), National Consumer Law Center 
(NCLC), Public Citizen, Revolving Door Project, Texas 
Appleseed, U.S. PIRG, Virginia Citizens Consumer Council, 20/20 
Vision.
    For these reasons, we oppose H.R. 4766.
            Sincerely,
                                   Maxine Waters,
                                           Ranking Member.
                                   Nydia M. Velaquez,
                                   David Scott,
                                   Al Green,
                                   Bill Foster,
                                   Brad Sherman,
                                   Stephen F. Lynch,
                                   Emanuel Cleaver II,
                                   Joyce Beatty,
                                   Juan Vargas,
                                   Sean Casten,
                                   Rashida Tlaib,
                                   Nikema Williams,
                                   Vicente Gonzalez,
                                   Ayanna Pressley,
                                   Sylvia R. Garcia,
                                           Members of Congress.