Push for anti-CBDC bill could derail stablecoin bill support, says TD Cowen

House Republicans' push for an anti-central bank digital currency bill could disrupt bipartisan support for a stablecoin bill, according to investment bank TD Cowen. 

The CBDC Anti-Surveillance State Act, introduced by House Majority Whip Tom Emmer, R-Minn., last year would block the Federal Reserve from issuing a CBDC directly to individuals. The bill advanced out of the House Financial Services Committee in September with heavy criticism from Democrats. 

Those close to the situation say House conservatives are in talks to potentially vote for the CBDC bill alongside a long-sought-after stablecoin bill, according to Politico. Some members have floated this idea, but it's not a plan being spearheaded by Rep. Emmer, a source familiar said.

"Our concern is that linking a ban on a digital dollar to the stable coin legislation could derail bipartisan support for the bill as Democrats generally see value to at least exploring a central bank cryptocurrency," said the TD Cowen Washington Research Group, led by Jaret Seiberg, in a note on Monday. 

The Top Democrat on the House Financial Services Committee, Maxine Waters, D-Calif, and its chair, Patrick McHenry, R-N.C., have been in talks for years to reach a compromise on a bill that would regulate stablecoins. The bill advanced out of the House Financial Services Committee, but it hit a snag over a provision that allows state regulators to approve stablecoin issuances without Federal Reserve input.

Since then, Waters and McHenry have met more often, but disagreement remains on who should be the primary regulator for stablecoin issuers. 

 "We are not yet willing to declare the stable coin bill in trouble, though passing any legislation is extraordinary difficult," TD Cowen said. "It is why we view any development that complicates the stable coin bill as further narrowing the path to enactment."

The central bank has been exploring the possibility of issuing a CBDC and last year released a report examining its pros and cons, but central bank officials have thrown cold water on the idea in the past.

Fed Chair Powell told lawmakers last month that the Fed was "nowhere near" making a recommendation on or adopting a CBDC and asserted that the central bank won't issue a CBDC without congressional approval. 

The Heritage Foundation's scorecard

The Heritage Foundation has put pressure on passing a CBDC bill and, in February, urged lawmakers to cosponsor the legislation, warning that if lawmakers don't, their score on the Heritage Action Scorecard "will be negatively impacted."

The scorecard, mentioned in TD Cowen's note, shows voters how conservative lawmakers are by comparing them to the priorities of the right wing's political branch.

Sen. Ted Cruz, R-Texas, has also introduced a bill to ban CBDCs, which has been endorsed by the Heritage Foundation and the Blockchain Association, among others. 

Updated (April 1, 4:23 p.m. UTC): Added details.