Potential movement on stablecoin legislation following talks with Sen. Schumer: TD Cowen

Movement on stablecoin legislation could be feasible this summer or during the lame-duck session. This follows talks between top House leadership and Senate Majority Leader Chuck Schumer a few days ago, according to a note from investment bank TD Cowen. 

Both Punchbowl News and Politico report that Schumer, D-N.Y., met late last week with House Financial Services Chair Patrick McHenry, R-N.C., and ranking Democrat Maxine Waters, D-Calif., to discuss their House-led stablecoin legislation. 

The lawmakers reportedly discussed attaching the bill to upcoming Federal Aviation Administration reauthorization, which could accompany cannabis banking legislation. FAA reauthorization is through May 10, but political urgency to respond to Iran's attack on Israel could mean lawmakers have more time, TD Cowen said in a note on Monday. Stablecoin legislation could also be attached to end-of-year bills, such as the National Defense Authorization Act. 

"As we have written in the past, there is a path for stable coin legislation. It would require the backing of Team Biden and the inclusion of AML/BSA crypto controls. It also could be paired with a Democratic priority. Enacting these creative packages is tricky, which is why we keep our expectations tempered," said the TD Cowen Washington Research Group, led by Jaret Seiberg, in their note. 

The House and Senate have passed their own versions of FAA reauthorization bills and are working on differences where safety issues are "dominating that narrative," said Ron Hammond, director of government relations at the Blockchain Association, in an interview. 

He added that the FAA reauthorization bill must be passed, but there is always drama at the last second. If a stablecoin bill is included in the FAA reauthorization, other lawmakers might try to insert their own bills as the end of the year nears and jeopardize things, Hammond said.

State of play

Reps. Waters and McHenry have been working on a regulatory framework for stablecoins, though industry sources have said talks over who should be the primary regulator for stablecoin issuers have been caught in a holding pattern. 

The bill advanced out of their committee over the summer but was met with partisan bickering. Congressional Republicans blamed the White House for opposition to the bill. At the time, Waters said the bill was "deeply problematic" due to a provision that allows state regulators to approve stablecoin issuances without Federal Reserve input.

On the Senate side, Sens. Cynthia Lummis, R-Wyo., and Kirsten Gillibrand, D-N.Y., have said they plan to announce a stablecoin bill that aims to clarify stablecoins and protect consumers. 

There have been reports of a potential compromise to get a stablecoin bill passed. Senate Democrats have been pushing for a marijuana banking bill called the Secure and Fair Enforcement Regulation Banking Act that could trade interests with a stablecoin bill. The bill would allow financial institutions to provide services to the marijuana industry. 

If the Senate does reach a compromise, it would still face some challenges in the House since Speaker Mike Johnson, R-La.,  has repeatedly opposed the marijuana banking bill, according to multiple news reports. 

Hammond said he is optimistic that something will happen on stablecoins this year. If the bill is not attached to the FAA reauthorization, it has a chance through the NDAA, an aid bill and then after elections during the lame-duck session, he said.