Sen. Hagerty's stablecoin regulation draft aims for clarity, echoes House bill framework

Crypto-friendly Sen. Bill Hagerty unveiled a discussion draft of legislation to create a regulatory framework for stablecoins that is very similar to work being done in the House of Representatives. 

The Tennessee Republican said his draft legislation "provides much-needed clarity" in a statement on Thursday. The draft closely resembles the Clarity for Payment Stablecoins Act worked on in the House of Representatives by Rep. Patrick McHenry, R-N.C., and Maxine Waters, D-Calif. 

“It is Senator Hagerty’s version of McHenry-Waters," spokespeople for Sen. Hagerty said in an emailed statement to The Block. Hagerty also is a member of the Senate Banking Committee, which has jurisdiction over key agencies, including the U.S. Securities and Exchange Commission. 

Sen. Hagerty's draft bill takes the structure of the House bill while also splitting federal supervision between the Federal Reserve for banks and the Office of the Comptroller of the Currency for non-banks, his spokespeople said. 

Hagerty's draft bill would include a provision that says issuers that go over a $10 billion threshold may get a waiver from their federal regulator to then stay under their state's jurisdiction. The draft legislation also includes language around maintaining reserves on a one-to-one basis with reserves that have U.S currency. 

“Stablecoins have the potential not only to enhance transactions and payment systems, but also to help create new demand for U.S. Treasuries as we work to address our unsustainable deficit,” Sen. Hagerty said in the statement. “For too long, these benefits and the broader promise of stablecoins have been hindered by the lack of clear regulations."

Negotiations around passing a stablecoin bill have been complicated over the last few years on Capitol Hill. House Financial Services Chair McHenry and the top Democrat of that committee, Rep. Waters, have been working on their bill to create a regulatory framework for stablecoins since 2022. The bill advanced out of the Republican-led committee last year but has not gained much traction. At the time, Waters called the bill "deeply problematic" due to a provision that allows state regulators to approve stablecoin issuances without Federal Reserve input.

However, tables might have turned last month during a congressional hearing when Rep. Waters said she wants to "strike a grand bargain on stablecoins" before the end of the year. Waters said the bill needs to place the Federal Reserve in a "dominant role" and that stablecoins must be backed by safe reserves, such as short-term Treasury bills. 

"I've made a public statement to you about bipartisanship — let's see what you do with it," Waters told McHenry in late September. 

Cody Carbone, president at The Digital Chamber said the advocacy group was “encouraged” by the release of the draft legislation. 

“While the window for passage in this Congress is limited, Senator Hagerty’s efforts have revitalized the discussion,” Carbone said in a statement to The Block. “The push for a U.S. stablecoin regulatory framework is bipartisan, and we urge lawmakers to prioritize this important, common-sense legislation through the end of the year.”

Ron Hammond, director of government relations at the Blockchain Association said Sen. Hagerty’s draft was “an important development” especially after comments made by McHenry and Waters to move forward stablecoin legislation before the end of the year. 

“While the election results will largely determine what is in the realm of possible for the lame duck, it is likely the Republicans will take back the Senate and this effort from Sen Hagerty could be the starting point for a Republican led Senate Banking Committee in 2025 should stablecoins not get addressed in the lame duck,” Hammond said in a statement to The Block. 

Update: Oct. 10 , 10:15  p.m. UTC to include comments from Carbone and Hammond