House Republicans Demand Jerome Powell Provide Clarity On Fed's Crypto Intervention

Republican representatives from the House Financial Services Committee have expressed concerns over the Federal Reserve's recent interventions in the cryptocurrency sector.

In a letter addressed to Fed Chair Jerome Powell, Committee Chair Patrick McHenry (R-NC) stated that the Fed's increased scrutiny of crypto activities in banks might hinder the development of federal regulations for stablecoins.

This correspondence follows the Federal Reserve's Aug. 8 announcement of initiatives aimed at intensifying its oversight of cryptocurrency operations within U.S. banks.

The program's objective is to bolster the supervision of emerging practices, encompassing "crypto-asset custody, crypto-collateralized lending, and stablecoin/dollar token issuance or distribution." The ongoing debate surrounding the regulation of digital assets and the role of key financial institutions will be a focal point of discussion at the upcoming Benzinga's Future of Digital Assets conference.

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McHenry, along with other signatories like Rep. French Hill (R-AR) and Rep. Bill Huizenga (R-MI) emphasized in their Aug. 23 letter, "If these letters are left in place, they will undoubtedly deter financial institutions from participating in the digital asset ecosystem."

They further argued that it should be Congress's responsibility to establish a framework, ensuring clarity for those involved in the market.

McHenry highlighted concerns regarding the Novel Activities Supervision Program, suggesting it seems intended to place more regulatory constraints on banks dealing with cryptocurrencies.

The proposal has already made headway in the House Financial Services Committee, despite facing opposition from Committee Democrats earlier this season.

Seeking clarity on the Federal Reserve's stance, McHenry has requested detailed responses on their evaluation methodology and their approach to proposals from state banks.

The program mandates state member banks to secure the Federal Reserve's written consent before employing distributed ledger technology (DLT) for payment activities, including transactions in dollar tokens.

Powell has been given a deadline of Sep. 29 to respond to McHenry's inquiries.

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Photo: Shutterstock and Fed