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Crypto: House stablecoin bill delayed until September

Yahoo Finance crypto reporter Jennifer Schonberger reports on crypto regulation and the provisions holding up a House stablecoin bill.

Video transcript

BRAD SMITH: Delays surrounding a new stablecoin. And this bill has pushed back any legislation till possibly September. For more on this, we welcome in Yahoo Finance's Jen Schonberger. Jen.

JENNIFER SCHONBERGER: Good morning Brad. Draft legislation from the House Financial Services Committee to regulate stablecoins is being held up by a provision Democrats want on how to treat digital wallets, according to a person familiar with the matter. This is holding up a markup on the bill till September, though draft legislation could be released as soon as this week. But a source tells Yahoo Finance, even that's up in the air.

At issue, including strong provisions for digital wallets to protect consumers, which is not currently in the bill. Democrats at Treasury want a federal standard for digital wallets that would bar custodial wallets from becoming a shadow bank.

That entails banning custodians from taking customers stablecoins and using them as liabilities to make loans or hold other riskier assets. Democrats also want to require that digital wallets segregate proprietary assets from customer assets to insure against losses if a custodian fails.

Separately, Democrats also want risk management standards and financial resource requirements to manage operational risks. Republicans, for their part, feel digital wallets are outside of the scope of the legislation, but have offered the idea that states could issue their own wallet regulations, a nonstarter for Treasury and Democrats on the committee. Treasury won't back a bill without strong provisions for digital wallets to protect consumers.

And guys, in absence of an agreement on this issue by September, this bill is unlikely to move forward. Back to you.

JULIE HYMAN: So that's it then, dead bill, Jen? Or is there any kind of prospect of it being-- I don't know-- revitalized at some point?

JENNIFER SCHONBERGER: Hey, there, Julie. Yeah, it looks like this is a major sticking point for Republicans and Democrats on the House Financial Services Committee. So if this is not agreed to this bill could be dead. That being said, we do have some legislation for consideration in the Senate, though that's not a priority.

And individual regulatory agencies here in Washington have not been taking action on stablecoins, even though we saw Tara fail and have a run earlier this year exposing investors to that. So right now, it doesn't seem like we have any major agreement in DC and any legislation that could be coming any time soon, absent an agreement on this specific provision.

BRAD SMITH: Yahoo Finance's own Jen Schonberger joining us with the breakdown on this legislation, and potentially still some of the headwinds and road bumps that are along the way. Thanks so much, Jen.