Republicans in the US House are pushing for legislation on stablecoin regulation after Democrats called for an override

Republicans on the House Financial Services Committee are taking another swing at stablecoin legislation with a discussion draft revealed Monday afternoon that could mark a new starting point for negotiations with Democrats.

The bill — the second draft law published in as many weeks — would create a definition of “stable coins,” specifying the types of entities that can issue them and defining how those companies will manage reserves.

Unlike an earlier version of the bill, which was published on the committee’s website ahead of a hearing on stablecoins last week, the new version omits algorithmic stablecoins, although it repeats clauses that say an issuer can either be a subsidiary of a federal insured depository institution or a state or federally regulated nonbank corporation.

The bill also makes it clear that stablecoins must be fully backed by safe reserves that are subject to monthly assessments by chartered accountants, which would eliminate the possibility of mat-backed stablecoins being able to comply.

It also declares that stablecoins are not securities, settling a controversial point in the ongoing debates over whether tokens are securities or commodities, which determines which agency will oversee their trading – the Securities and Exchange Commission (SEC) or the Commodity Futures Trading Commission. The SEC had recently warned stablecoin issuer Paxos that it could face enforcement alleging that Binance USD is an unregistered security.

This bill is unlikely to have the immediate bipartisan support it needs to become law. During last week’s hearing, Maxine Waters (D-Calif.), the top Democrat on the committee, said the legislative body should “start from scratch.” She expressed frustration that Republicans had gone ahead and worked on this draft without Democratic input.

A senior Republican staffer said a copy of that draft was given to Waters’ staff, and Republicans hope it will start another round of negotiations.

Senator Sherrod Brown (D-Ohio), who chairs the Senate Banking Committee, has not committed to any action on the stablecoin legislation, saying only through a spokesperson that he would “look at” the various efforts being put together. Any stablecoin bill would also have to go through his committee.

One of the most debated points in the legislation since last year has been how much authority is given to federal and state regulators. This version would create a path for state-based licensing of issuers and maintain state enforcement powers, but it also allows for an enforcement disagreement to be overridden by the Federal Reserve.

The legislation would also put issuers’ CEOs on the hook for misrepresenting a stablecoin’s reserves, asking them to sign off on the monthly figures and face criminal charges if the reports are known to be false.

McHenry’s committee is working separately on legislation to regulate market structure in the crypto sector, staffers said, and that bill is expected to address key questions the industry is eager to have answered about which agencies will have which roles to oversee digital assets. One of the panel’s subcommittees scheduled a hearing on the topic on April 27.