In Congress, the Fed was accused of erecting barriers to banks’ issuance of stablecoins

The latest steps by the Fed to tighten oversight of banks’ ties to cryptocurrencies undermine the push for stablecoin regulation, according to a group of lawmakers in a letter to Fed Chair Jerome Powell.

Signatories on the document were Patrick McHenry, chairman of the House Financial Services Committee, and his Republican colleagues Bill Haysenga and French Hill.

“We are concerned that the Fed is taking these actions to hinder Congress in establishing a regime for regulating stable payments. If these directives persist, […] they will deter banks from participating in the digital assets ecosystem,” — the lawmakers said.

In early August the Fed required financial institutions to obtain written permission from the agency before issuing, holding or transacting with dollar-denominated tokens.

Additionally, the Fed will regulate the provision of banking infrastructure to companies engaged in digital assets and blockchain technology. Supervisory teams will be empowered to examine institutions at their discretion for compliance with U.S. law.

Thus the Fed aims to ensure the safety and soundness of the banking system.

“While the supervisory process is being dressed up as guidance, it is clear that the Fed does not intend to permit such activity, at least with regard to public blockchains,” — the lawmakers said.

The authors of the letter said they regret that the Fed’s latest actions complicate the development of a regulatory framework for stablecoin issuers.

“Instead of working with Congress to establish a workable regime for stablecoins, less than two weeks after the Banking Committee’s decision, the agency issued these directives,” they noted.

The lawmakers urged the Fed to respond to the letter by September 29.

In February the Fed, FDIC and OCC reminded US financial institutions of potential risks arising from companies offering crypto services.

In June, Fed Chair Jerome Powell described stablecoins as money and called for their regulation.

Earlier, the House Financial Services Committee introduced a third version of a bill on “stablecoins.”