▶ 0:23:41Chair Scott: I call this committee to order and move to executive session. Any members who wish to speak on the bills can do so after the votes. Amendments will be called up in the order of seniority as agreed to with the recce member. Senators will be recognized for their amendment prior to building. We begin with opening statements.
▶ 0:24:03Chair Scott: Obviously, we need to have enough ice present for us to move forward, so there may be a bit of a lapse in time before we finish the votes. That is just part of the process of having members on multiple committees doing the same thing at the same time. I will start with my opening statement. Any members who wish to speak on the bills can do so afterwards. Senators will be permitted to speak on amendments.
▶ 0:24:33Chair Scott: When I became chairman of this committee, I promise we would return to regular order. For those of you unfamiliar with the regular order, as I am, it's been seven or eight years since we actually had a markup on this committee. It is ridiculous in one way, frankly, remarkable in another way that we are returning to regular order which is one of the priorities I committed to when becoming chairman.
▶ 0:25:00Chair Scott: Today's historic mark up of the genius act and firm act is proof that we are in fact delivering on our promises. The digital as a community and more importantly the american consumers deserve clarity. For far too long, the absence of regulatory framework has left consumers vulnerable man businesses in the dark. This uncertainty has also stifled innovation here at home in america. That changes today.
▶ 0:25:31Chair Scott: The genius act is a bipartisan step forward in ensuring stable coins are safe and reliable tools in the financial system. The genius act establishes commonsense rules that require stable coin issuers to maintain reserves backed one to one, comply with anti-money laundering laws, and ultimately protect american consumers while promoting the U.S. dollar strength in the global economy.
▶ 0:26:00Chair Scott: This is about keeping innovation and opportunity on american soil rather than driving it overseas. We are also taking action today toend the weaponization of financial regulators. The firm act will eliminate the ability of regulators to use reputational risk as a justification to debank legal operating businesses of individuals.
▶ 0:26:25Chair Scott: No federal agency should have the power to cut off access to our financial services industry simply because they disapprove of a customer's politics, business, or industry. That is simply un-american. This bill ensures that banks will make decisions based on financial risk, not political preference.
▶ 0:26:50Chair Scott: While the firm act is the first step, there are other bills, really good bills that address de-banking, including senator cramer's fair sense to banking act. As a committee we will commit to working on this issue and figure out the best way to solve it long term. With today's market, we are advancing serious bipartisan solutions.
▶ 0:27:14Chair Scott: I look forward to working with my colleagues to get these bills to the senate floor and ultimately to president trump's desk. Finally, I want to take a second to think those senators hagerty and lummis for working together on such an important work as the genius act. I would like to thank your staffs, as well.
▶ 0:27:35Chair Scott: This has been a very important process, and the success we have had comes from a bipartisan coalition that includes senator alsobrooks as a cosponsor of the legislation, working together not as republicans or democrats, but working together as americans, protecting innovation in the greatest nation on the planet.
▶ 0:27:56Chair Scott: If we are going to have economic supremacy in the world, it requires us to encourage, frankly, innovation before we stifle it with too much oppressive regulation. I turned to our ranking member, senator warren.
▶ 0:28:11Sen. Warren: Thank you, Mr. chairman. Many of us are prepared to support a sensible stable coin bill. We can see a bill get a wide majority of votes if it protects consumers, if it protects our national security, and if it protects our nation's financial stability. But this bill, in its current form, doesn't do any of that.
▶ 0:28:38Sen. Warren: First, the bill ignores basic consumer protections that apply to every other financial product available in america. If you are sending a U.S. dollar from your paypal wallet and you get scanned, the cfpb has the authority right now to help you get your money back.
▶ 0:29:00Sen. Warren: But if this bill passes and you are sending a stable coin from your paypal wallet and you get scammed, you may just be out of luck. In fact, the bill even invites scammers into the market by refusing to prohibit people convicted of fraud and money laundering from owning stable coin companies.
▶ 0:29:23Sen. Warren: Sam bankman-fried could buy a stable coin company from prison and regulators would have no legal grounds to stop him under this bill. We need to fix that. I don't understand why there would be anyone, democrat or republican, who wouldn't want to do that.
▶ 0:29:46Sen. Warren: Second, the bill lacks basic national security protections that again apply to every other type of financial transaction in america. Without changes, this bill will supercharge the financing of terrorism. It will make sanctions innovation by iran, north korea, and russia easier, and it will help out international gangs that are moving fentanyl into the united states.
▶ 0:30:14Sen. Warren: It even provides a boost for the sale of child pornography. Last week, and industry report called stable coins "the new kingpin of illicit crypto activity." let me give one example. The bill does not authorize the united states to enforce our existing sanctions when north korea or iran buy nuclear materials using dollar back to stable coins instead of dollars.
▶ 0:30:49Sen. Warren: We need to fix that. I don't understand why they would be anyone, democrat or republican, who wouldn't want to do that. Third, the bill lacks basic safeguards necessary to ensure that stable coins don't blow up our entire financial system. Under this bill, stable coin issuers can invest in risky assets, including the very assets that were bailed out in 2008, and again in 2020.
▶ 0:31:21Sen. Warren: Anyone who thinks the U.S. taxpayer will not be called on directly or indirectly to bail out these guys is kidding themselves. Circle, one of the largest stable coin companies in the world, would have blown up in 2023 if regulators had not bailed out its $3.3 billion of deposits at silicon valley bank. This bill begs for more bailouts. We need to fix that.
▶ 0:31:52Sen. Warren: I don't understand why they would be anyone, democrat or republican, who wouldn't want to do that. Finally, this bill does something that democrats and republicans have usually linked arms to stop throughout history. It lets a giant commercial company to create its own currency, giving it a massive economic power that is usually reserved for publicly chartered banks.
▶ 0:32:21Sen. Warren: This means that this bill is elon musk, gives them the chance to issue his own x money currency, monetize our most sensitive transactions data, punish people who speak out against him by choking off their access to the payment system, use his currency to undercut the U.S. dollar, and destabilize our financial system when it all goes bust.
▶ 0:32:49Sen. Warren: This bill opens the door for the richest man in the world to build a global empire that could begin to supplant the functions of the U.S. government. And we really need to fix that. I don't understand why they would be anyone, democrat or republican, who wouldn't want to do that. Not one of the fixes we are talking about here would end stable coins. Not one of the fixes would restrain innovation.
▶ 0:33:19Sen. Warren: Not one of these fixes would be hard to put in place. Because not a single one of these gaps in the bill is necessary to create a reasonable federal regulatory regime for stable coins. Several of them have been included in earlier, bipartisan stable coin proposals introduced in congress.
▶ 0:33:42Sen. Warren: And each can be addressed by adopting straightforward amendments that apply the same basic rules in the stable coin market as we have for every other financial product. Let me be direct. We all know there are stable coin issuers making money off of facilitating crime and funding iran and north korea. We know there are stable coin issuers making money off of cheating consumers.
▶ 0:34:10Sen. Warren: And we are pretty sure elon musk would like to issue his own currency to compete with the U.S. dollar. But we were not sent here to work for north korea or iran or elon musk or a bunch of scammers. Innovative clutching companies that want to regulatory certainty and a vibrant and innovative marketplace deserve better than we are giving them in this bill, and so do the american people.
▶ 0:34:38Sen. Warren: If we can find compromises on these issues today, I'm prepared to support this bill. If not, I will work to defeat it, because we are not going to get a second chance to do this right, and we will all have to live with the consequences of what we do here today. This committee will also be considering the firm act today's session. I have deep concerns about this bill, as well.
▶ 0:35:06Sen. Warren: I am glad that republicans and democrats agree that congress should be taking steps to address de-banking, and I hope, Mr. chairman, we could have worked together on meaningful legislation to do that. However, the bill we see today would hamstring regulators in their efforts to preserve the safety and soundness of our banking system without addressing the underlying causes of de-banking.
▶ 0:35:34Sen. Warren: Republicans and democrats need to work together to stop unfair customer account closures, but this bill isn't it. Thank you, Mr. chairman.
▶ 0:35:42Chair Scott: Thank you. Just to be clear, these opening statements are supposed to be two minutes or less, so please stick with that. Senator hagerty, you are recognized.
▶ 0:35:56Sen. Hagerty: Thank you, chairman, thank you for your leadership or bring this to the floor. As the world modernizes its payment systems, the U.S. cannot be behind. Stable coins can play a pivotal role in spurring modernization. Whether improving transaction efficiency or freeing up working capital or driving U.S. treasury demand, the benefits of a clear revelatory framework for stable coin are immense.
▶ 0:36:18Sen. Hagerty: I want to acknowledge the hard work of my colleagues on both sides of the aisle who worked on this bill and have consulted with cut bus industry participants, academic experts, government stakeholders to put together a truly bipartisan effort. I want to underscore the current draft is, we will address many claims that were launched by the ranking member today, and will clarify the fact that many of the claims are not applicable here.
▶ 0:36:46Sen. Hagerty: The genius act again bipartisan support because it contains common sense will separate the consumers from competition and foster innovation. It is time we provide the clarity and stability that our country and its innovators so desperately need. Before I conclude, I just like to note that senator alsobrooks also raised an adjustment to ensure proper technical application to the consumer protection laws. There are no loopholes created in this bill and if there any technical fixes necessary, I look forward to working with senator alsobrooks and my colleagues on this committee to address them.
▶ 0:37:16Sen. Hagerty: I also want to say thank you to my staff, luke, john, matt, ethan, the bacon committee staff, and the personal staffs of all of my colleagues who worked so hard on this bill. Thanks very much.
▶ 0:37:29Chair Scott: Senator lummis is recognized.
▶ 0:37:34Sen. Lummis: Thank you, Mr. chairman. I am proud to join you and senator hagerty and senator gillibrand and senator alsobrooks in bringing the genius act and firm act to mark up today. I'm really proud of the product we have before the committee. It is the product of years of policy development and negotiations that were started in 2022 by senator hagerty, senator gillibrand, senator toomey, and myself. And it continues through this process today.
▶ 0:38:07Sen. Lummis: This bill promotes responsible financial innovation and protects consumers. It is that simple. This bill also strengthens the dual banking system by creating a strong pathway for both state and federal stable coin issuers to operate on a level playing field under robust supervision.
▶ 0:38:26Sen. Lummis: Wyoming pioneered digital asset legislation in 2018, and I'm proud to say that this bill builds upon my states hard work and success, and framework that creates a very fair, but highly transparent and regulated process. I look forward to continuing to work with members on a bipartisan basis to improve the bill as it moves along.
▶ 0:38:54Sen. Lummis: I want to assure everybody that machiavelli is not going to get rays from the dead to issue stable coins so we can destroy our planet with drugs. This is ridiculous. This is innovative, important financial product that has safeguards built into the bill. I strongly support it and encourage all to do so.
▶ 0:39:21Sen. Lummis: I, too, want to thank my staff, chris, connor, and many others who have been working on the bill for years. Senator hagerty, thank you. Working with your staff, senator gillibrand's staff has been delightful. I yelled back.
▶ 0:39:37Chair Scott: Senator alsobrooks.
▶ 0:39:41Sen. Alsobrooks: , thank you, chairman scott, ranking member moran for your leadership. I'm proud of the bipartisan work that senators haggerty, gillibrand, lummis and I have been able to accomplish with this piece of legislation, the genius act. It is critical that as we address emerging markets, we do so in the way that protects consumers, drives innovation and allows everyone to participate in and benefit from these markets. And it also prioritizes american leadership.
▶ 0:40:11Sen. Alsobrooks: I believe that our bill provides an important foundational framework from which to build, and that today we have an opportunity to make positive changes toward our common goal. We've heard some concerns that our revisions to the state preemption language may have unintended consequences. I would like to thank senators haggerty and lummis for their commitment to work with us to address these concerns and to do so on the floor.
▶ 0:40:37Sen. Alsobrooks: I look forward to working with both chairman scott and ranking member warren as well as my esteemed colleagues on this committee as we consider a number of thoughtful amendments today. Thank you.
▶ 0:40:47Chair Scott: Thank you, senator alsobrooks. I now move to call up s.919, the guiding and establishing national innovation for you as stable coins act. I should have stuck with the genius act. Reading is fundamental. [laughter] so are my contacts. I ask unanimous consent that we dispense with the reading of all the minutes.
▶ 0:41:18Chair Scott: Senators will find printed copies in front of them and the text of which has been made available. Is there objection? Without objection, so ordered. I moved to consideration of the managers package, scott amendment one. This includes a number of bipartisan provisions including amendment number five by senators lummis, gallego which clarifies the treatment of stable coins that are not issued by a permitted issue where.
▶ 0:41:43Chair Scott: Amendment 16, senators gallego and crapo, which requires rigor that is to consider the competence, experience, and integrity of key leaders at an applicant's company. Amendment 36 by senators warnock and britt which adds language to prohibit the use of deceptive names by a stable coin -- payment stable coin issuer.
▶ 0:42:07Chair Scott: Amendment 56 by senators rounds and blunt rochester's which clarifies the bill intention to maintain the status quo as it relates to the master account access at the federal reserve. Amendment number 65 by senators blunt us are, tillis which give customers in stable coin super priority over other creditors and bankruptcy.
▶ 0:42:34Chair Scott: Amendment number 79 by senator warner, clarification on the stable coin reserve requirements, as well as some technical edits. I urge all of my colleagues to support this bipartisan amendment. Would anyone like to speak on this amendment? Seconds? There is no other discussion on the amendment. I asked the amendment be adopted by voice vote. All in favor say aye.
▶ 0:43:04Chair Scott: All opposed? Ayes habit and the men it is agreed to. I now call up amendment 61. Senator warren, you are recognized.
▶ 0:43:14Sen. Warren: Throughout history, our country has maintained a separation between our system of money and payments on the one side, and actual business, commerce, the real economy on the other side. This protects the financial system, promotes competition, it prevents concentrating too much economic power in the hands of a few giants. Democrats and republicans have time and time again linked arms to defend the separation.
▶ 0:43:46Sen. Warren: It is under threat now and democrats and republicans should once again come together to preserve it. Under this bill, big tech billionaires like elon musk and mark zuckerberg and jeff bezos could effectively issue their own currencies that compete with the U.S. dollar. Why should that bother us? They could monitor our most sensitive transactions data and use it to fuel even more intrusive advertising and surveillance pricing schemes.
▶ 0:44:16Sen. Warren: They could also wield control over their own currencies to censor adversary -- adversaries and crushed competitors. Over the years, my colleagues have shared their concerns about facebook censoring conservative voices and engaging in election interference. Just imagine if these companies are issuing their own currencies.
▶ 0:44:40Sen. Warren: In fact, many of my republican colleagues did express concern in this very hearing room in 2019 when a facebook executive testified about the proposed libra stable coin project. Senator kennedy may have said it best when he said facebook now wants to control the money supply. What could possibly go wrong? If a big tech company fails to enforce the largest bailout in U.S.
▶ 0:45:08Sen. Warren: History, if it threatened to tear down the payment system to use by billions of people around the world. But my most pressing concern is elon musk's attempt to build an empire that rivals the power of most nation states. He has declared his ambition to launch x money. It turns out that is not easy to do, it is tough to build a new currency right now. There are lots of laws in place to protect consumers.
▶ 0:45:38Sen. Warren: If he does it through current law. That is why he is trying to dismantle the cfpb. This is a bill that would give him an open door to be able to issue those musk money coins all on his own. I strongly recommend that this committee vote against it.
▶ 0:45:59Chair Scott: I urge my colleagues --
▶ 0:46:02Sen. Warren: I should say, vote in favor of the amendment which would vote against it. I saw the chairman getting itchy . I just want to say, by amendment -- all it does is put the walls back in place that have always been in place between the commercial side and the house banking side. It puts it back in place. I urge people to vote yes.
▶ 0:46:26Chair Scott: I urge my colleagues to oppose this amendment. It makes little sense to limit stable coins issuance to banks. Issuing stable coins is inherently different than banking. First, payment stable coin issuers are not offering lending or credit products at all. Second, payment stable coins are backed one-to-one on reserves. Payment stable coins are just travelers checks on the block chain.
▶ 0:46:55Chair Scott: Traditional concerns underlying the banking versus commerce are not present in this framework. The alternative is letting banks dominate the stable coin space, stifling innovation and allowing no competition in this innovative market. This harms consumers. I urge my colleagues to vote no. The clerk will call the role. -- roll.
▶ 0:47:19Chair Scott: [roll call] Mr.
▶ 0:48:07Chair Scott: Chairman, the vote is 13 oppose, 11 in favor.
▶ 0:48:10Chair Scott: The amendment is not agreed to. We will bring up warrant amendment 74. I recognize senator warren. Two minutes.
▶ 0:48:21Sen. Warren: This amendment, 74. Wait a minute, I have amendment 76. Let me go ahead and do this. I think this is a amendment 76. I apologize. This is one I cannot understand why my republican colleagues would vote against. This is a check to make sure we are not licensing stable coin issuers that threaten our national security.
▶ 0:48:52Sen. Warren: I want to drill down on one particular -- here we go. I want to make sure that we protect national security when we have stable coins and bills. We have to make sure that this bill does this. It's been widely reported that terrorists, drug traffickers, money launderers, people trying to avoid sanctions are using cryptocurrency to facilitate their illicit activities. It is especially true with stable coins.
▶ 0:49:23Sen. Warren: In recent days, many members of this committee have reviewed classified analysis of the scope of the problem. The industry itself now describes stable coins as saying they account for more than 60% of all illicit activity in crypto. People in the industry are now describing stable coins as the kingpin of illicit crypto activity.
▶ 0:49:52Sen. Warren: A well regulated stable coin regime could help fix this problem. This bill doesn't do that, it makes the problem worse, because it makes it easier to use these tokens. Let me be clear. This legislation poses a clear threat to our national security, if we don't just put basic safeguards in place.
▶ 0:50:15Sen. Warren: Terrace, fentanyl traffickers, iran, north korea, russia, child pornographers, all of these adversaries are using stable coins and will continue to use them. This basic fix should be noncontroversial. Regulators should be required at least to look to make sure stable coin issuers don't have a history of facilitating sanctions innovation, drug traffickers moving fentanyl into our streets, funding weapons programs to north korea or iran,
▶ 0:50:46Sen. Warren: Or making it easier to distribute child pornography. If they pose that kind of risk, they shouldn't be able to get a license. That is all this bill is about, deny licenses to people who have histories in those areas. I urge a yes vote.
▶ 0:51:03Chair Scott: Is there a rebuttal? Senator hagerty.
▶ 0:51:12Sen. Hagerty: , I urge my colleagues to oppose this amendment. First on the classified information that was raised, issues regarding national security. Classified -- thank you, Mr. chairman, that demonstrate the need for juniors to go into law so we can disrupt criminal networks. An expansion of the dollar internationally affords us new opportunities to disrupt the financing of bad actors.
▶ 0:51:37Sen. Hagerty: The genius act enhances national security by regulating and registering payment stable coin issuers and ensuring they comply with law enforcement. The genius act will also allow the dollar to grow internationally generating long-term demand for U.S. treasuries. And is critical for digital technological advancement that we remain a leader in this space. We should lead around the globe. Also I want to talk to the anti-money laundering provisions.
▶ 0:52:01Sen. Hagerty: The genius act has been updated to put more fundamental requirements and classifying payment stable coin issuers as a financial institution to the bank secrecy act, suggesting them to programs that -- mandates that they maintain the technical ability to freeze and for mullets. That will allow them to ensure compliance with lawful orders. Directs the financial crimes enforcement network to adopt rules implementing the bsa and aml requirements for payment stable coin issuers.
▶ 0:52:33Sen. Hagerty: It actually strengthens treasuries ability to coordinate sanctions enforcement. I urge my colleagues to vote against this amendment.
▶ 0:52:40Chair Scott: The clerk will call the roll. >> Mr. chairman. [roll call]
▶ 0:53:40Chair Scott: Mr. chairman, the votes are 13 oppose, 11 in favor.
▶ 0:53:43Chair Scott: This amendment is not agreed to. I call up warrant amendment 76.
▶ 0:53:49Sen. Warren: I just want to remind everyone what the previous one was about was just who gets access to these things, who gets to issue them. Looking into the backgrounds of the people who do it. If you are a drug traffickers, you probably shouldn't be able to do this. I cannot understand why my republican colleagues would vote against that but that is where we are. I want to drill down on one particular threat.
▶ 0:54:14Sen. Warren: As every member of this committee knows, drug overdose deaths have devastated communities across the country in recent years. Republicans and democrats agree it's a crisis, we work together to address it. Let me see if we can just agree on a narrow fix to improve the bill. At least make sure it doesn't make it easier for cartels to get fentanyl and other drugs into our communities.
▶ 0:54:42Sen. Warren: This amendment would require regulators to make sure that stable coin issuers don't have a history of facilitating fentanyl and other drug trafficking, and to revoke a license if they are found to engage in that activity or other financial crimes. Every member of the committee should vote for this amendment. Without it, the committee is basically saying, drug trafficking using stable coins is just not my problem.
▶ 0:55:14Sen. Warren: If this bill puts more money and makes it easier for fentanyl traffickers to be able to move the money around so they can get more fentanyl into our communities, that is a problem. We can stick to that loophole up. It is highly specific. The only people we are hurting here are the fentanyl traffickers. I urge a yes vote.
▶ 0:55:34Chair Scott: Is there a rebuttal? Senator hagerty.
▶ 0:55:40Sen. Hagerty: For many of the reasons I mentioned in our last exchange, I encourage my colleagues to oppose this amendment. Senator kim's amendment, we discussed, I look forward to working with him on the floor to address some of the concerns raised here in every respect. The genius act actually updates and includes more fulsome anti-money laundering requirements, increases law enforcement capacity to. Deal with problems I I encourage my colleagues to oppose this amendment.
▶ 0:56:10Chair Scott: The clerk will call the roll. [roll call]
▶ 0:57:03Chair Scott: Mr. chairman, the vote is 13 oppose, 11 in favor.
▶ 0:57:05Chair Scott: The amendment is not agreed to. I call up warren amendment 78.
▶ 0:57:12Sen. Warren: I will try one more time. I understand, as senator hagerty says, there are some anti-money laundering provisions here. Part of the point of a markup is to put up the other possibilities where there may be things that are not yet covered. I know everyone of us on this committee opposes the spread of child pornography.
▶ 0:57:36Sen. Warren: According to one of the leading nonprofits working to eliminate child porn online, crypto is quote the dominant choice for buyers and sellers of commercial child sexual abuse content.
▶ 0:57:53Sen. Warren: Putting aside terrorist funding, north korea, and iran, and drug trafficking, my republican colleagues have already voted against requiring regulators just to make sure they are not licensing stable coin issuers that contribute to those national security risks. We should at least be able to agree on checking whether an issuer has a history or poses a risk of facilitating the transfer of child pornography.
▶ 0:58:24Sen. Warren: Surely, we agree on keeping our children safe and making certain that we are not facilitating sexual abuse. This amendment would just make the regulators check for that kind of risk and require them to pull a license if an issuer is found to have engaged in facilitating the proliferation of child sexual abuse content. The current bill does not permit that.
▶ 0:58:53Sen. Warren: Without it, the committee would be saying that child pornography is not my problem, if it puts more money into the hands of these child pornographers. Again, this is just a common sense amendment and says we have some generic provisions on anti-money laundering, but can we at least look at the people issuing these coins and try to keep the child pornographers out? I urge a yes vote.
▶ 0:59:21Chair Scott: Senator hagerty.
▶ 0:59:23Sen. Hagerty: I want to thank the ranking member for her concern but I will encourage my colleagues to oppose the amendment. The genius act actually addresses the concerns underlying the amendment raised by senator warren. The bill requires regulator's to consider the integrity of officers and directors among others when considering applications for payment of stable coin licenses.
▶ 0:59:44Sen. Hagerty: The bill also allows make of it is to establish additional factors that can also be considered when evaluating applications, requiring the dni to evaluate each application is therefore not necessary and would cause delay. I encourage my colleagues to oppose the amendment.
▶ 0:59:58Chair Scott: The clerk will call the role. -- roll. [roll call]
▶ 1:00:49Chair Scott: Mr. chairman, the vote is 13 oppose, 11 in favor.
▶ 1:00:51Chair Scott: The amendment is not agreed to. We call up an amendment 40 two from senator warren.
▶ 1:00:57Sen. Warren: I have to say, I don't understand this. These are not hard fixes. They will not slow down the bill, will not slow down innovation. Who are we trying to protect? The child pornographers, iran, north korea? Let me turn to another problem we have here. The genius act with the stability of our financial system at risk, and I'm deeply worried that yet again the public is going to be asked to bail out stable coin issuers when they go belly up.
▶ 1:01:27Sen. Warren: The bill permits stable coin issuers to invest in assets that are too risky. It ties regulator's hands in prescribing financial stability safeguards, and stable coin holders are not insured, so they have an incentive to do a run on the bank and redeem their coins, if they worry about what is happening at the issuer.
▶ 1:01:50Sen. Warren: As of stable coin issuers rush to meet redemptions and sell off their assets at fire sale prices, regulators will once again stepped in to stop the bleeding. We have seen the story before where a new type of shadow bank is created without appropriate safeguards. We bailed out money market funds and other short-term funding markets in 2008 and again in 2020.
▶ 1:02:16Sen. Warren: We bailed out a stable coin company in 2023 that had 3.3 billion dollars in deposits in silicon valley bank. We will bail out the stable coin industry the next time the financial system is under duress. If we will not fix those problems with this bill, then we need to at least protect taxpayers and impose market discipline by banning bailouts of this industry.
▶ 1:02:47Sen. Warren: My amendment would prohibit taxpayers and the government from bailing out stable coin issuers using the federal reserve's emergency lending facilities or the treasury department's exchange stabilization fund, 2, 2 common banking bailout strategies. If we cannot say that these guys are not going to get a bailout, in effect, we are saying, yup, go out there and get your profits, and when things go wrong, come back.
▶ 1:03:16Sen. Warren: At least somebody here is willing to have the american taxpayer on the line to bail them out. I urge a yes vote.
▶ 1:03:22Chair Scott: We will have a rebuttal in just a second from senator hagerty. I will say, however, that we are not going to be able to vote. We are now down to 12 as opposed to the 13 we need. I look forward to hearing the rebuttal, however -- strike my comments. I look forward to the rebuttal.
▶ 1:03:45Sen. Hagerty: Thank you, Mr. chairman. I will urge my colleagues to oppose the amendment. The concerns raised by senator warren are addressed by the bill. We think about how previous stable coin issuers failed because they held risky assets. It was because they hid the composition of their reserves. The genius act actually solve these problems by ensuring stable coins are always backed one-to-one with highly liquid reserves that are published and that are examined on a monthly basis.
▶ 1:04:16Sen. Hagerty: The amendment therefore is not necessary to improve the bill. I urge my colleagues to oppose the amendment.
▶ 1:04:21Chair Scott: Thank you, senator blunt rochester for coming back. The clerk will call the roll. [roll call]
▶ 1:05:20Chair Scott: Mr. chairman, the vote is 13 oppose, 11 in favor.
▶ 1:05:23Chair Scott: The amendment is not agreed to. We will bring up reed amendment three.
▶ 1:05:31Sen. Reed: , thank you, Mr. chairman. My amendment brings up an issue that senator warren raise but in a different way. My amendment would ever the list of stable coin issuers to ultra safe assets, specifically cash insured bank deposits and short-term treasury bills.
▶ 1:05:49Sen. Reed: The whole point of stable coins is that they peg to the dollar, and it was a guarantee that the dollar worth in stable coin can be redeemed for an actual dollar at any time, but that may not work unless the assets are really the most liquid and the most secure.
▶ 1:06:10Sen. Reed: The basic bill allows a stable coin issuers to invest customer funds in potentially risky instruments includingrepos with unregulated hedge funds, uninsured deposits, or any of the liquid asset that is approved by a federal or state regulator. We have proof already, as senator warren referred to, in 2008, primary funds of the money market, sitting on aaa lehman brothers debt, which everyone thought was entirely secure.
▶ 1:06:41Sen. Reed: Of course, the debt crashed. We ended up bailing out the money market industry to the tune of $2.7 trillion. We don't want to do that for the industry, crypto industry. More recently, the stable coin issuers circle relied on over $3 billion in uninsured deposits at silicon valley bank to back the stable coin. When the bank failed, we had to step in once again and bail out this entity.
▶ 1:07:13Sen. Reed: My amendment helps to ensure this will not happen again, that it will protect customers, taxpayers, stable coin issuers, and the financial system. I urge passage.
▶ 1:07:23Chair Scott: Thank you, senator reed. Senator lummis.
▶ 1:07:29Sen. Lummis: , I urge my colleagues to oppose this amendment. It restricts unnecessarily the options for stable coin issuers. It would make stable coin issuance not economically viable. Because it would effectively make it difficult, if not impossible, for stable coin issuers to issue what is essentially travelers checks in digital form. I urge us to oppose this amendment.
▶ 1:07:59Chair Scott: The clerk will call the roll. [roll call]
▶ 1:08:53Chair Scott: >> Mr. chairman, the boat is 13 oppose, 11 in favor.
▶ 1:08:58Chair Scott: The amendment is not agreed to. I call up reed 31.
▶ 1:09:07Sen. Reed: The base bill would require any stable coin company that issued $50 billion or more in stable coins to undergo an independent audit. That threshold is a absurdly high, I believe. Indeed, the $50 billion threshold in this bill would only require a single stable coin issuer, circle, to get an annual order.
▶ 1:09:32Sen. Reed: I propose lowering the threshold in order to align with the bills on the provisions which require issuers of $10 billion or more of stable coins to be subject to federal oversight. The principle is simple. If you are large enough to merit federal oversight under this bill, you are also large enough to get an order. In fact, I think it's remarkable, because we spend so much time arguing here how the department of defense cannot get in order, it is so terrible, etc.
▶ 1:10:03Sen. Reed: Yet, we are giving a free ride to these companies. I want to remind my colleagues that all banks, regardless of their size, are fully audited. There are thousands of banks with less than $10 billion in assets that are able to get audits. It should not be a problem at all for these issuers. It's a very basic consumer investor protection -- indeed the bare minimum. I would ask a yes vote.
▶ 1:10:30Chair Scott: Senator lummis.
▶ 1:10:34Sen. Lummis: I urge my colleagues to oppose this amendment. The bill requires larger issuers to prepare financial statements that are audited by a registered public accounting firm on a regular basis. Even issuers who are not subject to the bills audit requirements, the audit requirements of a publicly traded company, are required to publish and certify the accuracy of their reserves on a monthly basis.
▶ 1:11:03Sen. Lummis: These provisions strike the right balance between consumer protection and transparency without imposing duplicative and costly requirements that discourage innovation and entry into the market. I urge my colleagues to oppose this amendment.
▶ 1:11:19Chair Scott: Thank you, senator lummis. We are short one for our necessary quorum to continue voting. At this point, I suggest we have an opportunity to hear from either senator cortez masto or van hollen on some of your upcoming amendments, if you would like to talk about them, which will save us time in the future, as well. >> Mr. chairman, mine is relatively straightforward, so I will be brief.
▶ 1:11:49Chair Scott: You don't have to be brief.
▶ 1:11:55Sen. Van Hollen: That's all right. Then I'm out of here, Mr. chairman. It adds to the annual financial disclosure reports provided by senators and members of congress. The additional requirement that we disclose financial interests in payment stable coin issuers. So it is a pretty straightforward public disclosure, transparency amendment. I would hope the majority would accept it.
▶ 1:12:24Chair Scott: Thank you, sir. Appreciate that. Senator cortez masto, smith? Either one of you want to talk about her upcoming amendment?
▶ 1:12:38Sen. Cortez Masto: Out of the respect for you, and I have a lot of respect for you, this is not regular order. Not only does it seem like we are taking the time to talk about amendments, but there is no debate, and there are some good amendments here, and I'm hopeful that we have a good product coming out of here, but it is the democrats here holding the quorum, not the republicans. We just lost the quorum. Here is my concern. This is a great starting product. I applaud my colleagues were doing this.
▶ 1:13:09Sen. Cortez Masto: It's a great start. But it is not ready for prime time. There are many of us that want to work with you to make it ready for prime time. I was hopeful that we would have the opportunity to do that here because that is what this is about. But it is not happening. And I'm frustrated because I know there are some good players out there that want a good, strong legislation that we can bring them together.
▶ 1:13:35Sen. Cortez Masto: And I will talk about my amendment, because by amendment is really a concern that even the american bankers association gave to us with concerns about it. My first amendment, number 11, removes subsection b, paragraph seven of 4a. It gives issuers the ability to engage in any nonpayment stable coin activity.
▶ 1:14:01Sen. Cortez Masto: My amendment would expressly limit the activities of a stable coin issuer to only the activities that directly support the work of issuing and redeeming stable coins, managing the reserves, and providing custodial services. These parameters are already outlined in the preceding five subsections of the bill. They are already there. They are already there. I know one of my colleagues at the same concerns that I did. This is my concern.
▶ 1:14:31Sen. Cortez Masto: Unreasonable, these are conversations we need to have but the inclusion of subsection b negates the guardrails that are supported here. There are many that want to provide a good product at the end of the day but it looks like to me the die is already cast. You get what you get. Tether gets to decide what is in this regulation and what isn't. The good players out there that want to work with all of us and a good strong bipartisan legislation, we are not going to have it.
▶ 1:15:01Sen. Cortez Masto: That is my frustration. I have so much respect for you and my colleagues because this is a great start but it is not a great start at really getting a good product at the end of the day and bringing all the stakeholders together.
▶ 1:15:12Chair Scott: When I became chairman of this committee, I was transparent about my intention to return to regular order. I am here to legislate for the american people. We have been working nights, days, weekends in order to get this accomplished. Anyone who doesn't know where the stable coin legislation line, is not on me or this committee.
▶ 1:15:38Chair Scott: Frankly, we have had a number of conversations and I started off with bipartisan amendments because there has been an engagement on both sides of this aisle. One thing you can't say on both sides of this dais I should say. One thing you can say about this process or it lacks transparency or you haven't had the opportunity to engage in debate.
▶ 1:16:01Chair Scott: Frankly, I will say while I have not agreed to any of the amendments, the challenge we have is not whether or not we agree to the amendments it is whether or not you have the opportunity to share your frustrations, or concerns, frankly, to redirect the process. I am thankful we have had an opportunity to do so. Thankful we have had an opportunity to do it in public and senator cortez masto as part of this committee.
▶ 1:16:27Chair Scott: You bring a lot of weight and to our committee and that has been a blessing to all of us. We want to get a finished product whether we are talking about the firm act, stable coins, or other pieces of legislation going forward.
▶ 1:16:41Sen. Cortez Masto: I would hope, this is my offer to my colleagues that wrote this because you did an incredible job, I would hope you would remain open to still include provisions that we can agree on together that are going to improve this bill based on what we are still hearing from folks in the industry who want to be a part of this.
▶ 1:17:03Sen. Cortez Masto: If you are willing to do that, that would make me really feel much better about today's process which looks like, clearly, it has already been set in stone. I'm hoping you're open even after today's hearing to take amendments if we can keep an open mind so that at the final product when we go to the floor, if it comes to the floor for senate vote, that we have an improved product. Would you be willing to do that?
▶ 1:17:36Sen. Hagerty: I would like to highlight the fact that senator lummis chaired a bipartisan subcommittee hearing working session on this bill. We had robust discussion in that regard. Our staff has been working night and day on this. The discussion draft has been out since last october on this bill. We have benefited I think from a very robust bipartisan process. I appreciate the input from all of our colleagues on both sides of the aisle.
▶ 1:18:05Sen. Hagerty: We are going to continue to work to improve this. I have acknowledged my willingness to do that here today to the extent there are additional technical corrections or in many cases, valid issues are being race that I think are far more appropriate for market structure piece of legislation. I am more than willing to work with my colleagues on that market structure but that should come next in order. Thank you.
▶ 1:18:28Chair Scott: Senator warren.
▶ 1:18:30Sen. Warren: I share senator cortez masto's concerns and all of us who are still here, most of the republicans have left, and it is hard to have a discussion about our amendments if there isn't anyone here to discuss them with or the number of people it takes to try to persuade why we might need some changes. I appreciate the hard work you have done.
▶ 1:18:57Sen. Warren: I did not get to see a draft of this until monday night in the amended draft until this morning. The process regular order, which I commend the chair for his commitment to trying get us back to regular order and process that works is exactly this.
▶ 1:19:14Sen. Warren: My only other experience is in the senate armed services committee where we routinely say "I've got an idea for an amendment," people put it out there and talk about it and they say, "I think that is a bad idea in here six reasons why I think it is bad" and someone else as it is a good idea. I think it is fair to say we don't vote party line, we vote -- try and work through. These big and important questions. This feels like a show trial here.
▶ 1:19:44Sen. Warren: That we get up and read our little part about each of the amendments and the republicans really come a majority of the republicans, have decided their vote without even hearing anyone making an argument for why this might be an amendment that would be appropriate for this bill.
▶ 1:20:01Sen. Warren: The second thing I want to say is exactly what senator cortez masto said and that is there is a bill to be done that could get wide support in the united states senate. That bill is possible. This is not a case of "no, no, what we are trying to do is figure out how to blow the thing up." there are people who want to support this but they're are also legitimate concerns.
▶ 1:20:30Sen. Warren: You have given us a strong base, but I have got an amendment raised by the community bankers. Are we really not going to have a discussion about what it means to issue stable coins and what the impact will be on community bankers? Senator cortez masto has one from the american bankers association. We don't have a quorum. We don't have a discussion. I recommend here, Mr.
▶ 1:20:57Sen. Warren: Chairman, that we suspend these proceedings until we can come back together and actually have the discussion in regular order.
▶ 1:21:07Chair Scott: Thankfully, my script here says that's recess until 11:15. So we are already on the same page as I've just written that down. However, I will say before I read -- recess to give us a chance, I am thankful the process is what it is. The process is messy. Markups are messy. The fact of the matter is we have an opportunity to read the amendments before we come to committee was of the first time you read it is during the committee, that is on you not me.
▶ 1:21:36Chair Scott: I think folks on both sides of this dais care about the issue and the american people care more about the underlying issues. Does not pretend this is the first time you've had an opportunity to do this or that this is the only way it is being done in the senate banking. This is how it is happened throughout congress 15 years I've been here. The one thing that has not happen until right now is an actual markup.
▶ 1:22:04Chair Scott: For years in the minority, there was not a single markup I participated in because there was not a single markup we brought to the table. Perhaps the problem we face today is we have forgotten what this process feels like, looks like, and it is messy. We all serve on multiple committees at the exact same time. We are going have to get used to being uncomfortable with progress areas this is what it looks like. With that, we will recess until 11:15.
▶ 1:48:39Chair Scott: The committee will come to order. Reed amendment 31 amendment. The clerk will call the roll. [roll call]
▶ 1:49:56Chair Scott: The amendment is not agreed to. Senator moreno?
▶ 1:50:01Sen. Moreno: If I can maybe finish off where we left for recess? I think I can safely say republicans would love to get into a real conversation with the other side to get good things done. I don't think it is fun for either one of us to go back to our constituents and explain to them why we can't get things done. I think most voters expect this body works functionally. But we also have to be cognizant of hyperbole that just doesn't make any sense.
▶ 1:50:34Sen. Moreno: You talked about the importance of national security. I agree with you. I think it is important to recognize what are stable coins intended to do. I think most of us -- most people who have only lived in the united states don't even understand what is the point. You don't see yourself going to 7-eleven and buying a stable point but there places like the country came from where colombia, payments don't exist and you don't have the ability to transact most of you have places like the bahamas and africa where payment systems are not matured.
▶ 1:51:06Sen. Moreno: We have facing us a choice, do we want china to own the stable coin market? Nobody is interested in the chinese currency is a stable coin so they have tried to make it a brics stable point but you can't take four pieces of crap, chocolate. We have the alternative which is to have a U.S. dominated stable coin that becomes a world standard. That protects the integrity of the U.S. dollar around the world.
▶ 1:51:31Sen. Moreno: We should be applauding that saying, my god, we have the ability to have an own this technology that fortifies the U.S. dollar. That would lead to more national security. I get there's a lot of breakup issues with elon musk but elon musk has nothing to do with this legislation. Nothing to do with that. When you say this makes child trafficking and drug trafficking and more, you know it does that? Open borders.
▶ 1:51:59Sen. Moreno: Open borders for the last four years we had 10 million border encounters are now down to 8000 a month. I urge my colleagues to think about that.
▶ 1:52:05Chair Scott: Going to go to amendment --.
▶ 1:52:08Sen. Warren: Wait a minute, if we're going to have discussion, we have to have discussion on both sides. Before we talk about hyperbole, could we just look at what the industry itself says? When they say 60% of the financing that is going through for these child pornographers and drug traffickers for iran and north korea are coming through stable coin and no one is asking not to do stable coin.
▶ 1:52:39Sen. Warren: We are just saying, can we please just do it in a way that keeps enough guardrails around it so good issuers who want to do this can continue to do it? For example, an amendment does has could we just checked these guys? And make sure they don't have a history of being child pornographers before they get to issue their coins? That they don't have a background in drug trafficking? This is not a hard thing.
▶ 1:53:07Sen. Warren: This doesn't try to upset the whole apple card and tear it apart. It does basic pieces that are side of the aisle is trying to get in place so it works in a safe and dependable way. That is all that anybody here is looking for. Nobody is looking to shut this down. No one is looking to stop innovation. But we do want to try to make this a little cleaner than it is right now.
▶ 1:53:31Chair Scott: Let me have the last word and we will move on. The current legislation actually increases transparency for money laundering. I think it was 2018 journal on money-laundering that said the current system in 2018 missed 99.9% of money laundering.
▶ 1:53:56Chair Scott: This is a leap into a different world and a better world and we will continue with cortez masto amendment 11.
▶ 1:54:07Sen. Cortez Masto: This amendment would remove section b in the existing bill 7 section 4a. B section gives the ability to engage in any nonpayment stable coin activity. This amendment would expressly limit the activities of the stable coin issuer to only activities that directly support the work of issuing and redeeming stable coins, managing this reserves, providing custodial services.
▶ 1:54:39Sen. Cortez Masto: Here's is why I'm doing this. If you look at the legislation, those parameters are already outlined in the preceding five subsections of the bill. So section b, not sure what it does other than negate what we have already put into the preceding sections. Clearly, the reason why they put it in I would imagine it's because the good folks that were drafting this starting legislation -- let me say, this is a good first start it is just not ready for prime time.
▶ 1:55:10Sen. Cortez Masto: Whoever drafted it made clear to put those subsections in so I'm not quite sure what subsection b does other than negate those clear guardrails. I would like to submit to the record the american bankers association letter which clearly spells out some of those concerns that I have highlighted with section b. My concern is stable coin issuers committed to have a complex business with financial activities far beyond the scope of what they are registered for.
▶ 1:55:41Sen. Cortez Masto: I think we have made it clear in legislation if you're going to register as a stable coin issuer, do that alone. We are setting the guardrails, setting the parameters. So let's start there. If we have to open the door, then let's have a further conversation around it but we have already set the guardrails. It is a good starting point. I would ask my colleagues to join me in supporting this amendment.
▶ 1:56:04Chair Scott: Senator lummis?
▶ 1:56:07Sen. Lummis: I urge my colleagues to oppose this amendment. The act carefully limits the activities of primitive payment stable coin issuers in ways that ensure consumer protection. That is what we need to be balancing here, consumer protection and permitted activities by stable coin issuers.
▶ 1:56:32Sen. Lummis: Efforts to further limit the activities of primitive payment stable coin issuers will discourage potential issuers from entering the market. One of the things this market brings as an unintended but happy consequence is stable coin issuers are purchasing U.S.
▶ 1:56:53Sen. Lummis: Treasuries in tremendous amounts to make them the 100% hard asset-backed asset of stable coins. This creates a massive new market for U.S. treasuries that will help further keep the united states dollar the world reserve currency.
▶ 1:57:21Sen. Lummis: So this new market for white we think is one of the most stable assets in the world, U.S. treasuries, is something we should be encouraging. The way that bill is currently written, it does limit the activities of permitted payment stablecoin issuers to ensure consumer protection. I think senator hagerty has hit the sweet spot on this.
▶ 1:57:48Sen. Lummis: We don't want to harm consumers or the markets for U.S. treasuries by limiting its potential. I urge opposition to the amendment.
▶ 1:58:01Chair Scott: The clerk will call the roll. [roll call]
▶ 1:59:02Chair Scott: The vote is 13 opposed, 11 in favor.
▶ 1:59:04Chair Scott: Amendment not agree to.
▶ 1:59:10Sen. Cortez Masto: This is in addition to section eight, my amendment is very easy. It gives the secret service the authority they need to better detour and detect money-laundering, drug trafficking, terrorist financing, other theft and fraud facilitated through unlicensed money transmitting business is not currently, the way the bill was written from a secret service has no authority to go after illegal online platforms facilitating the buying and selling of stable coins or other cryptocurrencies.
▶ 1:59:38Sen. Cortez Masto: This amendment simply gives and provides the secret service with the tools they need to go and eradicate that criminal activity. I would ask my colleagues to support it.
▶ 1:59:48Chair Scott: Senator hagerty.
▶ 1:59:51Sen. Hagerty: This amendment expands secret service investigative authorities. I believe that would be much better suited for separate discussion on financial crime. It is not related to stablecoins and the genius act and urge my colleagues to vote against.
▶ 2:00:04Chair Scott: The clerk will call the roll. [roll call]
▶ 2:01:02Chair Scott: The vote is 13 opposed and 11 in favor.
▶ 2:01:04Chair Scott: The amendment is not agree to. Smith amendment 53.
▶ 2:01:12Sen. Smith: I'm offering smith amdment 53, I think a simple amendment. What it would do, colleagues come is to say federal and state payment stablecoin regulators, so the regulators would develop standards to make sure consumers can quickly and easily redeem their stablecoins for base value.
▶ 2:01:33Sen. Smith: I appreciate this legislation requires stablecoin issuers to publish their policies about what those redemption standards would be, but that just concerns me that it doesn't go far enough. That it just makes sense that we would have kind of a base level of standard set for how quickly you can get your stablecoin redeemed, like how will the value of your redemption be established.
▶ 2:02:04Sen. Smith: I realize that most of the time this probably would not be an issue, that we also know that where is volatility in digital asset markets and there could be a run on withdrawals and consumers are there trying to figure out how to redeem your stablecoin. All my amendment would do is assure those trying to redeem their stablecoins would have basic protections in place without a bunch of delays or fees.
▶ 2:02:29Sen. Smith: So this is a simple addition I think it would go a long way toward promoting consumer confidence and fairness in stablecoin. I asked my colleagues for their questions or their support for this amendment.
▶ 2:02:40Chair Scott: Senator hagerty.
▶ 2:02:43Sen. Hagerty: The amendment is already addressed in the bill. The genius act requires -- establishes procedures for timely redemption. The amendment proposed simply is too descriptive and can undermine the efforts of regulators to establish redemption. I urge my colleagues to oppose this amendment.
▶ 2:03:06Chair Scott: The clerk will call the roll. [roll call]
▶ 2:03:59Chair Scott: The book is 13 opposed him 11 in favor.
▶ 2:04:00Chair Scott: The amendment is not agree to. Amendment 55 smith amendment.
▶ 2:04:08Sen. Smith: I withdrawal this amendment.
▶ 2:04:10Chair Scott: All right. I called warnock amendment 35.
▶ 2:04:18Sen. Warnock: Michael of 35, the cfpb was created in the wake of the great financial crisis. Americans are wall street bankers give bailouts as millions lost their jobs, lost their homes, lost their life savings and retirements.
▶ 2:04:36Sen. Warnock: While the trump administration has gutted the cfpb, we have all seen this over the last few weeks by firing dozens, stopping certain consumer protection activities, even kicking people out of their building. Cfpb rules and regulations to remain on the books.
▶ 2:04:53Sen. Warnock: I offer a simple amendment while additional consumer protections have been negotiated and added to this bill, it is important to make clear to stablecoin issuers digital asset exchanges and consumers that the bureau's protections apply. That stablecoin is not an exception to the rule. My amendment changes nothing with the base text of the bill.
▶ 2:05:23Sen. Warnock: It simply affirms nothing in the bill changes, limits, remits protections consumers currently receive legally from the cfpb. I ask for roll call vote.
▶ 2:05:36Chair Scott: Senator lummis?
▶ 2:05:40Sen. Lummis: I appreciate my colleague from georgia but I will tell you, I urge my colleagues to oppose this amendment, this is at its core a consumer protection bill that establishes a first of its kind federal framework to regulate payment stablecoins.
▶ 2:06:05Sen. Lummis: The consumer financial protection bureau's scope is already outlined in statute. So if this fits, they will have authority. If it doesn't fit, this bill will have authority. So this amendment invites regulatory overreach in my opinion and it doesn't increase consumer protection.
▶ 2:06:34Sen. Lummis: For that reason, I encourage us to oppose this amendment.
▶ 2:06:38Chair Scott: -- .
▶ 2:06:44Sen. Warnock: If what she's saying is true, my question is, what are we concerned about? What are we afraid of. The subject has not changed.
▶ 2:06:53Chair Scott: Clerk will call the roll. [roll call]
▶ 2:07:54Chair Scott: The vote is 13 opposed and 11 in favor.
▶ 2:07:55Chair Scott: The amendment is not agree to. We call it warnock amendment 36.
▶ 2:08:07Sen. Warren: Before I get to this next amendment, I want to make a note as republicans are steamrolling this bill through the committee, bloomberg just broke the news that the trump family's crypto company is in discussions with finance on doing business, including possibly creating a new stablecoin.
▶ 2:08:30Sen. Warren: For those of you who don't remember, finance pleaded guilty to criminal charges for "willful failures that allowed money to flow to terrorists, cyber criminals, and child abusers through its platform." we have a chance right now to fix this bill, to prevent commercial empires like the trump organization --.
▶ 2:08:51Chair Scott: I called on warnock.
▶ 2:08:54Sen. Warren: Sorry, I thought you called on me.
▶ 2:08:58Sen. Warnock: I withdrawal mine.
▶ 2:09:01Sen. Warren: I apologize. In my next?
▶ 2:09:06Chair Scott: Actually, it is kim. We will get to it.
▶ 2:09:12Sen. Kim: , amendment 38.
▶ 2:09:16Sen. Kim: I would like to introduce kim limit 38 although I'm not asking for a vote. I must express my deep concern with the evidence showing that cryptocurrencies particularly stablecoin have been utilized by numerous bad actors including by drug cartels, foreign terrorist organizations, finance or illicit activities.
▶ 2:09:35Sen. Kim: There needs to be deterrence under law to ensure stablecoin issuers do not engage in any activities that would facilitate funds to any such cartels or foreign terrorist organizations. I am pleased to see the additions added to this bill since its initial introduction with respect to the illicit finance provisions more needs to be done to help counter bad actors.
▶ 2:10:03Sen. Kim: We have to make sure we are not making decisions that can strengthen them and other foreign terrorist organizations and building up their strength and helping them evade sanctions. One critical way to deter such illicit activities is require annual certifications by the issuers. I'm going to keep fighting to finalize my amendment as this bill moves out of committee to deter issuers from engaging in illicit finance acts. I'm going to keep fighting to establish comp rates of aml dsa illicit finance framework beyond just issuers.
▶ 2:10:39Sen. Kim: This should be a bipartisan concern and I look forward to working with my colleagues on both sides of the aisle on this very important issue. At this moment, I will withdraw this amendment and continue to work with my republican colleagues on language. I yield back.
▶ 2:10:53Chair Scott: Senator hagerty?
▶ 2:10:57Sen. Hagerty: May I make a statement? I agree with senator kim illicit activities by drug cartels, foreign terrorist organizations, state actors are a serious issue that cannot be ignored. As such we must ensure justice in traditional finance deterrence under law that ensure stablecoin issuers don't in any way inadvertently facilitate these activities.
▶ 2:11:18Sen. Hagerty: I want to make it clear I came into working with senator kim to finalize and amendment is the bill moves forward to ensure issuers annually certify they are not enabling such activity subject to civil and criminal penalties. I commend -- commit to working on coverings of -- future pieces of legislation that would include but not be limited to forthcoming market structure bill.
▶ 2:11:49Chair Scott: Senator kim amendment 39.
▶ 2:11:55Sen. Warren: I think that is me. I am on 39. I'm going to do 39. We are cosponsors.
▶ 2:12:06Chair Scott: Senator warren.
▶ 2:12:08Sen. Warren: While we have been sitting here, bloomberg has broken the news the trump family's crypto company has been in discussions with finance on doing business including possibly creating a new stablecoin. Exactly what we are debating now.
▶ 2:12:24Sen. Warren: For those who don't remember, bytedance pleaded criminal to criminal charges for "willful failures that allowed money to flow to terrorist cyber criminals and child abusers through its platform." we have the chance to fix this right here in this committee. In literally just an hour ago, every republican voted against an amendment to do exactly that.
▶ 2:12:50Sen. Warren: We should be standing up to this kind of naked corruption, not trying to figure out how to build a superhighway so it can take off even faster, bigger, and better. The amendment I have here is about issuers get coins they can put out into the world just like the government prints money.
▶ 2:13:13Sen. Warren: And for regular money we require banks and other financial institutions, the ones that actually move that money around and facilitate those transactions to follow basic rules to protect against money laundering, terrorist financing, sanction, and other financial crimes. The cosponsors of this bill I think started in the right direction and made it clear they don't want stablecoins to be used to supercharge that kind of criminal activity.
▶ 2:13:44Sen. Warren: By the bill imposes those restrictions only on the initial issuer, not on the other key players who are more likely to be moving money into the hands of the bad actors. The amendment I propose would fix that by making clear the same rules apply to moving money to the basic institutions that move this money around. It would apply to exchanges and while it providers that actually move these stablecoins.
▶ 2:14:13Sen. Warren: I urge everyone to vote yes on this to protect our financial system.
▶ 2:14:18Chair Scott: This article has nothing to do with what we are here doing today. What is in front of us today, bill is focused on payment stablecoins not digital asset exchanges. Bring up the article serves as a distraction from the legislation in front of us right now. We're here to advance a first of its kind regulatory framework that advances the standing of the U.S. dollar, protects consumers, and protects national security.
▶ 2:14:46Chair Scott: This bill is critical for the digital asset and payments innovation which we must lead around the globe. The clerk will call the roll. [roll call]
▶ 2:15:43Chair Scott: The vote is 13 opposed and 11 in favor.
▶ 2:15:44Chair Scott: Amendment the amendment is not agreed to. I bring up blunt rochester amendment 66.
▶ 2:15:54Sen. Blunt Rochester: I would like to call up and withdrawal amendment 66. I appreciate the willingness of my colleagues to improve the bill in a bipartisan manner. The manager's amendment I was able to secure a number of enhancements to this bill that will strengthen its consumer protections and approve the safety and soundness of the banking system. I would like to thank Mr. tillis and Mr. rounds for working with me on some of my amendments.
▶ 2:16:23Sen. Blunt Rochester: While the bill is improved, I think we still have a way to go to strengthen it even further. I am particularly concerned when some of the easy amendments that deal drug trafficking and child pornography can't get in, that causes some concern. My amendment would help safeguard the data of consumers from being sold, especially by nonbanks, without enhanced protections. Mr.
▶ 2:16:53Sen. Blunt Rochester: Chairman I'm going to withdrawal my amendment today to continue to work toward improving the consumer protections in this bill and on the senate floor.
▶ 2:17:01Chair Scott: Senator reed, amendment 30.
▶ 2:17:06Sen. Reed: Thank you. My amendment authorizes regulators to crack down on excessive executive compensation arrangements. Thank regulators have this authority but stablecoin regulators would not. I think that is a mistake. Stablecoin issuers may need by investing customer funds come executives have incentives to chase the highest dealing assets.
▶ 2:17:33Sen. Reed: Those are usually the most riskful. The biggest stablecoin issuer -- tether is the most profitable company for in the world, even more than the biggest banks. You don't make that much profit without taking some risk.
▶ 2:17:52Sen. Reed: My amendment will help ensure crypto executives do not take excessive risks with customer's money to make short-term profits while leaving customers and taxpayers holding the bag in the future. Eliminating a petition is a fundamental part of safety regulation and I would urge an aye vote.
▶ 2:18:13Sen. Hagerty: I urge my colleagues to put opposed -- to oppose. If additional explicit restrictions on executive compensation are necessary, they can be addressed in rulemaking. I encourage my colleagues to oppose this amendment.
▶ 2:18:33Chair Scott: The clerk will call the roll. [roll call]
▶ 2:19:32Chair Scott: The vote is 13 opposed, 11 in favor.
▶ 2:19:34Chair Scott: The amendment is not agreed to. Reed number 25.
▶ 2:19:41Sen. Reed: This amendment enables the treasury department to sanction the crypto mixing services that are used by north korea and other rogue states and criminal enterprises to launder crypto they receive through hacking, ransomware, and drug trafficking. Just two weeks ago, north korea pulled off the biggest crypto hack of all time.
▶ 2:20:07Sen. Reed: The lazarus group hackers stole $1.4 billion in crypto and then laundered it using mixers to make it untraceable. In 2022, north korea stole $600 million. The crypto that north korea has stolen in laundered includes stablecoins.
▶ 2:20:33Sen. Reed: My amendment helps ensure these laundering tools are not available. That will deprive north korea funding it is using to develop wmd and support russia's illegal invasion of ukraine. I would ask and urge a yea vote.
▶ 2:20:54Sen. Hagerty: There are already robust related to stablecoin. It strengthens national security and improve the treasury department's ability to monitor the sector. Broader discussions on anti-money laundering and amending the international emergency economic powers act should take place in another context, not this one. As such this amendment is outside the scope of the bill and I encourage my colleagues to vote no.
▶ 2:21:18Chair Scott: Clerk will call the roll. [roll call]
▶ 2:22:16Chair Scott: The vote is 13 opposed, 11 in favor.
▶ 2:22:18Chair Scott: The amendment is not agreed to. I will call up cortez masto.
▶ 2:22:27Sen. Cortez Masto: This is in addition to section four been within the existing bill. My amendment ensures stablecoin issuer cannot hold reserves at the central bank of china, iran, russia, or any other nation deemed adversarial to the united states. The bill has to ensure and ensure can hold those stablecoin reserves -- excuse me, cannot hold those stablecoin at a hostile country spec without any regulator customers doing about that risk.
▶ 2:22:56Sen. Cortez Masto: Imagine if an adversary can lock up a permitted you a stablecoin issuers reserves as a result of a geopolitical factor. We really cannot give our enemies that type of leverage. Such an action by for an adversary can cause great risk and harm to people holding the stablecoin reserves. I would ask my colleagues to support me in this amendment.
▶ 2:23:21Sen. Hagerty: We have no control over what form depositories institutions can hold as deposits. The other issue I think in senator lummis described it very well is we want to increase demand for treasuries around the globe not limit it. This amendment as drafted is an overage and could harm. I urge my colleagues to oppose it.
▶ 2:23:47Chair Scott: Clerk will call the roll. [roll call]
▶ 2:24:41Chair Scott: The vote is 13 opposed, 11 in favor.
▶ 2:24:43Chair Scott: The amendment is not agreed to. Amendment 14.
▶ 2:24:50Sen. Cortez Masto: Cortez
▶ 2:24:55Sen. Cortez Masto: Co this would protect not only people but della supremacy, specifically my a minute would ensure people in the U.S. could only access payment stablecoins if the stablecoin is redeemable solely in dollars or money issued by the central bank of a g7 member. This will prohibit stablecoins from being redeemed by the central bank of any adversarial country such as china, iran, russia, or other hostile nation.
▶ 2:25:19Sen. Cortez Masto: This also prohibits payment stablecoins from being redeemed for any money issued by any intergovernmental organization that could include multinational development banks like that china sponsored asian infrastructure bank or new development bank or the russian sponsored eurasian development bank. We want to ensure dollars supremacy around the globe, this amendment would further this goal.
▶ 2:25:44Sen. Cortez Masto: My amendment would prevent you a stablecoin holders from unknowingly supporting foreign adversaries through redemptions as central banks or multinational development banks and hostile nations. I asked my colleagues to support it.
▶ 2:25:57Sen. Hagerty: This amendment would allow stablecoins to be tied to other countries currencies. The purpose of the genius act is to ensure the U.S. stablecoins are backed solely by U.S. treasuries and U.S. dollars. It is critical we maintain the exclusive U.S. dollar backing to preserve the american dollar is a world currency. I urge my colleagues to oppose this amendment.
▶ 2:26:19Chair Scott: The clerk will call the roll. [roll call]
▶ 2:27:11Chair Scott: The vote is 13 opposed, 11 in favor.
▶ 2:27:13Chair Scott: The amendment is not agreed to. We will call it amendment 54, senator smith.
▶ 2:27:20Sen. Smith: I'm going to offer this and then withdraw it. I note a distinct trend in the voting trend so I will not ask my colleagues to vote again on this but I would ask folks pay attention to what I am raising in this amendment because I think it's important. This amendment would say it is not lawful -- that we would not be required community banks or credit unions that don't issue stablecoin to pay into a rescue fund for stablecoin issuers.
▶ 2:27:53Sen. Smith: We saw what happened with silicon valley bank and signature bank -- I understand that wasn't stablecoin. I'm just saying for digital assets and for stablecoin in addition, the need to rescue banks that got themselves into a very dicey situation and it doesn't seem right to me we would be asking community banks that are so important to all of our states to be paying into a
▶ 2:28:23Sen. Smith: Rescue fund in this case. My amendment would ensure if stablecoins ever do become too big to fail and would require a bail outcome of that community banks and credit units would not be on the hook for that.
▶ 2:28:35Chair Scott: We will call it reed amendment 22.
▶ 2:28:41Sen. Reed: . My amendment affirms the U.S. dollar is the official currency of the united states of america and that it cannot be replaced by an alternative as legal tender. That means our taxes can be paid only an dollars, military can only be paid in dollars and our mortgages can only be paid in dollars.
▶ 2:29:04Sen. Reed: Throughout the world, posting powers are trying to displace the united states economically and the dollar is the most dominant currency. If that happens, we will be in a very difficult situation. My amendment is designed to ensure the enemies of the united states cannot supplant the dollar with unregulated offshore alternatives or other currencies.
▶ 2:29:32Sen. Reed: I would ask for the yeas and nays.
▶ 2:29:37Sen. Hagerty: Simply, the genius act is very narrowly focused on providing a workable framework for permitted payment stablecoins. This amendment is outside the scope of the bill and should not be adopted. I urge my colleagues to oppose.
▶ 2:29:54Chair Scott: The clerk will call the roll. [roll call]
▶ 2:30:45Chair Scott: The vote is 13 opposed, 11 in favor.
▶ 2:30:48Chair Scott: Amendment not agreed to. Senator van hollen has already spoken on his amendment and would like us to go straight to the vote.
▶ 2:31:00Sen. Warren: Can you remind us with this is about before we vote?
▶ 2:31:06Chair Scott: Amendment number 86 is before you. I would encourage my colleagues to vote no.
▶ 2:31:20Chair Scott: 86 not 82?
▶ 2:31:26Chair Scott: He is not here so. We are going to move on to the next amendment. He is on his way so we will try to let him get here. I will call up cortez masto number 15.
▶ 2:31:45Sen. Cortez Masto: I withdraw the amendment.
▶ 2:31:50Chair Scott: Senator warner? Warren. You are recognize.
▶ 2:31:58Sen. Warren: Thank you. I have heard from some of my republican colleagues that we need an america first crypto strategy but the genius act has a giant loophole and it that allows foreign issued stablecoins to evade this new regulatory framework and yet still be used in the united states. For example, a company would be allowed to issue a stablecoin a bride and then have it -- are broad and then have it offered to the customers in U.S. on U.S.
▶ 2:32:27Sen. Warren: Trading platforms all while evading the safeguards built into this bill. In other words, the bill incentivizes U.S.-based crypto companies to move offshore. And it does nothing to address the risks posed by tether come the largest stablecoin company in the world and according to years of public reporting to my favorite financing vehicle of cartels.
▶ 2:32:56Sen. Warren: In a normal world we would be able to get more than 90 senators to support closing this loophole. Or to combat illicit finance or both. It seems my republican colleagues are worried about facing backlash from one of donald trump's close friends and our nations commerce secretary howard lutnick.
▶ 2:33:20Sen. Warren: He is a cheerleader for tether and his twentysomething sons are now the co-ceos of his company which still owns a 5% interest in tether. That is why I'm calling for a vote on warren 44 which would close this glaring loophole.
▶ 2:33:41Sen. Lummis: I urge my colleagues to oppose this amendment. This bill is tailored to provide a first of its kind regulatory framework it is not a framework to -- framework to regulate the secondary market. We need to discuss in the market structure legislature. We are going from this bill to market structure.
▶ 2:34:09Sen. Lummis: We decided to talk about this in a narrow manner and a number of things have been raised will be addressed but they need to be addressed in market structure. The protections provided in this bill prohibiting non-permitted stablecoin issuers from being used as margin or collateral between banking organizations around the payment infrastructure between banks are tailored to payment stablecoin
▶ 2:34:39Sen. Lummis: Issuers. Additional restrictions would harm the dominance of the dollar, disrupt issuers, cause financial instability and expand this bill's scope. I want to add one more thing. This bill is probably too restrictive to encourage stablecoin ensure tether to uninsured's business. This is a very restrictive bill when it comes to their business model.
▶ 2:35:11Sen. Lummis: I urge my colleagues not to be looking over their shoulder at someone at a specific company and I yelled back.
▶ 2:35:19Chair Scott: Clerk will call the roll. [roll call]
▶ 2:36:10Chair Scott: The vote is 13 opposed, 11 in favor.
▶ 2:36:12Chair Scott: The amendment is not agreed to. We will move back to call up van hollen movement 86.
▶ 2:36:21Sen. Van Hollen: Thank you. Just to refresh everyone's memory, this is a very straightforward provision. It simply adds interest in payment stablecoin issuers to the list of congressional financial disclosures required by members of congress. I urge its adoption.
▶ 2:36:46Chair Scott: Is there a rebuttal? >> is beyond the scope.
▶ 2:36:56Chair Scott: Clerk will call the roll. [roll call]
▶ 2:37:55Chair Scott: The vote is 13 opposed, 11 in favor.
▶ 2:37:57Chair Scott: The amendment is not agreed to. We will call up warren amendment 71. Senator warren.
▶ 2:38:05Sen. Warren: C1
▶ 2:38:13Sen. Warren: I don't understand, this looks want to say on my two minutes?
▶ 2:38:22Sen. Van Hollen: I thought this would be an amendment that was adopted by every member here simply requiring that as part of the annual financial disclosure reports that we all currently file that includes stocks and other interest that we would include interest in stable coin issuers.
▶ 2:38:45Sen. Van Hollen: The fact that -- I didn't hear the argument other than it is beyond the scope, to try and build any kind of confidence in stable coins. It includes a very good framework with respect to stable coins.
▶ 2:39:10Sen. Van Hollen: I have some thoughts on the anti-money laundering provisions and look forward to reading some of the classified report. It seems to me if we want to inspire any confidence in stable coins we should except an amendment that discloses any personal interest in stable coins. That would be a starting point it seems with respect to transparency.
▶ 2:39:40Sen. Van Hollen: Thank you senator warren and I'm disappointed that amendment failed.
▶ 2:39:43Sen. Warren: Let me just say, we are supposed to be here to protect sanctions, that is a tool we want to use against bad actors around the world. It could say if you are trying to avenge sanctions with dollars, if you use stable coins you will be just fine. I don't think that was the intent of the drafters.
▶ 2:40:10Sen. Warren: The same sanctions rules applied to stable coins as they do to dollars. This one should be easy too. >> the clerk will call the roll. [roll call],
▶ 2:41:00Sen. Warren: [roll call] the vote is 13, 11 in favor. >> the amendment is not agreed to. We will now move to warren 498 we will now move to warren 49.
▶ 2:41:21Sen. Warren: As every member of this community knows community banks are the lifeblood of our economy. They help small businesses get off the ground, first-time homebuyers finance mortgages, they help farmers stay afloat all while meeting the unique needs of the communities they serve. The genius act has the potential to devastate community banks all around this country.
▶ 2:41:50Sen. Warren: Deposits could flow out of community banks out of the stable coin market leaving fewer funds available for lending to small businesses and households especially in rural communities where credit is increasingly scarce. This could have a drastic impact on community banks ability to lend to small businesses to serve our towns to meet local need. That's ym calling for a vote on war and 49.
▶ 2:42:18Sen. Warren: This would require the treasury department to assess the impact of the genius act on community banks ability to serve households and small businesses. If the department finds after five years the genius act has had a negative impact it will sunset and stable coin issuers will be required to redeem their coins. All we are asking for here is a study to find out what happens to our community banks.
▶ 2:42:49Sen. Warren: We stand up over and over. Let's put our money where our mouth is, say let's keep track of what happens after five years in this new stable coin regime and ensure our community banks are fully protected. >> the genius act already includes an annual reporting requirement on the stability risks that oppose the safety and soundness of the greater financial system.
▶ 2:43:21Sen. Warren: This reporting would include any impact on the banking sector. We recognize the important role community banks play but creating a sunset provision makes the entire bill unworkable . It does not provide clarity to the stable coin industry. >> the clerk will call the roll.
▶ 2:43:40Sen. Warren: [roll call] the
▶ 2:44:24Sen. Warren: Vote is 13 opposed, 11 in favor. >> the amendment is not agreed to, we will call up warren 69.
▶ 2:44:34Sen. Warren: Thank you, most crypto transactions are publicly preserved en bloc chain so there's an opportunity to monitor the flows of money for malicious activity if it is an obscured by tumblers. It is important stable coin issuers have the ability to freeze and burn stable coins once law enforcement identifies unlawful conduct.
▶ 2:45:00Sen. Warren: Too often after-the-fact approach leaves our authority scrambling. This committee can and should help law enforcement get the information they need as quickly as possible. This amendment would help make that fixed by requiring issues to monitor their block chains and report suspicious activity to law enforcement. The way every other responsible bank and financial institution already does.
▶ 2:45:31Sen. Warren: These issuers could turn a blind eye to the criminal financing that is right there in plain view whether it is moving money to drug traffickers or funding child pornographers, or moving money to iran. I urge the committee to give a yes vote.
▶ 2:45:50Sen. Hagerty: Requiring issues to monitor block chain is costly and time-consuming. Stable coin issuers must already comply with the banks act including filing suspicious activity reports and cooperating with law enforcement. >> clerk will call the roll.
▶ 2:46:10Sen. Hagerty: [roll call] the
▶ 2:47:00Sen. Hagerty: Vote is 13 opposed, 11 in favor. >> the amendment is not agreed to. We will call up amendment 52 by senator warren.
▶ 2:47:12Sen. Warren: The last amendment I will offer here today addresses the fact that this bill lacked the basic safeguards to make sure stable coins don't blow up our entire economy. Under this bill regulators are severely constrained in their ability to apply capital and liquidity state guards -- safeguards increasing the likelihood stable coin issuers experience debilitating runs, sell off assets at fire sale
▶ 2:47:44Sen. Warren: Prices and destabilize our financial system. The bill uses language designed to prevent regulators from having meaningful safeguards, instead quite frankly just letting them run wild. The last time this committee came together to deregulate a key part of the financial system was 2018. Large regional banks.
▶ 2:48:10Sen. Warren: It blew up five years later in 2023 when we saw the second, third, fourth largest bank failures in U.S. history. At some point we need to stop making the same mistakes over and over again. Warren 52 would reduce these risks and restore regulators ability to employ capital liquidity and other risk management safeguards to stable coin issuers.
▶ 2:48:39Sen. Warren: I just have to say as we wrap this up, it would be crazy to advance this bill when it has so many holes in it and to advance it at the exact moment that news is breaking about donald trump trying to create his own stable coin with an outfit that is notorious for breaking the law. This makes no sense for us to do this.
▶ 2:49:11Sen. Warren: No one here is saying we can't do stable coin legislation. We pointed out through amendment after amendment, places where we just need to close some loopholes or add a little more muscle for the regulators, places we are told by the republican sponsors we fixed that. If you fixed that, why not adopt some of these amendments that say for certain and for sure.
▶ 2:49:41Sen. Warren: Instead, jamming this through while donald trump is making a deal with a criminal stable coin plat arm makes no sense at all. We will regret this. >> let me just say real quick that the genius act has capital liquidity, it makes the capital liquidity and mismanagement requirements weaker by limiting asset certification.
▶ 2:50:06Sen. Warren: Stable quite regulators are given discretion when applying the standard that allow regulators flexibility that will help ensure regulations are workable for payment stable coin issuers. I urge my colleagues to vote no. >> I would request recognition for about 90 seconds. >> I will give you one minute. Do you want to speak on this?
▶ 2:50:39Sen. Warren: The clerk will call the roll on this amendment. [roll call]
▶ 2:51:28Sen. Warren: The vote is 13 opposed, 11 in favor >> the amendment is not agreed to. We will end -- move to the end of this legislation. We have one more that will not take nearly as long. I recognize senators warnock and warner as well as senator hagerty for comments around one minute please.
▶ 2:51:48Sen. Warnock: Cryptocurrency and digital assets are here to stay. It is important we keep technological superiority right here in america. That is why I had hoped to support this bill today. While I appreciate the considerable improvements that happened, more work remains to protect consumers and contact -- protect the financial system.
▶ 2:52:16Sen. Warnock: It must tighten up restrictions related to national security and unregistered foreign stable coin issuers from doing business here in america. Today I am going to vote no on this legislation. I hope this bill improves enough that I could support it on the floor.
▶ 2:52:38Sen. Warnock: I believe we need a rational regulatory structure around stable coin and I stand ready in a bipartisan way to get that done. >> I would not have supported this bill but there have been a lot of mischaracterizations. We dramatically increased bsa and we made it easier for criminal penalties in place.
▶ 2:53:08Sen. Warnock: We have done a lot on foreign issuers. Many of us were involved in this. I actually think a strong bipartisan amendment coming out of this frankly strengthens our hands. Some of them have said they will work with us. This one is easy compared to market structure. Exchanges, this is much more gnarly.
▶ 2:53:37Sen. Warnock: This is a bill that was for the most part drafted with not a lot of our input. I think we could start with much more bipartisan input. I think we do that by sending a strong bipartisan vote out of this committee. >> I will be very brief. A lot was made to this bill during the amendment process. I want to commend everybody involved with that.
▶ 2:54:08Sen. Warnock: I still have serious concerns that were addressed by some of the amendments that were not adopted. I do look forward to going down to the classified room to read all sides with respect to the use of stable coins. It remains my biggest concern at this point given the changes that have been made. I will be voting no. I look forward to working with my colleagues to see if they could address some of the concerns I still have.
▶ 2:54:37Sen. Warnock: >> we are here today to advance a first of its kind regulatory framework that advances the standing of the U.S. dollar and protect national security. This bill is critical for digital assets. America must lead around the globe. I also want to point out this bill are the product of significant bipartisan negotiations. You set the stage very well.
▶ 2:55:06Sen. Warnock: This is the beginning of the conversation that will continue. You have issues and amendments brought up today that will fit well into further conversations. The critical element today as we have worked extraordinarily hard. All of those staffs have worked their hearts out. We appreciate the effort that has gone into it and I look forward to taking this major step in the direction of supporting critical innovation here in america.
▶ 2:55:35Sen. Warnock: >> while I appreciate the hard work and frankly the debate, maybe the 38 people watching us on c-span that have seen the sausage making process that is not as attractive as it sounds like. This is an open process. The senate banking committee returning to that regular order is an accomplishment.
▶ 2:56:05Sen. Warnock: This genius act I am a cosponsor of is a leap in the right direction. We have an opportunity to work in bipartisan fashion. I want to thank my staff, they coordinated, work with staff. They have been fabulous. We will not always agree on the final product.
▶ 2:56:29Sen. Warnock: I look forward to having a robust conversation on the market structure that will be much easier than this process, not harder. >> I have a question, Mr. chairman. >> I will not recognize you at this point but we do recognize hard work and dedication has been put into this. I will entertain the question before final vote.
▶ 2:56:50Sen. Warnock: >> I'd like to know if somebody's working on the market structure bill, who that is, so I could engage with them on some of the issues that we talked about. >> I will have my team reach out. I would love to have the conversation with anyone who's interested. Let's start that conversation immediately when we return next week. >> thank you. >> the final question on this bill, we have one more to do.
▶ 2:57:22Sen. Warnock: Senate bill number 919, cosponsored by senators haggerty, lawrence, scott, alsobrooks, jill of ram -- gillibrand. [roll call]
▶ 2:58:39Sen. Warnock: >> I like that better than this, this is great. [roll call] >> the vote is 18 and favor, six opposed. >> senate bill 919 is reported as an amendment to the full senate. I ask unanimous consent staff could make technical in performing state -- changes.
▶ 2:59:09Sen. Warnock: Hearing no objections, so ordered. I moved to call up s875. We dispense with the reading of all amendments, centers will find printed copies of those amendments in the text before you. I moved to consider the managers packets on amendment 16.
▶ 2:59:34Sen. Warnock: It includes amendment 18 which adds the taylor rapp that requires regular -- federal regulators for community banks. I urge all of my colleagues to support the amendment. Would anyone like to speak? Senator rounds.
▶ 2:59:49Sen. Rounds: I will be very quick. I like to thank you for including the taylor act. Financial institutions were negatively impacted by burdensome unnecessary regulations due to disproportionate client cost. The taylor act mandates financial institutions risk profiles when formulating regulations.
▶ 3:00:16Sen. Rounds: It requires the agency to submit an annual report detailing regulatory adjustments and efforts. I want to thank the cosponsors of the bill, senators kramer, tillis, compared with the firm act, this is plain common sense to get our regulators refocused on the statutory mandate. Thank you. >> is there any further discussion? I will ask for a voice vote. >> they aye's have it.
▶ 3:00:49Sen. Rounds: We will move to read amendemnet we will move to read amendemment 10. >> my amendment strikes this bill and replaces it with section 10 of the safer banking act, which this committee favorably reported last congress on a bipartisan 14-9 vote. The bipartisan safer banking act would prohibit the banking agencies from debanking people unless agencies have a valid reason to do so.
▶ 3:01:23Sen. Rounds: They replace the use of regular -- reputation risk without eliminating the concept entirely. Policies adopted by the banking regulators and 2018 when donald trump was president and republicans were in charge of both houses. This bill completely rights reputational risk out of the supervision regulation area enforcement. That is the message bank supervisor should not be raising red flags for risky activity.
▶ 3:01:53Sen. Rounds: I believe that is a mistake. Reputational risk is financial risk. Just look at the 2018 -- 2008 crisis. Customers, creditors, the market loss of banks for underwriting mortgages misleading investors about the risk of complex securities tied to those mortgages. This amendment prevents debanking in a responsible way.
▶ 3:02:20Sen. Rounds: >> I will urge my colleagues to oppose this amendment. Section 10 of the safer banking act was carefully crafted and I commend those who drafted it. The firm act eliminates reputational risk altogether. We have seen regulators over and over use it in broad, interpretive ways that compromise their authority from our perspective. I urge my colleagues to vote no.
▶ 3:02:51Sen. Rounds: [roll call]
▶ 3:03:41Sen. Rounds: The vote is 13 opposed, 11 in favor. >> the amendment is not agreed to. We will call reed amendment 13. >> I believe it is 11. >> even better. >> my amendment would help ensure the banking agencies will continue to have all of the authority to root out bad actors from the banking system.
▶ 3:04:10Sen. Rounds: Banks routinely apply reputational risk policies and procedures to make sure they are not doing business with dangerous individuals or groups. This includes individuals and organizations linked to terrorist groups like ms 13 and enemies or adversaries. We see what happens when banks discount reputational risk.
▶ 3:04:36Sen. Rounds: For example, two large banks decided within their risk tolerance to do business with jeffrey epstein after his first conviction for soliciting child prostitution. Overlooking that, facilitated additional comments and resulted in banks paying 365 million dollars in settlements. The prohibitions in this bill are so overboard that the regulators will find it harder to hold this kind of behavior.
▶ 3:05:07Sen. Rounds: They did to allow reputational risks like sex trafficking of a minor because simply the client is a wealthy, lucrative, making money. My amendment will preserve this. I would ask for the yay's and na y's. >> I urge my colleagues to oppose this amendment. Each of the activities listed are already crimes.
▶ 3:05:38Sen. Rounds: It would be illegal for a bank to engage in any conduct with criminals. We have very specific anti-money laundering laws that prevents banks from doing business with identified affiliates in addition to doing any other illicit business. The firm act is not in any way curtail regulators or law enforcement's ability to penalize banks from doing business with criminals.
▶ 3:06:07Sen. Rounds: [roll call] the
▶ 3:06:56Sen. Rounds: Vote is 13 opposed, 11 in favor. >> lee amendment is not agreed to -- the amendment is not agreed to. We will move to cortez masto five. >> this creates an exception to bank examiners considering reputational risks for any financial institution.
▶ 3:07:18Sen. Rounds: It adds a new section, section six, now section seven exempting bank regulators when banks are serving foreign governments hostile to the united states. It allows bank regulators to continue their current practice of considering all risks. It permits bank examiners for reputational risks for banks doing business with governments and leaders of countries adversarial to our nation.
▶ 3:07:46Sen. Rounds: It lists china, iran, north korea adversary to the united states. Considering reputational risks for banks for the leaders of china and other hostile powers. Years ago they went to great lengths to help former chilean dictator hide his stolen wealth. That closed the largest bank then in washington, D.C.
▶ 3:08:15Sen. Rounds: It prohibits bank examiners from considering reputational risk to any bank or credit union for any reason. Instead bank regulators which would occur if banks do business it provides services to state terrorism. That is common sense, I urge my colleagues to support. >> I appreciate the sentiment of my colleague, I encourage my colleagues to vote no.
▶ 3:08:47Sen. Rounds: Adversarial nations are subject to sanctions preventing banks from conducting business with them. It would be inappropriate for the congress to give financial regulators the authority to give activity. It seeks to prevent banking regulators from using their authority to pick winners and losers. It simply prevents regulators from picking and choosing. The clerk will call the roll.
▶ 3:09:14Sen. Rounds: [roll call] the
▶ 3:10:13Sen. Rounds: Vote is 13 opposed, 11 in favor. >> the amendment is now recognized. We will call up amendment number nine.
▶ 3:10:28Senator Cortez Masto: Related to section seven which requires a report to congress. The amendment would add to that report a requirement for regulators to list the names of all financial institutions which have more than half their net income from overdraft and/or nonsufficient fees. As part of that report they should analyze and inform the public which banks and credit unions generate more than half their profits from overdraft or nonsufficient fund fees.
▶ 3:11:01Senator Cortez Masto: We heard from witnesses who urge congress and banking regulators to scrutinize banks for overdraft fees. My amendment urges regulators whose main business is overdraft fees. >> I encourage my colleagues to oppose this. It is a narrowly crafted bill. The bank has nothing to do with any form of bank activities.
▶ 3:11:33Senator Cortez Masto: It would be inappropriate to include a study on any form of bank activity. The clerk will call the roll. >> it is not a study, it is a report. Adding to the report required to the bill. >> what she said, the clerk will call the roll.
▶ 3:11:54Senator Cortez Masto: [roll call] the
▶ 3:12:47Senator Cortez Masto: Vote is 13 opposed, 11 in favor. >> the amendment is not agreed to. The question is now on ordering senate bill 875 reported as amended, the clerk will call the roll.
▶ 3:13:12Senator Cortez Masto: [roll call] the
▶ 3:14:00Senator Cortez Masto: Vote is 13 opposed, 11 in favor. >> the aye's have it. I ask unanimous consent staff allowed to make technical changes. Any objections, hearing no objections. Without any further statements the session is now adjourned.