Fresh off his retirement announcement, House Financial Services Committee Chair Patrick McHenry (R-N.C.) spoke at length to us about financial policy and what he thinks 2024 could hold. There’s a lot of news to unpack, so let’s dive right in.
Start high level: As we wrote in Friday’s PM edition, McHenry is more bullish than we’d expect about the potential for policymaking next year given the upcoming elections. But the North Carolina Republican thinks that the FY2024 spending fights scheduled for January and February offer a rare opportunity for legislating in the new year.
“With the twists and turns of Washington right now, you don’t know what the next couple months hold,” McHenry said.
The House Financial Services Committee’s tentative early 2024 schedule includes hearings focused on Biden’s “rogue regulators” in January, “holding bad actors accountable” in February and “ensuring American competitiveness” come March.
McHenry’s personal legislative goals continue to revolve around consumer data privacy reform, digital asset reform and capital formation.
The Senate’s political dynamics will continue to be the chief obstacle to those efforts, particularly with crypto. Senate Banking Committee Chair Sherrod Brown (D-Ohio) opposes the House GOP’s digital asset bills. Brown’s tough-looking reelection makes us more skeptical about the potential for bicameral dealmaking.
Digital download: McHenry told us it was time for the House to take a closer look at the anti-money laundering rules for crypto. This should get both the Senate and the crypto industry’s attention.
To date, the Senate has been the most focused on anti-money laundering reform targeting crypto. When we pointed that out to McHenry, he acknowledged this as an area of potential bicameral compromise — which is news in and of itself:
This effort is in the very early stages, to be clear. But McHenry’s interest in anti-money laundering policy is a sign the industry might need to brace for a serious regulatory reform effort.
Stablecoin status: McHenry isn’t backing down on his committee’s approach to regulating stablecoins, which has encountered resistance from Democrats and the Biden administration over limiting the Fed’s role.
McHenry acknowledged that the Fed isn’t getting the supervision powers it’s asking for when it comes to state-issued stablecoin firms. Stablecoins imitate the role of private money in crypto, which makes the U.S. central bank more than a little nervous.
But McHenry says his stablecoin bill is still better than the status quo. “Right now, there’s no role for the Fed. There’s no federal role,” he said. “So they can take a modest amount of power in the hopes of later getting more power, or they’ll get none.”
The veteran lawmaker argued that the Fed needs to wait for the stablecoin ecosystem to develop and that state authorities like New York and California are well-positioned to get the ball rolling:
Outbound overtures: One area where McHenry’s not sounding so compromise-y? Outbound investment reform, another conflict that spilled out into the open during final negotiations around the annual defense authorization package.
Republican lawmakers including House Foreign Affairs Committee Chair Michael McCaul (R-Texas) and Sen. John Cornyn (R-Texas) have a bill that would introduce new reporting requirements on American investments abroad. McHenry and several other senior lawmakers on the House Financial Services Committee are opposed to that approach.
And while some lawmakers, including McCaul, have suggested there could be some compromise between the two camps, McHenry wants to make sure lawmakers understand how far apart the bills are today.
“I’m talking about sanctions. They’re talking about reporting requirements,” McHenry said. “Sanctions have a global effect. Their reporting requirement would have a domestic effect. I’m talking about an effective, time-tested regime. They’re trying to create a new reporting requirement.”
— Brendan Pedersen