The question must be asked as Rep. Patrick McHenry, R-N.C., takes his leave of Congress:
What happens to financial services regulation, and by extension, payments innovation?
As had been widely reported Tuesday (Dec. 6), McHenry said that he won’t seek re-election when his current term is up. McHenry, who briefly served as interim speaker of the House this year, has been in Congress since 2005.
During his tenure on the Financial Services Committee, stretching back to January 2019 as ranking member and then more recently as chair, McHenry’s been no stranger to making strong pronouncements on the state of financial services innovation, and no stranger to criticizing what he’s seen as regulation, and regulators standing in the way of that progress and modernization.
As recently as last week, and as detailed here, McHenry stated that the Consumer Financial Protection Bureau (CFPB) is serving as a political actor rather than an independent financial regulator. He contended that the CFPB has also made changes that it doesn’t have authority to make — illustrated, he said, by the 1071 rule regarding small business data collection, requiring “onerous amounts” of information.
McHenry’s also been among the group of lawmakers challenging the funding structure of the agency itself. A month ago, he slammed the CFPB’s notice of proposed rulemaking on digital wallets as limiting nonbanks’ ability to offer new payments products and services.
Earlier this summer, legislation authored by McHenry, along with fellow Republican Glenn Thompson of Pennsylvania, gives the Commodity Futures Trading Commission (CFTC) explicit spot market authority over crypto commodities, in a move that the representatives said would create favorable environment for market participants and promote increased efficiency in the crypto space.
In June, McHenry introduced two pieces of legislation to bring transparency and accountability to FinCEN. The Accountability Through Confirmation Act and the Protecting Small Business Information Act aim to give small businesses the time to comply with the reporting requirements without being burdened by what critics charge is an overly complicated compliance regime.
And upon the news that PayPal had launched its own stablecoin in August, McHenry said in a statement that “this announcement is a clear signal that stablecoins — if issued under a clear regulatory framework — hold promise as a pillar of our 21st century payments system.”
His stance towards regulation, and in general, innovation, was crystalized in a late 2022 interview with Karen Webster, where he said that “the nature of legislative compromise does not often create something of beauty. It creates something of practical consequence. And this is what I’m going for.” Stablecoins are “the ‘on-ramp’ to digital assets,” said McHenry, and constructing that on-ramp requires some standardization at the federal level.
But beyond the crypto space, later that year, McHenry reintroduced H.R. 9556, the Financial Services Innovation Act, which would, in part, require federal regulators to create Financial Services Innovation Offices within their agencies to foster innovation.
As chairman of the House Financial Services Committee, his departure leaves that top role open, and jockeying may begin among subcommittee chairs to gain the position. The changeover is one where someone new takes his place — and thus, so does a new style, and perhaps new approach to legislation — but McHenry’s stance through a volatile time for financial services has been that regulatory over-reach turns would-be guardrails on innovation into roadblocks and stumbling blocks.
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