HOUSE FINANCIAL SERVICES COMMITTEE HEARING
Overview
For questions on the note below, please contact the Delta Strategy Group team.
On March 11, the House Financial Services Committee held a hearing entitled “Navigating the Digital Payments Ecosystem: Examining a Federal Framework for Payment Stablecoins and Consequences of a U.S. Central Bank Digital Currency.” Witnesses in the hearing were:
- Caroline Butler, Global Head of Digital Assets, The Bank of New York Mellon Corporation
- Charles Cascarilla, CEO and Co-Founder, Paxos
- Patrick Collison, Co-Founder and CEO, Stripe
- Randall Guynn, Chairman, Financial Institutions Group, Davis Polk & Wardwell
- Carole House, Senior Fellow, GeoEconomics Center, Atlantic Council
Legislation noticed for the hearing:
- H.R.___, the Stablecoin Transparency and Accountability for a Better Ledger Economy (STABLE) Act of 2025
- H.R.___, the CBDC Anti-Surveillance State Act
- H.J. Res. 64, Disapproving the rule submitted by the Bureau of Consumer Financial Protection relating to “Defining Larger Participants of a Market for General-Use Digital Consumer Payment Applications”
Below is a summary of the hearing prepared by Delta Strategy GroupDelta Strategy Group. It includes several high-level takeaways, followed by summaries of opening statements.
Key Takeaways
The following is a summary of the main topics explored in the hearing, with further details in the Discussion section below.
- The hearing discussed how stablecoin transactions reduce friction in cross-border payments, streamline commercial transactions, and give more communities broader access to digital financial tools. Representatives and witnesses cited the need for legislation, such as the Stablecoin Transparency and Accountability for a Better Ledger Economy (STABLE) Act, to provide clarity in its stablecoin regulatory framework, and highlighted the role of private sector innovation.
- There were partisan divisions in regard to certain proposed legislative provisions and extent of necessary regulatory safeguards, such as Know Your Customer (KYC) and Anti-Money Laundering (AML) alongside consistent adherence and enforcement of the Bank Secrecy Act (BSA). Representatives and witnesses discussed how the Europe’s Markets in Crypto-Assets Regulation (MiCA) framework can serve as a guide and reference point in creating a U.S. regulatory framework.
- Chairman Hill (R-AR) raised how global payment systems are leveraging technology to modernize legacy infrastructure, drive innovation, and expand access while lowering costs, citing the evolution of payment stablecoins and their increasing adoption beyond the digital asset ecosystem.
- Republicans discussed the importance of fostering economic growth with clear regulations that matches the pace of international financial innovation, with Representative Barr (R-KY) citing examples about the digital yuan entering a Central Bank Digital Currency (CBDC) market. Representatives discussed the importance of fostering and enabling private sector engagement as the driving economic force of innovation.
- Representative Emmer (R-MN) cited the need to pass the Anti-CBDC Surveillance State Act and stated that “CBDC technology is inherently un-American.” He emphasized the need to prioritize pro-stablecoin legislation alongside anti-CBDC legislation.
- Democrats, led by Ranking Member Waters (D-CA) and Representative Sherman (D-CA), emphasized the importance of effective KYC and AML regulations, alongside strict adherence to BSA and Combating the Financing of Terrorism (CFT) protocols, within guardrails for stablecoin and cryptocurrency regulation.
- House raised the importance of privacy concerns and conflict of interest protections for a U.S. dollar-backed stablecoin, and Representative Lynch (D-MA) citing risks to the stability of a U.S. CBDC during times of market stress. House called for a combination of STABLE Act and the McHenry-Waters draft legislation.
Opening Statements and Testimony
Chairman French Hill (R-AR)
The STABLE Act reflects coordinated themes from feedback and refinements serve to strengthen the operational standards for payment stablecoin issuers, as well as clarify the supervision and enforcement authorities of the state and federal regulators that will oversee these entities. The STABLE Act also makes sure that BSA and AML compliance and oversight are a critical part of this framework. A properly regulated stablecoin market can strengthen the U.S. dollar’s dominance, modernize our payments infrastructure, and promote financial access without government overreach. There is an unfortunate and competing vision for the future of digital money that puts the government at the center of every transaction: CBDCs. A government-controlled digital dollar would put the Federal Reserve (Fed) in direct competition with the private sector and undermine the very progress that stablecoins are making, as well as troubling cases of the debanking of politically favored industries. Unlike stablecoins, which operate in a competitive market, a CBDC would concentrate financial power within the federal government, restrict consumer choice and undermine the innovation that has made U.S. financial markets the strongest in the world. A CBDC would suppress competition, jeopardize financial privacy, and weaken the role of the U.S. banking system. We need to prohibit a U.S. CBDC, and I support Representative Emmer’s Anti-CBDC Surveillance State Act in moving full steam ahead to strengthen and expand the pro-innovation agenda as the U.S. stands at the forefront of financial innovation.
Ranking Member Maxine Waters (D-CA)
We need to craft commonsense crypto legislation with guardrails for consumers, and strong oversight. In less than two months, President Trump and Elon Musk have undermined all of this work. We can still work together on a bill that requires stablecoins be robustly and fairly regulated. The bill noticed for this hearing strips away critical protections to shield investors from criminals and tears down the wall that used to separate banking from commerce, allowing big tech firms to issue their own money. We must go back to the drawing board on stablecoins, and the best starting point is the Waters-McHenry bill released a few weeks ago. The Republican resistance to allow the Fed to study CBDCs is not only anti-innovation but is anti-American as it helps China win the digital currency “space race” and undermines the U.S. dollar as the world’s reserve currency.
Representative Bryan Steil (R-WI)
The goal of our digital assets policy is to make sure that the next wave of crypto and web three businesses emerge in basements and in dorm rooms, not in boardrooms and law firms. Digital assets and blockchain chain technology are democratizing the Internet and our financial choices. These technologies can extend dollar dominance, lower costs, and expand financial choices. The STABLE Act establishes a framework for issuing and operating U.S. dollar-backed stablecoins. We are now in the process of collecting feedback on the legislation as we move forward in where we are today and where we are going.
Representative Stephen Lynch (D-MA)
It is critical to prioritize financial stability, national security, and consumer protection. I have grave concerns about the STABLE Act allowing big tech firms to effectively become stablecoin issuers and dominate the stablecoin market, leaving consumers vulnerable to financial data exploitation and removing the separation of banking from financial commerce. Uninsured deposits have proven to be vulnerable to systemic runs. Legitimizing stablecoins without adequate safeguards risks financial stability and allowing issuers a state pathway without sufficient prudential oversight creates a race to the bottom, with very little in the STABLE Act to prevent money laundering in illicit finance as every major economy races ahead of the US and developing a central bank digital currency. Discussions in the U.S. have been obscured by disinformation and political ideology, so if we share the goal of maintaining dollar supremacy, we should encourage this type of innovation.
Caroline Butler, Global Head of Digital Assets, The Bank of New York Mellon Corporation
Blockchain, specifically payment stablecoins, has the potential to unlock greater utility of assets, enhance resiliency, and drive operational efficiencies. We need to maintain the core tenets of asset safety and protection, regardless of the technology wrapper applied to the asset. Embracing blockchain technology and stablecoins in connecting the traditional and digital markets is necessary to support innovation in the global financial system. We need informed legislation and associated thoughtful regulatory frameworks designed to protect customers, promote resiliency, and allow banks to participate in the stablecoin ecosystem. BNY is focused on using the benefits of blockchain to develop other secure, innovative, and client-centric solutions, including: 1) tokenization will result in greater speed, resiliency, and operational efficiencies; 2) connecting traditional and digital rails can offer scalable services that run 24/7 for our clients; and 3) integrating blockchain technology can lead to new financial products and transform roles and operations in traditional finance. BNY provides custody and other financial services to governments and institutions, not consumer banking. Our Clearance and Collateral Management business plays a central role in supporting U.S. Treasury markets, with the average settlement of $16.3 trillion in Treasury securities per day. The stablecoin ecosystem will continue to develop as market participants explore use cases based on their business models and client needs. This ecosystem will benefit from federal legislation that advances clarity and consistency, no matter the type of stablecoin issuer or the governing regulatory regime.
Charles Cascarilla, CEO and Co-Founder, Paxos
Stablecoins are a national imperative for preserving the U.S. dollar’s global dominance, requiring the U.S. to set global standards that enable broad adoption and interoperability. The STABLE Act is a commendable legislative achievement, but enhancements can ensure its lasting success. The U.S. dollar must adapt to an always-on, internet-based, AI-driven global economy to maintain its role as the world’s reserve currency. Without enabling the dollar’s continued leadership, foreign currencies, tokenized assets like Bitcoin or gold, and CBDCs that may not align with our values could challenge its position. Blockchain-based stablecoins allow for secure, programmable payments that move instantly with minimal cost, making them a more efficient way to distribute dollars globally. The private sector is the primary driver of financial innovation, and there is no immediate need for a U.S. CBDC, as private-sector developments will continue to shape the future of digital payments. The STABLE Act correctly distinguishes between stablecoin issuers and traditional banking institutions, and designating the OCC as the federal regulator for non-bank issuers is the right approach. The Act appropriately holds stablecoin issuers to AML, KYC, and BSA standards without exceptions, ensuring financial integrity while avoiding unnecessary compliance burdens that could hinder innovation. Strong reserve requirements, including 1:1 cash backing, a ban on rehypothecation, and strict transparency measures, align with existing global regulatory standards. To further strengthen the Act, two refinements are necessary: 1) cross-jurisdictional reciprocity and 2) equivalence in state and federal oversight. Treasury should establish clear timelines for recognizing overseas jurisdictions with comparable regulations to prevent bureaucratic delays, enhance global standards, and promote regulatory interoperability. Stablecoin issuers should have the flexibility to choose regulation at the state or federal level, provided that state regulations meet or exceed federal standards in solidifying the U.S.’s role in shaping the future of stablecoins and maintaining financial leadership.
Patrick Collison, Co-Founder and CEO, Stripe
Stablecoins allow for automated financial transactions, fostering new business models and strengthening financial integrity through transparent networks that improve fraud detection and reduce unnecessary rejections, expanding financial inclusion. Since launching stablecoin payments in 2024, there has been more transaction volume in one week than Bitcoin saw in a year and a half. Stablecoins are already being used for real-world applications, enabling businesses to expand, simplifying treasury management, reducing remittance costs, and providing financial stability in inflation-prone economies. Despite regulatory uncertainty, 99 percent of stablecoins are USD-backed, resembling the “petrodollar” system in strengthening global demand for U.S. currency. Thoughtful policy can cement the dollar’s leadership in digital finance. A stablecoin regulatory framework should 1) ensure clarity in classification, 2) encourage innovation while addressing core risks such as AML and cybersecurity, 3) promote neutrality by enabling interoperability with existing payment systems, 4) protect consumers through transparent reserve and redemption requirements, and 5) establish U.S. leadership in setting global standards. Stablecoins present an opportunity to enhance financial efficiency, reinforce U.S. monetary dominance, and drive economic growth. With balanced regulation and a trusted financial ecosystem, the U.S. can lead the next phase of financial innovation, with stablecoins already enhancing the dollar’s status as the world’s reserve currency and lowering American borrowing costs.
Randall Guynn, Chairman, Financial Institutions Group, Davis Polk & Wardwell
With a properly calibrated reserve of liquid assets, capital buffer, and no material liabilities beyond stablecoin obligations, payment stablecoins should be as safe as insured bank deposits and central bank money. The STABLE Act seeks to bring payment stablecoins inside the regulatory perimeter, just as earlier forms of private money have been integrated. It requires stablecoin issuers to obtain a state or federal license, maintain a one-hundred percent reserve of high-quality liquid assets, adhere to capital requirements, and limit activities to prevent risk. The list of permitted reserve assets should be expanded to include all short-term U.S. government securities with an original maturity of less than one year, and the Fed should have limited discretion to designate additional assets that are sufficiently safe and liquid. A risk-based capital framework, rather than minimum leverage requirements, should apply, as stablecoin issuers are prohibited from engaging in maturity or liquidity transformation. The STABLE Act aligns with the regulatory model of the dual-banking system, permitting issuers to operate under either state or federal oversight, but it diverges by not applying Bank Holding Company Act (BHC Act) restrictions to stablecoin issuers’ parent companies, recognizing that stablecoins do not pose the same risks as banks. While proponents argue that a CBDC could improve financial inclusion and monetary policy, its risks and threats to financial privacy, financial freedom, and financial stability must be carefully considered. The alleged benefits of a CBDC have not been demonstrated to outweigh its risks, nor has it been shown that private sector stablecoins, properly regulated, could not achieve the same benefits without the associated concerns. The STABLE Act, with appropriate refinements, provides a framework to regulate payment stablecoins while maintaining financial privacy, economic freedom, and market-driven efficiency.
Carole House, Senior Fellow, GeoEconomics Center, Atlantic Council
We need a clear regulatory pathway for stablecoins are critical to ensure trustworthy and affordable financial services while reinforcing U.S. leadership in financial innovation. A comprehensive stablecoin framework must balance opportunities and risks, fostering innovation while addressing national security concerns such as billion-dollar hacks by rogue nations and the use of stablecoins in transnational crime and market abuses. Stablecoins real-world applications remain largely in the early stages, with most use cases still centered on settlement of trading activity. Strong safeguards are essential to maintaining U.S. competitiveness and ensuring a level playing field where compliant U.S. firms are not disadvantaged by weaker enforcement against foreign competitors. Without proper enforcement, regulatory frameworks fail to protect consumers and put compliant firms at a disadvantage. The STABLE Act incorporates important safeguards, including high-quality reserve requirements, dual state and federal oversight, and restrictions on hypothecation of Fed assets, but must address several missing elements to create a truly comprehensive framework. Federal oversight must ensure systemic stability while preserving state chartering options, allowing agencies like the Fed to fulfill their mandate on financial stability and monetary policy. The framework should also expand risk coverage to include credit, counterparty, market, and concentration risks. The Act lacks clear enforcement mechanisms, affiliate controls, and bankruptcy resolution protections for consumers in case of failure. Stronger AML and sanctions enforcement, including clear directives on extraterritorial application and compliance, is necessary to prevent U.S. dollar stablecoins from being exploited by cartels, sanction evaders, and terrorist financiers. Stablecoin issuers must comply with sanctions, including freezing and recovery capabilities.
Discussion
Chairman Hill (R-AR): How would the STABLE Act address inconsistences across Administrations’ priorities and alterations of rules on banks’ ability to engage? Do the same kinds of banking services deserve the same kind of regulatory treatment? Bulter: The STABLE Act gives clarity and certainty to know what activities we can perform, with all banks meeting the same set of standards. We need to ensure that there is a system of trust with regulatory oversight in financial markets. Same service, same risk, same regulation.
Chairman Hill (R-AR): Can you describe the benefits the dual banking system has brought to the U.S. financial system and explain how our framework attempts to replicate that for stablecoins? Would the federal floor prevent a race to the bottom? Guynn: The dual banking system has enabled banks to serve as fifty laboratories for innovation. While the federal government has set minimum banking standards, it has not established a comprehensive federal framework, leaving banks subject to both federal and state regulations. The STABLE Act mirrors this structure with two key differences: it creates a unified federal framework in 4A that applies to all federally and state-qualified payment stablecoin issuers, and any state-level framework must meet or exceed these federal standards. This ensures a regulatory floor, preventing a race to the bottom, as all state regulators must comply with or surpass the federal standards in 4A.
Chairman Hill (R-AR): Would you say the STABLE Act is a light-touch regulation, or does it strike the right balance? Cascarilla: New York State is the only jurisdiction where stablecoins can potentially be issued under regulation. Preserving this system fosters innovation. At the same time, establishing a federal floor would create consistency nationwide and even globally. Rather than a race to the bottom, it would drive a race to the top, ensuring all issuers meet the same high standards
Ranking Member Waters (D-CA): Why is it important to recognize the growing integration of cryptocurrency as a tool for illicit activity, given its potential to threaten system integrity and stability, as well as the pressure from adversarial nations? House: It is entirely necessary. It would be unacceptable for the nation’s greatest threats, often subject to our sanctions, to leverage the U.S. dollar and access our financial system. Yet this is happening with U.S. dollar-denominated stablecoins. Protections, like those on extraterritorial application, are crucial to ensure our adversaries are not exploiting our system.
Representative Lucas (R-OK): Do you think a U.S. CBDC would further polarize the Fed, and how could its increased authority, such as issuing a U.S. CBDC, be abused by partisan agendas? Guynn: Operation Choke Point 1.0 and 2.0 have shown that the politicization of the Fed is a real possibility. A CBDC would give Fed staff direct visibility into nearly every transaction made by Americans, and at least one of them would likely be tempted to use that information to advance what they see as worthy political goals. This poses serious threats to financial privacy, core freedoms, and financial stability. In times of stress, if a CBDC is available to retail investors, there would be a strong temptation to pull money from the banking system into CBDC.
Representative Lucas (R-OK): Why is it so important for us to catch up to the other jurisdictions, and what happens when we fall behind the UK and the EU? Butler: We need to be able to use the newest technology to meet client needs and market demand. The U.S. dollar is the largest currency for trade, and the stablecoin is just a representation of that dollar on a blockchain. Blockchain enables the dollar to be used more because of the benefits.
Representative Lucas (R-OK): What are the risks of passing a bill without the proper protections and potential impacts of stablecoins on financial innovation and consumer access? Cascarilla: The key point with a CBDC is that it creates a competitor for the private sector. At this stage in the market, maximizing innovation is crucial, and stablecoins need to achieve broad adoption for U.S. benefit; Collison: Stablecoins make money movement faster cheaper and more programmable creating entirely new kinds of financial applications. This adoption is not speculative, it is already occurring.
Representative Velaquez (D-NY): What privacy concerns do you think need to be further addressed in this proposal? House: The Fed does not have the authority to issue a CBDC, and the legal necessity of the legislation on banning issuance of a retail CBDC remains in question. There is no reference to privacy broadly nor the implications of publishing transactions on a public, unobscured ledger that presents risks to consumers. We still need privacy legislation.
Representative Velaquez (D-NY): How does the current participation of banks in stablecoin arrangements facilitate broader trust and reduce risk in the financial system, particularly compared to nonbank participants? Butler: We custody the reserve assets in accordance with our long-standing custody practice. We apply the same customer and asset protections to the reserve custodian work that we do to the traditional side; it is effectively the same custody and protections provided. We need to ensure that banks providing custody maintain implicit trust and confidence, and in accordance with federal legislation and regulations. We need a framework that provides prudential protections measures, such as cyber security and basic information security measures, to defend against exploits.
Representative Huizenga (R-MI): What is one aspect of the STABLE Act that hits the mark? Butler: Asset segregation as the foundational principle of custody. We need to make sure that that is preserved in the digital ecosystem as well as the traditional ecosystem; Cascarilla: I agree, we need to make sure the dollar is always a dollar through a trust or custodian, preventing asset fluctuation. We need a very clear set of guidelines for what is investable, allowing a dollar to be a dollar and provide confidence for use in everyday commerce; Collinson: We also need a viable state-based framework; Guynn: Stablecoins need to become “no questions asked money” with a one-hundred percent reserve requirement, the properly calibrated capital requirement, and the restriction on activities that would prevent it from having any material amount of other liabilities other than stablecoin liabilities; House: I agree with the proposed measures, particularly the 1:1 reserve requirements and the restriction on rehypothecation of assets, which are absolutely fundamental. I also support the inclusion of cybersecurity protections.
Representative Huizenga (R-MI): What are the pros and cons of the STABLE Act legislation discussion draft on payment stablecoin issuers being allowed to issue stablecoins through a subsidiary? Guynn: There are mostly pros. It is very easy to match up the reserve with the stablecoin liabilities if you were to issue stablecoins out of an entity engaged in a variety of activities. It would be very difficult, especially for an insured depositor organization with depositor preference rules, as well as ensuring restrictions on liabilities.
Representative Huizenga (R-MI): Should we be following the EU’s lead with the MiCA framework? Butler: We should follow their lead in the sense of providing clear guidelines. We should engage the private space, like we are doing, to take of the best of MiCA rules and apply them here.
Representative Barr (R-KY): Why is the STABLE Act consistent with Section VIII and X of Article I? Guynn: States have always chartered banks to issue private money in the form of paper, then as demand deposit claims. Private money accounts for eighty to ninety percent of the U.S. money supply. Claims against the Fed only account for a small fraction.
Representative Barr (R-KY): How would stablecoins issued under the STABLE Act be different than a CBDC in terms of the potential to erode the deposits base? Butler: There is consistency from applying the same standards across the ecosystem, participating in the ecosystem with clarity on what can and cannot be done. The STABLE Act’s asset protection rules are very important, including AML and BSA. We need to ensure those are protected at all times, carrying over the protections within traditional banking systems to the digital assets ecosystem. Innovative competitiveness and competitive solutions need to be the backbone.
Representative Barr (R-KY): Under the STABLE Act, what roles do you see banks playing in the payment stablecoin ecosystem? Butler: A very similar role to today, with trust and confidence in the ecosystem over a variety of payment rails. We will continue to evolve payment rails as technologies evolve.
Representative Barr (R-KY): What impact do recent actions, such as the rescission OCC Interpretive Letter 1179 and withdrawal from two interagency statements, have on the banking system? What other actions can be taken to ensure that banks have the clarity necessary to engage with the digital asset ecosystem while maintaining compliance with other bank related laws? Guynn: This means that the banks can now, without uncertainty, act as custodians, service providers, and as issuers of stablecoins. This is a good experiment, with the OCC as a competent regulator. A regulation could be issued that says that acting as an agent or principal to respect to digital assets, including stablecoins, is financial in nature for purposes of the BHC Act.
Representative Meeks (D-NY): What is the importance of working with the New York DFS in building a strong, well-regulated crypto ecosystem? What are the advantages of state regulation for a stablecoin issuer? Butler: Work closely with regulators through engaged dialogue on a continuous basis to ensure operable and operational clarity as these rules and the ecosystem evolves. We need to ensure two-way communication, with the clear and consistent framework across the entire ecosystem upheld at all times. It should not be about whether it is a state pathway or a federal pathway. We need to have consistency at the federal level for our regulations and our legislation so that we can ensure the integrity of the entire ecosystem, and all players are meeting the high standard; Cascarilla: NYDFS was the first to approve the issuance of a regulated stablecoin, with a state pathway and DFS regulatory frameworks as a cornerstone.
Representative Meeks (D-NY): What are the greatest risks in illicit digital financial activity, and how should they be addressed? Cascarilla: There need to be bank standards, such as AML, KYC, and BSA. New technology creates new tools, so there has to be new frameworks. There has to be new ways to be able to understand how assets are being utilized. With the right types of protections and the right types of bank-like standards or KYC, there can be a framework that marries and balances both the risks and the rewards.
Representative Williams (R-TX): What are the consequences of stablecoins being primary denominated in the Chinese yuan and not the U.S. dollar? Cascarilla: Currently, 98 percent of transactions happening in the crypto-related space are happening against U.S. dollars. If the U.S. has not set a clear framework, it opens up the possibility for other nations and other types of currencies to gain not just a foothold, but even a predominance.
Representative Williams (R-TX): Are there examples of Stripe’s stablecoin orchestration platform to break free from authoritarian governments or deflationary national currencies? Collinson: Yes, there are many. There is a comparison to the “petrodollar,” with emerging markets where people are taking enthusiastic advantage of this new liberty and this new capability. We need a fortified federal framework to establish U.S. competitiveness and enable this ecosystem. There is a risk that if the US adopt the posture of discouraging and inhibiting stablecoin adoption, the market will respond and adapt, with a non-U.S. preeminent stablecoin currency to our national detriment.
Representative Scott (D-GA): Should stablecoin issuers be required to hold fully audited reserves at insured bank in the event of a breach? How can federal agencies ensure stablecoin issuers adopt industry best practices in cybersecurity and risk mitigation? Butler: Yes, full reserve holdings is critical, as reflected in proposed legislation. It is essential to ensure that federal agencies have a line of sight for oversight on large stablecoin actors as very high value targets and have the responsibility to custody many of these assets, with a federal oversight arm. Some prompting and encouragement of industry to help to identify where certain vulnerabilities are being exploited and also to create new standards that are bespoke and unique to the space.
Representative Emmer (R-MN): What could a potential U.S. CBDC accomplish that a privately issued stablecoin could not? How does Section 15 of the STABLE Act, which requires federal regulators to establish reciprocal agreements with jurisdictions that have substantially similar regulatory frameworks for dollar-backed stable payment stablecoins, impact the extension of the dollar’s status as the world’s reserve currency? Cascarilla: We need to embrace and enable private sector innovation. Everyone wants a dollar, and the U.S. is its home. Exporting dollars is exporting American values. We want to make sure we have the same set of rules in the U.S. as we have around the world to avoid inter-jurisdictional arbitrage and have that same set of rules that everyone must meet to access the U.S. market. It will create a race at the top, not a race at the bottom.
Representative Lynch (D-MA): Is the stablecoin market subject to concentration, and what happens to competitiveness without protections against large firms coming into play? House: Yes, but the level also depends on whether a regulatory framework is in place to enable competition while ensuring protections. Without such safeguards, there is a risk that large players could leverage their market dominance through devices and applications to take over. Major players, particularly those operating without much transparency or customer protection, would still be significant competitors. It could break down the separation between banking and commerce, presenting a major risk if you start to conflate those without protections similar to those in the banking system.
Representative Lynch (D-MA): Do you support stablecoins that offer interest and are actual deposits? Guynn: Yes, if they have appropriate calibration. The goal is to structure payment stablecoins so that they are “no questions asked” money.
Representative Loudermilk (R-GA): How would the demand for U.S. Treasuries created by new stablecoin collateralization requirements affect demand for U.S. dollars and U.S. dollar foreign exchange rates globally? Butler: As demand for U.S. dollars represented on-chain through stablecoin growth increases, the underlying reserve would also grow. Given that U.S. Treasuries serve as the backbone of the global economy in terms of trust and security, they would continue to play that role through U.S. stablecoins.
Representative Davidson (R-OH): Why is it important to protect self-custody of assets, and how does it fit into permissionless transactions? Butler: Self-custody has two key considerations: the underlying asset and the protections ensuring asset safety. If asset safety protections, such as segregation, AML, KYC, and BSA compliance, are applied effectively, then self-custody ultimately becomes a matter of customer choice; Collinson: Because of the on-ramp off-ramp dynamic, there are natural points where some degree of system integrity can be insured and requirements like BSA can be applied.
Representative Rose (R-TN): How will the STABLE Act hold the stablecoin issuers accountable to reserve requirements? Guynn: The market will monitor disclosure reports. Within the disclosure, we need to be able to distinguish a payment stablecoin as being a very safe instrument that complies with this law, as opposed to something that might have a label stablecoin on that may not actually be subject to the same standards.
Representative Rose (R-TN): Under the STABLE Act, issuers licensed by a state regulator must respect the sovereignty of other states that may harmonize their requirements. Do you think this approach ensures a true state pathway, and what issues could arise if one state preempts another’s laws? Guynn: There is a baseline of federal standards that are quite comprehensive, and to the extent there is a state level regime, it is required to equal or exceed the standards in the federal framework; Collinson: A federal payments charter and payments system would be beneficial, in addition to state frameworks.
Representative Steil (R-WI): Does stablecoin usage strengthen the U.S. dollar? Collinson: It increases dollar demand, increases demand for U.S. treasuries, and it in turn lowers U.S. borrowing costs; Cascarilla: It minimizes risk and the need for private insurance, as the safest dollar in the world and creating usage confidence.
Representative Stutzman (R-IN): Would a private sector driven model for payment stablecoins foster more innovation and efficiency than a government-issued CBDC? Guynn: The private sector has always been the innovator. Fostering private innovation with stablecoins is very important and critical; Butler: We need to innovate while protecting the system. We should have clarity in rules to enable us to do that and should welcome competition because it drives our economy.
Representative Garcia (D-TX): Who should oversee stablecoin issuers of less than $10 billion? House: The federal level should have oversight, but it makes sense for states to run the charters for banks with over $10 billion and meet certain conditions. For non-bank issuers with less than $10 billion, state charters and licenses would be appropriate.
Representative Meuser (R-PA): How does custody in the traditional financial system differ than custody in the payment stablecoin ecosystem, and what custody standards were agreed upon? Butler: It does not differ because the custody that we provide for the reserve assets of a stablecoin is the exact same that we would do for the traditional custody that we provide in line with long-standing standards.
Representative Meuser (R-PA): How does a payment stablecoin approach these concerns differently? Can payment stablecoin strike a better balance between preserving individual privacy rights and maintaining the dollar status as a leading global currency? Cascarilla: This payment stablecoin is issued by private issuers, with the right balance as to make sure that the private sector is leading and able to create innovation in responding to the market as fast as possible. This will be done by and from the private sector.