Not sure if you noticed, but this week the U.S. Congress House Committee on Financial Services had a day investigating stablecoins, led by Chairman French Hill. The hearing was entitled ‘Navigating the Digital Payments Ecosystem: Examining a Federal Framework for Payment Stablecoins and Consequences of a U.S. Central Bank Digital Currency’ , and invited various industry luminaries to comment.
In his opening statement, Mr. Hill notes that billions of dollars are being transacted in stableconis with no clear regulatory framework. The aim is to create one through the development of the STABLE Act. The STABLE Act is designed to ensure that “BSA (Bank Secrecy Act) / AML (Anti-Money Laundering) compliance and oversight are a critical part of this framework”. The aim is to create “a properly regulated stablecoin market [which] can strengthen the U.S. dollar’s dominance, modernise our payments infrastructure, and promote financial access without government overreach”.
An interesting comment by Chairman Hill is that he notes “there is a competing vision for the future of digital money—one that puts the government at the centre of every transaction: central bank digital currencies, or CBDCs.
“A government-controlled digital dollar would put the Federal Reserve in direct competition with the private sector and undermine the very progress that stablecoins are making.”
Rather different to Christine Lagarde’s vision for the digital euro which aren’t working, as noted the other day.
Why is this important? Well, “Citi estimates that up to $5 trillion in global assets could move into stablecoins and other digital money formats by 2030 – a massive increase from the roughly $200 billion in dollar-backed stablecoins currently in circulation. Without action, the United States is in danger of becoming the rust belt of the financial industry”. (Charles Cascarilla, co-founder and chief executive of Paxos)
Anyway, back to Congress and they had various experts testifying their thoughts. In fact their written briefs are available online if you can be bothered googling, but the most interesting one for me was Patrick Collison, co-founder of Stripe, who was extremely eloquent on the subject.
Patrick’s view is that “putting in place a clear framework with prudent rules for the road will do a tremendous amount of good” and that, “in financial services, ambiguity is the greatest inhibitor to adoption”. Totally agree.
Collison outlined a stablecoin legislation be based on five essential principles:
1. Regulatory clarity
2. Flexibility and support for innovation
3. Neutrality and interoperability with existing systems
4. Robust consumer protection with a heavy focus on transparency
5. Outcome based framework for ensuring system integrity and preventing illicit activity
Caroline Butler, global head of Digital Assets at BNY, added that “we appreciate legislation that codifies the permissibility of banks to engage in stablecoin-related activity, including as an issuer of a stablecoin and/or as the custodian for the reserve. This clarity will help serve as a catalyst for banks to explore and evaluate opportunities in this space based on their business models, client needs, and use cases.”
Charles Cascarilla of Paxos, a regulated financial institution which provides blockchain technology, added that “stablecoins are a national imperative for the United States to modernise our financial system and preserve the dollar’s global dominance. To achieve this, the U.S. must set global standards that enable broad financial adoption and interoperability.”
You can watch the whole thing here …
… and I’ve included the written statements of some of the key panellists below, starting with Patrick Collison.
Caroline Butler of BNY:
Charles Cascarilla of Paxos
