On May 18, the Digital Assets Financial Technology Inclusion Committee held a hearing to discuss stablecoin policy. The committee aims to pass legislation supporting stablecoins as a recognized payment method, and they want stablecoins to be used as a payment mechanism.
During the hearing, bipartisan agreement was sought on appropriate stablecoin regulation. Witnesses testified, including representatives from Humanity Cash, The Department of XYZ, and Davis Polk & Wardwell. The witnesses addressed concerns such as the speculative nature of stablecoins, the roles of state versus federal regulators, disclosures and attestations, the role of the Fed, and safeguarding against threats to economic stability.
Congressman Lynch expressed concerns that if stablecoin regulation was given to individual states to decide, they would ratify lax regulation to attract stablecoin issuers to their jurisdiction. This could trigger a downward regulatory spiral among competing states.
Congressman Steil mentioned the recent SEC Wells Notice served against Paxos, which alleged the company had issued an unregistered security in the Binance USD stablecoin. Mr. Homer stated that the Howey Test was incorrectly applied in this case as it’s hard to understand how a stablecoin user has an expectation of profit.
Congresswoman Waters discussed the Fed’s role in stablecoin oversight and put it to Mrs. Hand that top-down legislation, with the federal level at the top, would ensure better consumer protections. Mrs. Hand agreed that the role of federal agencies at the top is key for consumer protection. She stated that the Fed could operate stablecoin oversight the same way as it governs chartered banks.
The hearing was an important step in finding bipartisan agreement on appropriate stablecoin regulation. The committee hopes to bring legal clarity and consumer protection to the stablecoin ecosystem.