    [House Hearing, 119 Congress]
    [From the U.S. Government Publishing Office]

                        NAVIGATING THE DIGITAL PAYMENTS
                    ECOSYSTEM: EXAMINING A FEDERAL FRAMEWORK
                    FOR PAYMENT STABLECOINS AND CONSEQUENCES
                    OF A U.S. CENTRAL BANK DIGITAL CURRENCY

    =======================================================================

                                    HEARING

                                   before the

                        COMMITTEE ON FINANCIAL SERVICES

                         U.S. HOUSE OF REPRESENTATIVES

                        ONE HUNDRED NINETEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 MARCH 11, 2025

                                   __________

                                Serial No. 119-9

           Printed for the use of the Committee on Financial Services

                     [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                                www.govinfo.gov

                                   ______

                     U.S. GOVERNMENT PUBLISHING OFFICE

    59-637 PDF                WASHINGTON : 2025

                     HOUSE COMMITTEE ON FINANCIAL SERVICES

                        FRENCH HILL, Arkansas, Chairman

    BILL HUIZENGA, Michigan, Vice        MAXINE WATERS, California, Ranking
        Chairman                             Member
    FRANK D. LUCAS, Oklahoma             SYLVIA R. GARCIA, Texas, Vice
    PETE SESSIONS, Texas                     Ranking Member
    ANN WAGNER, Missouri                 NYDIA M. VELAZQUEZ, New York
    ANDY BARR, Kentucky                  BRAD SHERMAN, California
    ROGER WILLIAMS, Texas                GREGORY W. MEEKS, New York
    TOM EMMER, Minnesota                 DAVID SCOTT, Georgia
    BARRY LOUDERMILK, Georgia            STEPHEN F. LYNCH, Massachusetts
    WARREN DAVIDSON, Ohio                AL GREEN, Texas
    JOHN W. ROSE, Tennessee              EMANUEL CLEAVER, Missouri
    BRYAN STEIL, Wisconsin               JAMES A. HIMES, Connecticut
    WILLIAM R. TIMMONS, IV, South        BILL FOSTER, Illinois
        Carolina                         JOYCE BEATTY, Ohio
    MARLIN STUTZMAN, Indiana             JUAN VARGAS, California
    RALPH NORMAN, South Carolina         JOSH GOTTHEIMER, New Jersey
    DANIEL MEUSER, Pennsylvania          VICENTE GONZALEZ, Texas
    YOUNG KIM, California                SEAN CASTEN, Illinois
    BYRON DONALDS, Florida               AYANNA PRESSLEY, Massachusetts
    ANDREW R. GARBARINO, New York        RASHIDA TLAIB, Michigan
    SCOTT FITZGERALD, Wisconsin          RITCHIE TORRES, New York
    MIKE FLOOD, Nebraska                 NIKEMA WILLIAMS, Georgia
    MICHAEL LAWLER, New York             BRITTANY PETTERSEN, Colorado
    MONICA DE LA CRUZ, Texas             CLEO FIELDS, Louisiana
    ANDREW OGLES, Tennessee              JANELLE BYNUM, Oregon
    ZACHARY NUNN, Iowa                   SAM LICCARDO, California
    LISA McCLAIN, Michigan
    MARIA SALAZAR, Florida
    TROY DOWNING, Montana
    MIKE HARIDOPOLOS, Florida
    TIM MOORE, North Carolina
                          Ben Johnson, Staff Director

                             C  O  N  T  E  N  T  S

                                  ----------

                            Tuesday, March 11, 2025
                               OPENING STATEMENTS

                                                                       Page
    Hon. French Hill, Chairman of the Committee on Financial
      Services, a U.S. Representative from Arkansas..................     1
    Hon. Maxine Waters, Ranking Member of the Committee on Financial
      Services, a U.S. Representative from California................     3

                                   STATEMENTS

    Hon. Bryan Steil, Chairman of the Subcommittee on Digital Assets,
      Financial Technology, and Artificial Intelligence, a U.S.
      Representative from Wisconsin..................................     4
    Hon. Stephen F. Lynch, Ranking Member of the Subcommittee on
      Digital Assets, Financial Technology, and Artificial
      Intelligence, a U.S. Representative from Massachusetts.........     4

                                   WITNESSES

    Ms. Caroline Butler, Global Head of Digital Assets, The Bank of
      New York Mellon Corporation....................................     5
        Prepared Statement...........................................     7
    Mr. Charles Cascarilla, CEO and Co-Founder, Paxos................    16
        Prepared Statement...........................................    18
    Mr. Patrick Collison, Co-Founder and CEO, Stripe.................    23
        Prepared Statement...........................................    25
    Mr. Randall Guynn, Chairman, Financial Institutions Group, Davis
      Polk & Wardwell................................................    31
        Prepared Statement...........................................    33
    Ms. Carole House, Senior Fellow, GeoEconomics Center, Atlantic
      Council........................................................    49
        Prepared Statement...........................................    51

                                    APPENDIX

                       MATERIALS SUBMITTED FOR THE RECORD

    Hon. French Hill:
        Statement from Fidelity Investments..........................   128
        Statement from American Bankers Association (ABA)............   132
    Hon. Maxine Waters:
        North American Securities Administration Association, Inc.
          (NASAA)....................................................   136

                     RESPONSES TO QUESTIONS FOR THE RECORD

    Written responses to questions for the record from Representative
      Monica De La Cruz
        Mr. Charles Cascarilla.......................................   142

                                  LEGISLATION

    H.R. ------, the Stablecoin Transparency and Accountability for a
      Better Ledger Economy (STABLE) Act of 2025.....................   145
    H.R. ------, the Anti-CBDC Surveillance State Act................   202
    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''.........................................   207

                        NAVIGATING THE DIGITAL PAYMENTS
                    ECOSYSTEM: EXAMINING A FEDERAL FRAMEWORK
                    FOR PAYMENT STABLECOINS AND CONSEQUENCES
                    OF A U.S. CENTRAL BANK DIGITAL CURRENCY

                                  ----------

                            Tuesday, March 11, 2025

                          U.S. House of Representatives
                                Committee on Financial Services
                                                        Washington, DC.

        The committee met, pursuant to notice, at 10:03 a.m., in
    room 2128, Rayburn House Office Building, Hon. French Hill
    [chairman of the committee] presiding.
        Present: Representatives Hill, Lucas, Huizenga, Wagner,
    Barr, Williams of Texas, Emmer, Loudermilk, Davidson, Rose,
    Steil, Timmons, Stutzman, Norman, Meuser, Kim, Garbarino,
    Fitzgerald, Flood, Lawler, Ogles, Nunn, McClain, Salazar,
    Downing, Haridopolos, Moore, Waters, Velazquez, Sherman, Meeks,
    Scott, Lynch, Green, Cleaver, Himes, Foster, Beatty, Vargas,
    Gottheimer, Casten, Tlaib, Torres, Garcia, Bynum, and Liccardo.
        Chairman Hill. The Committee on Financial Services will
    come to order.
        Without objection, the chair is authorized to declare a
    recess of the committee at any time.
        This hearing is entitled, ``Navigating the Digital Payments
    Ecosystem: Examining a Federal Framework for Payment
    Stablecoins and Consequences of a U.S. Central Bank Digital
    Currency.''
        Without objection, all members will have 5 legislative days
    within which to submit extraneous materials to the chair for
    inclusion in the record.
        I now recognize myself for 4 minutes for an opening
    statement.

        OPENING STATEMENT OF HON. FRENCH HILL, CHAIRMAN OF THE
      COMMITTEE ON FINANCIAL SERVICES, A U.S. REPRESENTATIVE FROM
                                ARKANSAS

        Good morning, and welcome to today's hearing entitled,
    ``Navigating the Digital Payments Ecosystem: Examining a
    Federal Framework for Payment Stablecoins and the Consequences
    of a U.S. Central Bank Digital Currency.'' Global payment
    systems are leveraging technology and modernizing legacy
    infrastructure, driving innovation and expanding access while
    lowering costs. The evolution of payment stablecoins and their
    increasing adoption beyond the digital asset ecosystem reflect
    broader modernization efforts in the United States and the
    global payment infrastructure.
        Every day, there are billions of dollars of stablecoin
    transactions, reducing friction in cross-border payments,
    streamlining commercial transactions, and giving more
    communities broader access to digital financial tools. Since
    2022, committee Republicans have worked to establish a
    legislative framework that strengthens their potential to
    become a cornerstone of a modern payment system. Last Congress
    this committee passed the Clarity for Payment Stablecoins Act
    of 2023. At the start of the 119th Congress, we built upon this
    foundation in coordination with the Senate Banking Committee.
    The House product, the Stablecoin Transparency and
    Accountability for a Better Ledger Economy (STABLE) Act, which
    we notice as part of today's hearing, reflects these key
    themes.
        Since its initial notice at Digital Assets Subcommittee
    Chair Bryan Steil's hearing last month, we have incorporated
    updates to the discussion draft based on the extensive written
    feedback that we received. These 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
    Bank Secrecy Act and anti-money laundering compliance along
    with cybersecurity and oversight are a critical part of the
    framework. The committee is grateful for the engagement and the
    feedback that we received on the STABLE Act, and we hope it
    will continue as we further iterate and strengthen this
    legislation.
        A properly regulated stablecoin market can strengthen the
    U.S. dollar's dominance, modernize our payment infrastructure,
    and promote financial access without government overreach. It
    is essential that we deliberate and get this job done and done
    right. Unfortunately, there is a competing vision about the
    future of digital money, one that puts the government at the
    center of every transaction, and that is a central bank digital
    currency (CBDC). 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.
        Chair Dan Meuser's Oversight and Investigations
    Subcommittee has explored the troubling cases of 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 innovation that has made the
    U.S. financial markets the strongest, most liquid in the world.
    A CBDC would also suppress competition, jeopardize financial
    privacy, and weaken the role of the U.S. banking system. I am
    so grateful to my colleague and friend, Republican Whip, Tom
    Emmer, for leading the charge to prohibit a U.S. CBDC, and I
    thank him for the work that he has done to get his Anti-CBDC
    Surveillance State Act reintroduced in this Congress and
    noticed for this hearing.
        Before I close, I want to emphasize that in addition to
    payment stablecoins, this committee has continued its efforts
    on a bipartisan basis to begin the work that we began last
    Congress to establish a comprehensive framework for digital
    assets market structure. We are moving full steam ahead in this
    Congress to strengthen and expand that pro-innovation agenda. I
    look forward to today's discussion, and I yield back the
    balance of my time.

    OPENING STATEMENT OF HON. MAXINE WATERS, RANKING MEMBER OF THE
      COMMITTEE ON FINANCIAL SERVICES, A U.S. REPRESENTATIVE FROM
                               CALIFORNIA

        I now recognize with pleasure the ranking member of the
    full committee, Mrs. Waters, for a 4-minute opening statement.
        Ms. Waters. Thank you, Mr. Chairman. For years, my
    colleagues and I have sought to craft commonsense crypto
    legislation with guardrails for consumers and strong oversight.
    In less than 2 months, President Trump and Elon Musk have
    undermined all of this work. In fact, since taking office,
    Trump has only enriched himself, his crypto cabinet, and the
    rest of the crypto billionaire class, and he has done nothing
    to improve the economy, let alone anything to bring down the
    cost of groceries, energy, or housing, as he promised. In fact,
    under Trump, egg prices are up 53 percent, and just yesterday,
    the S&P 500 fell a blistering 2.7 percent. Trump started with
    the meme coin scheme that scammed investors out of $2 billion,
    while Trump, his family, and other insiders pocketed $350
    million. Just last week, Trump signed an executive order to
    spend U.S. taxpayer resources to create a fund of billions of
    dollars of crypto that would squarely enrich Trump, Musk, and
    Make America Great Again (MAGA) cronies already holding these
    cryptocurrencies.
        Mr. Chairman, despite my belief that the Trump
    Administration only wants crypto legislation that personally
    benefits them and protects their crypto financers, I still hope
    we can work together on a bill that requires stablecoins to be
    robustly and fairly regulated. Unfortunately, the bill noticed
    for this hearing strips away critical protections to shield
    investors from criminals. The bill also tears down the wall
    that was used to separate banking from commerce, allowing Big
    Tech firms, including those owned by Elon Musk, to issue their
    own money, just like Facebook tried to do with Libra. I am
    proud of how this committee stopped Libra and Facebook, and I
    will do everything that I can to stop Musk also. It is also
    clear that given Trump's and Musk's actions on crypto and the
    mass layoffs of the employees who would be charged with
    overseeing crypto, we must go back to the drawing board on
    stablecoins. The best starting point for moving forward is the
    Waters-McHenry bill, which I released a few weeks ago.
        Before I close, I am so deeply concerned that we are
    considering a bill today to strip the Consumer Financial
    Protection Bureau of supervision of Big Tech payment apps. This
    comes after Trump's appointees halted all Consumer Financial
    Protection Bureau supervision of Big Banks. Moreover, the
    Republican resistance to even allow the Federal Reserve System
    (Fed) to study central bank digital currencies is not only
    anti-innovation, but it 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. Mr. Chairman, I am prepared to
    work with you and this committee, and we need to go back again
    to the drawing board on stablecoins and get started so we can
    really get into crypto, and I just believe that your leadership
    will take us there. I just cannot believe that this committee
    would follow what Trump is doing for himself and the other
    billionaire cronies of his. I yield back the balance of my
    time.
        Chairman Hill. The gentlewoman yields back. The chair
    recognizes the gentleman from Wisconsin, the Chairman of the
    Digital Assets, Financial Technology, and Artificial
    Intelligence Subcommittee, Mr. Steil, for 1 minute.

    STATEMENT OF HON. BRYAN STEIL, CHAIRMAN OF THE SUBCOMMITTEE ON
         DIGITAL ASSETS, FINANCIAL TECHNOLOGY, AND ARTIFICIAL
           INTELLIGENCE, A U.S. REPRESENTATIVE FROM WISCONSIN

        Mr. Steil. Thank you very much, Mr. Chairman, for holding
    this hearing. In the golden age of digital assets, the goal of
    our digital assets policy is to make sure that the next wave of
    crypto and third generation of the World Wide Web (Web3)
    businesses emerge in basements and in dorm rooms, not in
    boardrooms and law firms, and that is what our digital assets
    policy will do. The digital assets and blockchain technology
    are democratizing the internet and our financial choices. These
    technologies can extend dollar dominance, lower costs, and
    expand financial choices.
        Just over a month ago, Chairman Hill and I released a
    discussion draft of the STABLE Act. The bill 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, and I am excited about
    where we are today and for where we are going. Thank you for
    holding this hearing, Mr. Chairman. I yield back.
        Chairman Hill. The gentleman yields back. I recognize the
    gentleman from Massachusetts, Mr. Lynch, the Ranking Member of
    the Digital Assets, Financial Technology, and Artificial
    Intelligence Subcommittee, for 1 minute.

       STATEMENT OF HON. STEPHEN F. LYNCH, RANKING MEMBER OF THE
       SUBCOMMITTEE ON DIGITAL ASSETS, FINANCIAL TECHNOLOGY, AND
          ARTIFICIAL INTELLIGENCE, A U.S. REPRESENTATIVE FROM
                             MASSACHUSETTS

        Mr. Lynch. Thank you, Mr. Chairman. As this committee
    considers a potential regulatory framework for payment
    stablecoins, it is critical to prioritize financial stability,
    national security, and consumer protection. I have grave
    concerns about the Republican-proposed legislation that I hope
    we might be able to address. Naming the Republican bill the
    STABLE Act is like calling the Titanic the Titanic and telling
    the passengers it was unsinkable.
        First, allowing Big Tech firms like Meta and Apple to
    effectively become stablecoin issuers and dominate the
    stablecoin market leaves consumers vulnerable to financial data
    exploitation and removes the separation of banking from
    financial commerce. Next, uninsured deposits have proven to be
    vulnerable to systemic runs. Legitimizing stablecoins without
    adequate safeguards risks our financial stability.
    Additionally, allowing issuers a State pathway without
    sufficient prudential oversight creates a race to the bottom,
    and very little in this bill prevents money laundering and
    illicit finance.
        As every major economy races ahead of the United States in
    developing a central bank digital currency, discussions in the
    United States have been obscured by disinformation and
    political ideology. If my colleagues truly share the goal of
    maintaining dollar supremacy, they would encourage this type of
    innovation. Thank you, Mr. Chairman. I yield back.
        Chairman Hill. The gentleman yields back. Today, we welcome
    the testimony of Ms. Caroline Butler, who is Global Head of
    Digital Assets at the Bank of New York Mellon; Mr. Charles
    Cascarilla, who is the CEO and co-founder of Paxos; Mr. Pat
    Collison, who is the Co-Founder and CEO of Stripe; Mr. Randall
    Guynn, who is the head of Financial Institutions Group at Davis
    Polk & Wardwell; and Ms. Carole House, who is a senior fellow
    at the Atlantic Council GeoEconomics Center and a senior
    visiting scholar at Georgetown University's CyberSMART Center.
    We are so delighted to have all of you here.
        Each of you will be recognized for 5 minutes to give an
    oral presentation of your testimony, and without objection,
    your written comments will be made part of the record.
        Ms. Butler, you are recognized for 5 minutes.

     STATEMENT OF CAROLINE BUTLER, GLOBAL HEAD OF DIGITAL ASSETS,
                THE BANK OF NEW YORK MELLON CORPORATION

        Ms. Butler. Good morning, Chairman Hill, Ranking Member
    Waters, and members of the committee. Thank you very much for
    the opportunity to testify here today on innovation in the
    financial system, including the use of stablecoins. My name is
    Caroline Butler, and I am the global head of Digital Assets in
    Bank of New York (BNY) since 2023, and prior to that, I ran our
    custody business. I have more than 20 years of experience
    working at global, systemically important banks, which guide me
    and BNY in applying regulated banking concepts to blockchain-
    based solutions. In doing so, we maintain the core tenets of
    asset safety and protection, regardless of the technology
    wrapper applied to the asset.
        Founded by Alexander Hamilton in 1784, we are a global
    financial services company that helps make money work for the
    world by managing it, moving it, and keeping it safe. For over
    240 years, we have continuously adapted to the needs of the
    U.S. economy and have a number of firsts. We provided the first
    loan to the U.S. Government after the Revolutionary War, we
    were one of the first companies on the New York Stock Exchange,
    and we were one of the first institutions to use an electronic
    system for clearing government securities. These actions, often
    taken for granted today, were financial innovations at the time
    and have played a significant role in helping the United States
    become the world's predominant economic engine. As the world's
    largest custodian with more than $52 trillion of assets in
    custody, BNY helps companies and banks, big and small, access
    the money they need.
        BNY plays a central role in supporting U.S. Treasury
    markets and process approximately $2.4 trillion of payments per
    day across all payment rails. Our commitment to advancing the
    future of finance includes the integration of blockchain. This
    technology has the potential to make money move smarter and
    faster. Stablecoins can use these benefits to serve as a
    complement to the existing payment services and rails we offer
    our clients today.
        BNY supports stablecoin issuers by providing our
    traditional banking services, payments, deposit taking, and
    custody. For example, we serve as the primary custodian for the
    reserve assets of the largest stablecoin issuer in the United
    States today. Providing these traditional services to a new
    client type was a natural evolution for BNY. 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.
        BNY greatly appreciates the committee's bipartisan work,
    past and present, in developing a Federal framework toward
    those end goals. I appreciate the opportunity to testify here
    today, and I welcome any questions you may have.

        [The prepared statement of Ms. Butler follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman Hill. Thank you very much for your testimony. Mr.
    Cascarilla, you are recognized for 5 minutes.

       STATEMENT OF CHARLES CASCARILLA, CEO AND CO-FOUNDER, PAXOS

        Mr. Cascarilla. Chairman Hill, Ranking Member Waters, and
    members of the committee, thank you for the opportunity to
    testify today. My name is Charles Cascarilla, and I am the Co-
    Founder and CEO of Paxos. For 25 years, I have worked at
    financial services as an analyst, investor, and entrepreneur,
    getting a front row seat to the inefficiencies and systemic
    risks embedded in our legacy financial infrastructure. These
    experiences drove me to found Paxos in 2012 as a regulated
    financial institution using blockchain technology to re-
    platform the financial system. In 2015, Paxos received the
    first limited purpose trust charter from the New York State
    Department of Financial Services (DFS). We have worked closely
    with global regulators to advance the safe adoption of
    regulated stablecoins. Today, we provide stablecoin and
    tokenization infrastructure to some of the world's leading
    enterprises, including PayPal, MasterCard, Robinhood, and
    Stripe.
        There are three points I hope you will take away from my
    testimony. First, stablecoins are a national imperative to
    modernize the U.S. financial system and preserve the dollar's
    dominance. Second, to achieve this, the United States must set
    global standards that enable broad financial adoption and
    interoperability. Third, we strongly support the STABLE Act,
    and with some enhancements, it will be truly enduring.
        Since testifying in 2021, blockchain technology has evolved
    dramatically from the periphery to the mainstream. Today, the
    United States stands at a critical juncture. The question is no
    longer whether financial markets will evolve, they already
    have, but whether America will lead this transformation or be
    left behind. The stakes could not be higher. Our economic
    competitiveness, national security, and the dollar's role as
    the world's reserve currency hang in the balance. However, one
    constant remains unchanged. Everyone in the world wants U.S.
    dollars. When we export dollars, we export American values,
    free markets, the rule of law, and financial transparency.
    History teaches us that dominance is not eternal. For the
    dollar to remain the undisputed reserve currency, it must adapt
    to an always-on, internet-based, and AI-enabled global economy.
        Stablecoins represent the next evolution of money
    management. The global economy today demands secure
    programmable payments that move instantly 24/7 at nearly zero
    cost. This is not science fiction. It exists today thanks to
    blockchain. Our financial system already accommodates various
    forms of dollars: central bank cash in your wallet, bank
    liabilities and electronic account, money market funds on
    exchanges, or balances held in PayPal. Each operates on
    different rails. A stablecoin is just the dollar that operates
    on a blockchain rail. This is a new and more efficient way to
    distribute dollars around the world to consumers.
        The benefits of stablecoins are profound. While bank
    accounts have existed for hundreds of years, nearly 20 percent
    of Americans are underbanked, and 30 percent of the world is
    unbanked. Yet, in 15 years, nearly 85 percent of the global
    population have smartphones. At virtually no cost, anyone with
    only an internet connection and a smartphone can now use
    blockchain dollars, revolutionizing payments. I believe the
    private sector is the source of financial innovation, and I see
    no need for a U.S. CBDC at this time.
        The most important innovations have been and will continue
    to be driven by the private sector. I want to thank Chair Hill
    and Representative Steil personally for developing the STABLE
    Act. It represents a historic opportunity to cement America's
    leadership in finance. We strongly support the clear
    distinction between stablecoin issuance and traditional
    banking. Issuers like Paxos do not take deposits and we do not
    make loans. We facilitate payments and transfers. Designating
    the Office of the Comptroller of the Currency (OCC) as the
    Federal regulator for non-bank issuers is the right choice. We
    also endorse the bill's reserve requirements that mandate one-
    to-one backing, prohibit re-hypothecation, enforce redemptions,
    and require audits. These standards mirror the high bar Paxos
    already meets.
        We appreciate that the STABLE Act requires issuers to
    adhere to the same anti-money laundering (AML), Know Your
    Customer (KYC), and Bank Secrecy Act (BSA) standards as banks,
    no carveouts, no exceptions. As a globally regulated issuer
    with firsthand experience navigating markets, I urge the
    committee to consider two enhancements to make the STABLE Act
    enduring. First, we recommend strengthening international
    reciprocity by requiring the Treasury to designate compatible
    jurisdictions. This approach fosters a race to the top,
    encouraging international partners to align with U.S.
    standards. Second, State-regulated entities like Paxos must
    meet standards equivalent to those imposed by the OCC. If they
    do, these prudentially licensed issuers should be permitted to
    serve customers nationwide, providing a register report in
    customer States. Primary oversight should remain with their
    home State regulator, avoiding redundant regulatory burdens.
        In closing, Congress has the opportunity to act decisively.
    If we fail to act, other nations will fill the void, dictating
    the future of money on their terms, not ours. Passing clear,
    balanced legislation now is not just an opportunity, it is an
    imperative. The STABLE Act with these refinements will secure
    the dollar's global reserve status and reinforce our economic
    leadership. Thank you for the time, and I look forward to your
    questions.

        [The prepared statement of Mr. Cascarilla follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman Hill. Thank you, sir. Mr. Collison, you are
    recognized for 5 minutes.

       STATEMENT OF PATRICK COLLISON, CO-FOUNDER AND CEO, STRIPE

        Mr. Collison. Chairman Hill, Ranking Member Waters,
    distinguished members of the committee, thank you very much for
    inviting me to testify about the future of our digital payments
    ecosystem. If you will forgive the sentimentality, being here
    is a big deal for me. I grew up in rural Ireland, a couple of
    miles away from Ms. Butler. I was fortunate enough to move to
    the United States for college. This country has extended
    immense opportunity to me, and I want to start out by simply
    saying how grateful I am. This is an amazing country. My dad is
    actually sitting here in attendance, so I am going to be on my
    best behavior.
        My introduction to technology was taking my first communion
    money and buying a computer, but in our rural Irish community,
    getting a decent internet connection was very difficult. Both
    the promise of global connectivity, but also frustration with
    technology that did not quite live up to it were ingrained from
    an early age. I started Stripe with my brother in 2010 in that
    literal dorm room. At the time, we were merely trying to solve
    what we thought was a simple problem, making it easier for
    businesses to accept payments online, and this was an
    undertaking that we had found surprisingly difficult when
    starting a previous business.
        Today, businesses running on Stripe move over $1.4 trillion
    annually. We are proud to serve businesses from small family
    shops to Fortune 500 enterprises across the United States. We
    help power more than 10,000 companies in every congressional
    district represented here today. We build infrastructure, the
    out-of-sight mechanics of making payments and money movement
    easier. We support card payments, automated clearing house
    (ACH) wire transfers, and over 100 global payment methods. Our
    goal is to connect businesses both to established financial
    rails and also to emerging payments technologies. We see this
    work as part of a much larger journey. Throughout history,
    improvements in how money moves have expanded economic
    opportunity. From coins to bank notes, from gold to fiat
    currency, and from paper to digital payments, each transition
    has made commerce more efficient and more inclusive.
        It is from this vantage point that we see the promise of
    stablecoins. This is why we recently acquired Bridge, the
    world's leading platform for developers and businesses building
    with stablecoins. Bridge enables businesses to move money
    quickly and more cheaply across borders, which in turn helps
    them compete more effectively in the global marketplace. The
    Bridge acquisition reflects our conviction that stablecoins
    represent a fundamental innovation in how money moves. Now,
    importantly, this belief is grounded specifically in what the
    businesses themselves tell us. This is not speculative. They
    say that stablecoins deliver real utility. Today, we see
    businesses finding better ways to manage corporate Treasury, to
    handle international transfers, and to access dollars overseas.
    That is to say that stablecoins are creating economic
    opportunity for American businesses at this moment.
        Now, beyond the usability and the efficiency improvements
    for businesses, stablecoins also strengthen America's position
    in the global financial system. Despite regulatory uncertainty,
    approximately 99 percent of stablecoin balances today are U.S.
    dollar based. It is easy sitting here to underestimate how much
    demand exists globally for dollar-denominated assets, and this
    matters tremendously when approximately 1.3 billion people live
    in countries with average inflation rates exceeding 10 percent.
    As such, stablecoins are enhancing the dollar's status as the
    world's reserve currency and lowering American borrowing costs.
        Stripe now supports millions of businesses of all sizes,
    and we are acutely conscious of the attendant responsibilities
    that come with that position. We believe that a trusted
    financial ecosystem requires clear and effective regulation,
    and thoughtfully constructed frameworks for stablecoins will
    bring certainty, stability, and safety for businesses and
    consumers. That is why I appreciate this committee's
    consideration around an appropriate Federal framework.
        I respectfully suggest that any legislation be based on
    five essential principles: one, regulatory clarity; two,
    flexibility and support for innovation; three, neutrality and
    interoperability with existing systems; four, robust consumer
    protection with a heavy focus on transparency; and five, an
    outcome-based framework for ensuring system integrity and
    preventing illicit activity.
        Overall, stablecoins benefit American consumers, American
    businesses, the American Government, and the global economy at
    large. Because of these benefits, stablecoins are seeing
    incredible adoption, with use more than doubling over the past
    year. I commend Congress' recognition of the fact that
    stablecoins are an innovation of unusual import. I am very
    grateful for the opportunity to share these perspectives. I
    look forward to your questions.

        [The prepared statement of Mr. Collison follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman Hill. Thank you, sir. Mr. Guynn, you are
    recognized for 5 minutes.

     STATEMENT OF RANDALL GUYNN, CHAIRMAN, FINANCIAL INSTITUTIONS
                      GROUP, DAVIS POLK & WARDWELL

        Mr. Guynn. Thank you, Chairman Hill, Ranking Member Waters,
    and the other distinguished members of this committee. It is
    very difficult to follow that great opening statement, but as
    he explained, stablecoins are a modern digital version of
    private money. If a payment stablecoin issuer has a properly
    calibrated reserve of high-quality liquid assets, a properly
    calibrated capital buffer, and no material amount of other
    liabilities, payment stablecoins should be as safe as insured
    deposits or even central bank money.
        While a substantial portion of the U.S. money supply
    consists of public money in the form of coins, paper money, and
    demand deposit claims against the Federal Reserve Bank, the
    vast majority of the U.S. money supply consists of private
    money. This includes demand deposit claims against commercial
    banks, amounts standing to the credit of a person's account
    with non-bank payment companies like Venmo or PayPal, and
    stablecoins. A central bank digital currency, or CBDC, would be
    a new digital form of public money that would compete with
    private money, including stablecoins. The STABLE Act would
    create a regulatory framework for stablecoins modeled on the
    framework that applies to the dual banking system. That model
    has not changed fundamentally since the 1930s. It is well
    understood, and it has worked well. As a result, it makes sense
    to base the regulatory framework for payment stablecoins on the
    framework for the dual banking system.
        Let me make four points about the STABLE Act. First, the
    100 percent reserve requirement, together with a properly
    calibrated capital requirement and the activities restrictions
    in the STABLE Act, should make payment stablecoins issued by
    permitted payment stablecoin issuers as safe as insured
    deposits or central bank money. These features should reduce
    any run--risk against a payment stablecoin issuer to a
    negligible or even infinitesimal amount. Second, the current
    list of qualified reserve assets, however important it is, is
    too restrictive. The government should allow U.S. Government
    securities to have an original maturity of up to 1 year. The
    regulators can limit the interest rate risk in the overall
    portfolio by capping the average duration of the portfolio at 6
    months or less, or some other figure.
        Third, there is a tradeoff between the average duration of
    the reserve portfolio and the capital buffer. For example, if
    the average duration of the portfolio is 1 month, the capital
    buffer should be calibrated at a much lower level than if the
    average duration is 6 months or more. Fourth, the Federal
    Reserve should not be permitted to issue a CBDC unless two
    conditions are satisfied. First, it should be required to show
    that the alleged benefits of a CBDC could not be produced by
    private money in the form of payment stablecoins or demand
    deposit claims against commercial banks. Second, it should be
    required to show that the benefits of the CBDC clearly outweigh
    its considerable risks in terms of threats to financial
    privacy, core freedom, and financial stability.
        Thank you, and I would be happy to answer any of your
    questions.

        [The prepared statement of Mr. Guynn follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman Hill. Thank you, sir. Ms. House, you are now
    recognized for 5 minutes.

    STATEMENT OF CAROLE HOUSE, SENIOR FELLOW, GEOECONOMICS CENTER,
                            ATLANTIC COUNCIL

        Ms. House. Thank you, Chairman Hill, Ranking Member Waters,
    and distinguished members of the committee for holding this
    hearing and the honor of the invitation to testify on the
    digital payments ecosystem. I am Carole House, a senior fellow
    at the Atlantic Council, having recently departed the White
    House for my second tour on the National Security Council. I
    have served at the intersection of national security and
    emerging technologies and finance my whole career as an Army
    officer, a regulator, a delegate to international standards
    bodies, and also a national security and strategic tech expert.
    I am very glad now to see the level of support within Congress
    for elevating stablecoin legislation to a priority this year
    and applaud the efforts to date by many here today, including
    Chair Hill and Ranking Member Waters, for helping to paint a
    clear pathway.
        We must ensure that our regulatory frameworks create a
    foundation for providing trustworthy and affordable access to
    financial services for consumers, while also reinforcing the
    centrality of the United States in the financial system and as
    the home for responsible cutting-edge innovation in emerging
    tech and payments. That includes the critical need for timely
    progress on a comprehensive stablecoin framework that supports
    these objectives as well as driving broader experimentation and
    competitiveness in digital payments. These frameworks must also
    be comprehensive of the real and present risks as well as
    opportunities that we have observed in the digital asset
    ecosystem. For example, with proper protections, stablecoins
    have the potential to improve delivery and efficiency of
    financial products and services, to dismantle barriers to
    access and inclusion, and to promote U.S. leadership in
    payments. Let us also be realistic that most of those use cases
    still are in a nascent form and stage and still have time that
    is needed to bear out the benefits that are purported there
    because most of the use cases really have been in settlement of
    trading activity.
        We also see in the wake of serious national security
    threats, like billion-dollar hacks by rogue nations, growing
    integration of cryptocurrency, including stablecoins, as a tool
    for transnational organized crime, market abuses and frauds
    that can threaten system stability and integrity, as well as
    pressure from adversarial nations that are leveraging
    alternative payment systems to weaken and circumvent the
    dollar. It is clear that strong safeguards, including for U.S.
    competitiveness, are needed. This framework also demands that
    we ensure policy and enforcement approaches, both domestically
    and internationally, create a level playing field for U.S.
    firms, often the most compliant firms in the world, to be able
    to compete fairly.
        A policy that is not enforced does nothing to benefit
    consumers nor U.S. firms with stronger compliance that have
    been operating at higher costs and less competitive advantages
    than many foreign operating firms. This framework is
    achievable, able to build on years of bipartisan efforts
    working across the aisle to construct a truly comprehensive
    approach. We need strong prudential consumer protections and
    regulations to ensure that stablecoins are truly stable. We
    need to be able to shift the burden from consumers doing their
    own research to assess which stablecoin is truly stable. In
    this way, a clear regulatory framework that fosters trust can
    actually help set conditions to drive broader adoptions and
    competition. We also need to have strong AML protections in
    place for stablecoin ecosystems, and we need to ensure that
    cyber and AML vulnerabilities that are being exploited by
    hackers, like in the recent $1.5 billion ByBit hack by North
    Korea, are closed in this ecosystem.
        I am pleased to see many elements in the STABLE Act that I
    support and are critical safeguards, such as high-quality
    reserves on at least a one-to-one basis and vision roles for
    State and Federal regulators and restrictions on hypothecating
    Federal Reserve assets, as well as stablecoin issuer
    activities. These are critical safeguards, but there are also
    several key elements that are missing from this proposed
    legislation and that have been previously negotiated. If not
    addressed, we risk this framework not being comprehensive and
    needing to be patched and fixed later in the future. I propose
    some areas for consideration, like we must ensure Federal line
    of sight to support supervision on issues of systemic
    importance. I support the State charter and the dual system in
    banking, and we must preserve that option, but not by denying
    critical visibility for agencies like the Federal Reserve to be
    able to fulfill their mission on overseeing financial stability
    and conduct monetary policy.
        The legislation should also broaden to include a greater
    scope of risk coverage like credit and counterparty risk,
    market risk, and concentration risks. There is also no clear
    articulation of an enforcement mechanism, affiliate controls,
    or bankruptcy resolution to protect consumers in the wake of a
    failure. There is also not clear enough direction on AML
    sanctions and extraterritorial application. U.S. dollar
    stablecoins have been exploited by cartels and sanction evaders
    and terrorism financiers. We need to message that is
    unacceptable and make clear that U.S. dollar stablecoins must
    comply with sanctions, including freezing and recovery
    capabilities.
        The most important message here on innovating in digital
    payments is that we need to do so responsibly and invest in the
    building blocks that will allow for us to make this system more
    secure and inclusive. Thank you very much. I look forward to
    your questions.

        [The prepared statement of Ms. House follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman Hill. Thank you so much. We will now turn to
    member questions, and the chair recognizes himself for 5
    minutes.
        As I started out in my opening remarks, it is our job as
    Members of Congress to establish a legislative framework for
    payment stablecoins that balances growth and innovation with
    strong consumer protections, and I think all of us on both
    sides of the aisle have that as a cornerstone. Crafting a
    durable regulatory framework that achieves this balance is
    iterative and requires extensive stakeholder feedback and
    engagement. Today, we will use this hearing to further
    strengthen the STABLE Act, incorporating the expert testimony
    of our witnesses to refine our bill's consumer protections and
    solidify the Federal and State pathways for both banks and non-
    banks.
        Let me start and talk about banking engagement. In October
    2020 and January 2021, the OCC under the Trump Administration
    clarified that banks can both issue stablecoins and hold
    stablecoin reserves. Then just a few months later in November
    2021, the OCC, the Comptroller of the Currency Office, under
    the Biden Administration, stated that these activities could
    only be conducted by banks if they received a non-objection
    letter. Finally, just this past Friday, the Comptroller of the
    Currency has issued a statement indicating that banks under its
    supervision will no longer need permission to engage in certain
    digital asset-related activities. It is certainly my point of
    view why we need a regulatory framework so that we do not do
    this bouncing around.
        Ms. Butler, you work at BNY Mellon. You are a descendant of
    Alexander Hamilton. Can you explain how the STABLE Act
    addresses this inconsistency by changing administration and
    alters these rules on banks' ability to engage here?
        Ms. Butler. Thank you very much, Chairman, for your
    question. The STABLE Act gives us the clarity and certainty to
    know what we can actually perform in terms of activities for
    our clients, and that is absolutely incredibly important. In
    addition, the consistency of applying those same standards
    across the ecosystem so whilst we need the clarity as a bank to
    understand what activities we can perform. We need to know that
    the ecosystem we are performing those activities in is all
    players are meeting the same set of standards. That is going to
    be very important to ensure that there is a system of trust
    with regulatory oversight to ensure that we can protect the
    safety and soundness of financial markets.
        Chairman Hill. You believe that the same kind of service
    deserves the same kind of regulatory treatment, whether it is a
    bank or a non-bank. Is that right?
        Ms. Butler. Hundred percent, same service, same risk, same
    regulation.
        Chairman Hill. Okay. Thank you very much. Let me turn to
    the topic of a State pathway, which has been a big issue over
    the last couple of years that we have talked about this.
    Throughout the 118th Congress, we took testimony on this,
    including from Superintendent Harris of the New York Department
    of Financial Services, about that balance between State and
    Federal oversight. Any framework for payment stablecoins should
    build on the well-established dual banking system that many of
    you have talked about. Mr. Guynn, can you describe some of the
    benefits that the dual banking system has brought the U.S.
    financial system, and explain how our framework attempts to
    replicate that for stablecoin?
        Mr. Guynn. Certainly. I think the dual banking system has
    allowed banks to function as 50 laboratories for innovation. I
    think that is the most important function they have played. The
    Federal Government has often set minimum standards for banking,
    but they have not created a comprehensive Federal framework, so
    the banks are regulated both by Federal and State laws. The
    regulatory framework in the STABLE Act is virtually identical
    to the framework for the dual banking system, with two
    exceptions. First, the STABLE Act establishes a single Federal
    regulatory framework in 4(a) that applies to all Federal-
    qualified and State-qualified payment stablecoin issuers, and
    the alternative State-level framework has to meet the standards
    or be stronger than the standards in 4(a). It is different in
    the sense that it actually creates a comprehensive Federal
    floor.
        Chairman Hill. Some have argued this is a race to the
    bottom, and you believe that Federal floor would prevent that.
    Is that your view?
        Mr. Guynn. Yes, I do not see how there could be a race to
    the bottom because any State regulator who is applying the
    STABLE Act would have to either comply with the Federal
    standards in 4(a) or standards that meet or exceed those
    standards.
        Chairman Hill. Yes, and, Mr. Cascarilla, you have dealt
    with this for years because of your work in New York. Would you
    say that the STABLE Act is somehow light-touch regulation, or
    do you think it strikes the balance that is important to have a
    high standard, but you preserve your right to work in the State
    of New York, for example?
        Mr. Cascarilla. Today, we are the only prudentially
    regulated issuer of stablecoins, at least in New York. Sorry, I
    should say New York State is the only place where you can
    prudentially issue stablecoins, and I think that is important
    to preserve. It creates a laboratory for innovation, as Randy
    was pointing out, but also, having a Federal floor is actually
    going to create a consistency across the entire country and I
    think actually on a global basis. I think it would be actually
    a race to the top of meeting the same set of standards, which
    is the right way to operate, and if everyone meets those
    standards, you are in the right----
        Chairman Hill. Thanks so much, and I thank our panel. I now
    call on my friend, the ranking member, for 5 minutes of
    questions.
        Ms. Waters. Thank you very much, Mr. Chairman. Ms. House,
    in the 117th Congress, I reached across the aisle to work with
    the then Ranking Member McHenry, and led years of negotiations
    with Treasury, the Federal Reserve, and other stakeholders to
    establish the first of its kind bipartisan stablecoin
    legislation. Unlike the Republican bill posted for this
    hearing, our bill creates a strong regulatory framework that
    supports the responsible innovation with Federal oversight,
    along with the role for States. My bill includes appropriate
    supervision authority, including for third-party vendors, along
    with civil and criminal penalties for violations, language to
    address overseas threats, like from Tether, and a ban on
    convicted individuals, like Sam Bankman-Fried.
        In your testimony, you said, ``In the wake of serious
    national security threats, like billion-dollar hacks by rogue
    nations, growing integration of cryptocurrency as a tool for
    transnational organized crime, market manipulation and fraud
    that can threaten system integrity and stability, as well as
    pressure from adversarial nations seeking to develop and
    leverage alternative payment systems to weaken and circumvent
    the dollar, it is clear that strong safeguards, including for
    U.S. competitors, are needed.'' Do you stand by that? Why is
    what you are telling us so important?
        Ms. House. Yes, ma'am, it is entirely necessary. I think we
    all would find that totally acceptable for the Nation's
    greatest threats to us, which often are on the other end of our
    sanctions, to be able to leverage the U.S. dollar and to get
    access to the U.S. system. Yet, that is happening in U.S.
    dollar-denominated stablecoins. So many of the protections,
    like what you just mentioned on extraterritorial application,
    are needed in order for us to make sure that our adversaries
    are not exploiting our system.
        Ms. Waters. Thank you very much. I think enough is going to
    be said here today to see the difference between what Mr.
    McHenry and I was trying to do and what this bill does not do,
    but I want to jump over to something a little beyond
    stablecoins. When Trump first issued his meme coin 3 days
    before his inauguration, I expressed my deep concern. I warned
    that this raised major conflicts of interest, national security
    risks for the country, and left consumers vulnerable to rug
    pulls, market manipulation, and more. Unfortunately, that has
    happened. Can you quickly tell everybody what a rug pull is and
    how it works?
        Ms. House. Sure. With limited time, just, basically, when
    people are trying to hype up and get people to invest in an
    asset and making a broader promise, and then ultimately pulling
    out your investments in the assets. Ultimately, that ends up
    normally crashing the market value.
        Ms. Waters. Well, I expressed my deep concern, and I warned
    that this raised major conflicts of interest, national security
    risks for the country, and left consumers vulnerable to these
    rug pulls, market manipulation, and more. Unfortunately, that
    is just what happened. President Trump's insiders reportedly
    earned a staggering $350 million from sales and fees in the 3
    weeks after his meme coin was launched. While Trump ran away
    with his money, reports show that a far larger number of
    investors lost more than $2 billion after the meme coin
    crashed. Meanwhile, a Republican-led Securities Exchange
    Committee (SEC) has conveniently stated that meme coins are not
    subject to their regulatory oversight.
        With that, I want to just say to this committee and to
    everybody else, whenever you see this side and that side get
    together to work on something, that is significant and that is
    important. You cannot just erase the fact that Mr. McHenry and
    I put together stablecoins with the kind of guardrails that
    would avoid consumers from being ripped off. Now, I cannot
    understand why anybody on either side of the aisle would ignore
    all of this and a new SEC led by someone who does not believe
    in guardrails would continue to go down this road. We are not
    just talking about what you have advised us about. We are
    talking about the way that these meme coins are put together
    and the rug pulls. Those insiders, who know what they are
    doing, invest all of that money up front, and then after it
    grows, they pull it out, and the stupid people who thought they
    were investing in something lose everything. Why does everybody
    not just understand that? I yield back the balance of my time.
        Chairman Hill. The ranking member yields back. The chair
    recognizes the gentleman from Oklahoma, Mr. Lucas, the Chair of
    the Task Force on Monetary Policy, for 5 minutes.
        Mr. Lucas. Thank you, Mr. Chairman, and thank you to our
    witnesses for testifying today. I want to first focus on
    central bank digital currencies. As one of the few remaining
    Members of Congress who were on the Dodd-Frank Conference
    Committee, I am especially sensitive to expanding the
    authorities and reach of the Federal Reserve. We have seen the
    way partisan politics creeps into the supervision and
    regulation of our financial systems when we allow unaccountable
    agencies to look over our shoulder. As Chairman of the Task
    Force on Monetary Policy, Treasury Market Resilience, and
    Economic Prosperity, I have spent a lot of time talking about
    the Federal Reserve System becoming more partisan, and I expect
    to continue that dialog through our work on the task force. My
    view is to maintain the Fed's independence on monetary policy;
    we must hold the Fed accountable when they overreach on the
    regulatory proposals.
        Mr. Guynn, do you think a U.S. CBDC would lead to further
    polarization of the Fed, and how could increased authority,
    like the issuing of a U.S. CBDC, be abused by political
    partisans?
        Mr. Guynn. Thank you. I wish I could answer no to your
    question, but Operation Choke Point 1 and 2 have taught me
    that, unfortunately, I must say, yes, there is a possibility
    that it would increase the politicization of the Federal
    Reserve. A CBDC would give the Federal Reserve staff a direct
    window into virtually every transaction every person in America
    makes, and at least one of them will not be able to resist the
    temptation to use that information to promote what they
    consider to be worthy political goals. I think the real dangers
    have been outlined before by Norbert Michel of Cato Institute,
    which is there is a potential threat to financial privacy, to
    core freedom, and actually to financial stability, because if
    you have a CBDC in times of stress and if it is available to
    retail investors, then they will have a temptation to pull
    money out of the banking system and move it into CBDC.
        Mr. Lucas. We pride ourselves in the United States, and
    rightfully so, on our global leadership and technological
    advances. In the case of stablecoins and digital assets,
    Congress' failure to put together a workable legal framework
    and regulatory environment is putting our financial firms and
    consumers at a tremendous disadvantage. Ms. Butler, why is it
    so important for us to catch up to the other jurisdictions on
    this, and what happens when we fall behind the United Kingdom
    and the European Union here?
        Ms. Butler. Thank you very much, Congressman, for your
    question. As a global bank, we serve many different clients
    across over 100 markets, and it is imperative that we are able
    to use the latest and greatest technologies to meet the needs
    of our clients. The United States has been the world's economic
    leader and leader in innovation, and it is imperative to be
    able to take the new technologies and apply them to the needs
    that are in the market. It is very important to protect the
    U.S. dollar. The U.S. dollar is our largest currency for trade.
    A stablecoin is just a representation of that dollar on a
    blockchain, but the blockchain enables the dollar to be used
    more because of the benefits the blockchain can yield.
        Mr. Lucas. Around the world, we can see CBDC is being
    abused by central banks, and we cannot let that happen here at
    home. That is why I am a proud co-sponsor of Mr. Emmer's CBDC
    Anti-Surveillance State Act. Mr. Cascarilla, Mr. Emmer's bill
    would prevent the Federal Government from surveying and
    restricting American spending habits through a CBDC. In your
    view, what is the risk of failing to pass a bill with these
    protections?
        Mr. Cascarilla. I think the key point with the CBDC is that
    it is creating a competitor to the private sector. Right now,
    we are at a stage in the market where you need to have as much
    innovation as possible, and we need to have stablecoins become
    as broadly adopted as possible for the benefit of the United
    States and for the U.S. people.
        Mr. Lucas. In my remaining time, Mr. Collison, could you
    discuss the potential impacts of stablecoins on financial
    innovation and why it is important for consumers in my district
    to have access to these technologies?
        Mr. Collison. Stablecoins make money movement faster,
    cheaper, and more programmable, creating entirely new kinds of
    financial applications, and we have been very struck from our
    Stripe vantage point about how this adoption is already
    occurring. I think it is important to emphasize it is not
    speculative. We see it today.
        Mr. Lucas. My time has expired. I yield back, Mr. Chairman.
        Chairman Hill. Thank you, sir. The chair recognizes Ms.
    Velazquez, the Ranking Member of the Small Business Committee,
    for 5 minutes.
        Ms. Velazquez. Thank you, Mr. Chairman, and let me start
    off by thanking you for holding this very important hearing. We
    need to have a serious discussion about the future of
    stablecoins and the use of digital assets in our country, and I
    think to do that, we need to discuss the broader context and
    the environment in which we are holding this hearing.
        Since being sworn in as President, President Trump has
    sought to hand control of our financial system to the richest
    men in the world, a man who spent millions of dollars to get
    Republicans elected. Elon Musk and Department of Government
    Efficiency (DOGE) have sought to destroy the Consumer Financial
    Protection Bureau (CFPB), gain access to the Treasury
    Department's payment system, and froze rulemakings, litigation,
    and enforcement actions, not to mention firing or laying off
    thousands of Federal employees. Many of whom perform critical
    oversight roles in the regulators we are discussing here today.
    Now Elon Musk is working to transform X.com into a virtual
    wallet and payment system, and according to media reports, has
    ambitions to create his own stablecoin. Ms. House, as we sit
    here today discussing the merits of stablecoin legislation and
    what is likely to be a broader discussion on digital asset
    legislation later this Congress, do you think it is important
    for us to keep this broader context in mind?
        Ms. House. Yes, absolutely, Congresswoman. When we have the
    privilege and honor of serving in office and for the
    government, we have a sacred duty to maintain the public trust
    and to ensure that our activities are there. It is why there
    are so many clear protections, like things of conflicts of
    interest, so it makes sense to keep that context certainly in
    mind.
        Ms. Velazquez. Thank you, and, Ms. House, CBDCs are
    official government-issued stablecoins that operate with all
    the protections and rules of their traditional counterpart.
    Private stablecoin issuers do not like them because they are a
    threat to their issuances. They hide this fact by arguing
    behind things like government control and infringement on
    individuals' right to privacy. Ironically, one of the bills we
    are discussing here this morning bans CBDC experimentation in
    the name of privacy. Yet, as you correctly pointed out, the
    bill does nothing to address privacy issues presented by
    private crypto companies. Can you explain your statement? What
    privacy concerns do you think need to be further addressed in
    this proposal?
        Ms. House. Thank you, Congresswoman, for the question. I
    appreciate this point since I wanted to underscore that the
    U.S. Treasury, the Federal Reserve, the prior White House, and
    then it looks like this Congress have all agreed, in fact, that
    the Federal Reserve does not have the authority to issue a
    CBDC. The legal necessity of the legislation on banning
    issuance of a retail CBDC remains in question to me but thank
    you for highlighting the broader issues on privacy. There is no
    reference to broader issues of just general privacy legislation
    that is still needed, as well as what the privacy implications
    are certainly for publishing transactions on a public
    unobscured ledger that present risks to consumers.
        Ms. Velazquez. Thank you. Ms. Butler, in your testimony,
    you highlight that BNY performs custody services for stablecoin
    issuers in accordance with regulations guided at both the State
    and Federal level. 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?
        Ms. Butler. Thank you very much for that question,
    Congresswoman. We do indeed custody the reserve assets, and we
    do so in accordance with our longstanding custody practice. We
    have been providing custody for decades, $52 trillion worth of
    custody, and 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 we provide, and we
    take all of the protections and apply it as well. What is very
    important for the ecosystem is to make sure that with banks
    that are providing custody, there is implicit trust and
    confidence in the ecosystem that clients' assets are indeed
    protected and protected according to Federal legislation and
    regulation.
        Ms. Velazquez. Thank you, and I yield back, Mr. Chairman.
        Chairman Hill. The gentlewoman yields back. The gentleman
    from Michigan, the Vice Chairman of the House Financial
    Services Committee, Mr. Huizenga, is recognized for 5 minutes.
        Mr. Huizenga. Thank you, Chairman Hill, and good to see
    many of you again. I do want to note, Mr. Collison, I know your
    dad is back there and I am sure he is very proud. I had a
    chance, actually, to be at your headquarters out in San
    Francisco a number of years ago pre-coronavirus disease
    (COVID), met with your brother, John, in his opulent office. He
    is laughing because he knows what I mean. If you have not been
    there, it is a cafeteria. That is their opulent office space,
    but it was great. My tribe happens to hail from Cork, a little
    further down, I think, the coast from the two of you. With a
    Dutch name, it throws everybody off, but it is the season to
    see some good Irishmen around.
        Mr. Chairman, as you know and as everybody knows,
    stablecoins hold immense potential, and I think you have seen a
    little bit of that getting talked down on the other side by
    some. As you all have demonstrated, the capacity to simplify
    our payment system is going to be huge. I have been bouncing
    back and forth. I also sit on the Foreign Affairs Committee,
    where I am doing a review of Bureau of Industry and Security
    (BIS) and where chips are and where artificial intelligence
    (AI) is going. It terrifies me and fascinates me every time I
    get a briefing, but this is where the rubber is hitting the
    road, and I just applaud you all.
        Obviously, we have seen President Trump's actions,
    Secretary Bessent, the crypto czar, Mr. Sacks, and others. I
    think there is a moment for us here in Congress now to act. As
    legislators, it is ultimately up to us to provide the
    regulatory clarity needed to ensure that the U.S. dollar
    remains the dominant reserve currency, and I believe
    stablecoins can do that. I want to start by just setting the
    stage, and this question is for all of the witnesses very
    briefly. Ms. Butler, let us start with you. Please highlight
    one aspect of the proposals that you have seen that you think
    hits the mark.
        Ms. Butler. Thank you very much for your question. I would
    say asset segregation. This is the foundational principle of
    custody, and it needs to be preserved at all times, never co-
    mingling client assets with firm assets. We need to make sure
    that it is preserved in the digital ecosystem as well as the
    traditional ecosystem.
        Mr. Huizenga. All right. Mr. Cascarilla?
        Mr. Cascarilla. I agree. I think the most important thing
    is to make sure that a dollar is always a dollar. The way you
    can do that is by having legal protections on how the assets
    are held, which is why holding assets in a trust and a
    custodian are important. Second is making sure the assets
    cannot fluctuate in price, which is about having a very clear
    set of guidelines of what is investable. That allows a dollar
    to be a dollar and really, therefore, gives everyone confidence
    to use this in everyday commerce all over the world.
        Mr. Huizenga. Okay. Mr. Collison.
        Mr. Collison. My answer would have been the same as these
    two witnesses, but for the sake of variety, I will say----
        Mr. Huizenga. I am good with a good theme. That is all
    right, but, yes, give us a little spice.
        Mr. Collison. Having a viable State-based framework as the
    laboratory for innovation, I think is very helpful.
        Mr. Huizenga. You said State-based as well?
        Mr. Collison. Yes, in addition.
        Mr. Huizenga. Yes. Mr. Guynn.
        Mr. Guynn. I think if the goal to become truly accepted as
    money, stablecoins need to become no questions asked money.
    That is sort of the standard that economists have developed
    recently, and I think there are three aspects of the STABLE Act
    that actually should help stablecoins achieve that: the 100
    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.
        Mr. Huizenga. Ms. House, what do you think is hitting the
    mark?
        Ms. House. Great. I totally agree that with the measures
    that are in there, the ones, like the one-to-one reserve
    requirement and the restriction on rehypothecation of assets,
    is absolutely fundamental. As a cyber nerd, I will say the
    reference to cybersecurity protection is also very much
    appreciated.
        Mr. Huizenga. Okay. In the discussion draft of the STABLE
    Act, payment stablecoin issuers are permitted to issue
    stablecoins through a subsidiary. Mr. Guynn, what are the pros
    and cons, really quickly, on requiring issuance of that
    subsidiary?
        Mr. Guynn. Yes, so they are mostly pros, but I think the
    most important thing is it is very easy to match up the reserve
    with the stablecoin liabilities. If you actually were to issue
    stablecoins out of an entity that is engaged in a whole variety
    of activities, it would be very difficult. Particularly if the
    issuer were an insured depository institution, because there
    are depositor preference rules that give depositors preference
    over, say, a stablecoin holder, and there are also restrictions
    on securing liabilities for the insured depository institution.
        Mr. Huizenga. Okay. I would love to have more time, but yes
    or no from each one of you. Markets in Crypto-Assets regulation
    (MiCA) is now the law of the land in EU countries. Should we be
    following their lead? Ms. Butler.
        Ms. Butler. We should be following the lead in the sense of
    giving clear guidelines as to what can be done.
        Mr. Huizenga. Their structure----
        Ms. Butler. We should engage the private space, like we are
    doing, and ensure that we take the best of the rules that are
    in MiCA and apply them here.
        Mr. Huizenga. Okay. I have run out of time. That was a very
    good political answer, but I will follow up in writing with
    everyone. Thank you very much.
        Chairman Hill. We invite everybody to answer the question
    in writing.

        [The information referred to was not received prior to
    printing.]

        Chairman Hill. Now we will turn to the gentleman from
    California, Mr. Sherman, the Ranking Member of the Capital
    Markets Subcommittee, for 5 minutes.
        Mr. Sherman. Article I, Section 10, Clause 1 of the U.S.
    Constitution, ``Congress shall have the power to coin money and
    regulate the value thereof,'' so the Constitution says coining
    money is supposed to be done by the Federal Government. Now the
    private sector gets in and comes before Congress and says is
    not it outrageous that the Federal Government is competing with
    us, and we have to hamstrung them and make sure they cannot
    compete with us effectively. This would be like saying that now
    you can say that the Federal Government is supposed to coin
    money, so it cannot be electronic. That would be like saying
    that the Federal Government can only build roads designed for
    horses and buggies and that we should have private toll roads
    for automobiles.
        Mr. Guynn, I think you made the point very well. You said
    it is unfair to have a CDBG because it is too reliable, it is
    too secure, and in times of stress, that is where people will
    put their money. Then we are told, oh, but we are going to have
    privacy. Yes, Sam Bankman-Fried and Elon Musk are going to know
    every damn trade, every transaction I engage in, then they are
    going to sell that information to anybody who wants it, and
    then we are going to pass some loophole written law to say they
    cannot do it. They will just do it overseas. The idea that you
    are going to have privacy by giving the crypto bros all the
    information and letting them sell it to anybody they want,
    there is only one advantage of the coins we are talking about,
    stablecoins, and that is the crypto bros can make money from
    it. The goal of this hearing is to make sure that we do not
    have any competition from Section 10 of Article I.
        This is about the 400th hearing we have had on promoting
    cryptocurrency. We have not had a single witness come and tell
    us and make the case that we just simply should not have the
    cryptocurrency. We are told, if you invest in America and build
    jobs by investing in common stocks, your broker will send a
    Form 1099-A, and you will have to pay taxes on your gains. Then
    this Congress says, invest in crypto, create no jobs, except
    the jobs moving money around in crypto, not a single
    manufacturing job, and you pay no taxes.
        Ms. House, Zelle, is an electronic system. Unfortunately,
    for some people, it is not really good for tax evaders or
    people trying to hide their money from their former spouse. It
    is free. Our other witness has a system that is similar. They
    charge 2.9 percent at Stripe. Other than concealing assets from
    the government and former spouses, why would somebody go with a
    2.9 percent fee rather than a Zelle, which is free?
        Ms. House. Not knowing some of the specifics of Zelle since
    I am not a user, I think that there is interest in some of the
    broader, like, marketplace applications, where stablecoin is.
    Honestly, since most stablecoin activity is happening in
    trading, that is really where Zelle is not settling trading
    activity on crypto.
        Mr. Sherman. Okay. I have to make just one other point. Mr.
    Cascarilla tells us that people have iPhones, and they are
    unbanked, and we are going to get them banked, so the best way
    to get them banked is to have a CDBG. You want to prohibit
    that. Then it is talking as if CDBG would be mandatory. Why not
    just have one more competitor? Some people will want Elon Musk
    to know about their transactions and will trust him, and some
    will want to trust the Federal Government. We want to deny them
    the choice because anything that prevents Elon from making a
    profit, anything that prevents the crypto world from making a
    profit must be snuffed out no matter how useful it is to
    consumers. Okay. What could go wrong? I think Sam Bankman-Fried
    illustrated that to us.
        Ms. House, you have laid out in your testimony the
    protections we could have for Know Your Customer and anti-money
    laundering. I guarantee that the industry will block all of
    those that are effective because this industry cannot compete
    against the dollar unless it has an advantage, and that
    advantage is not that it is electronic because even Zelle is
    electronic. They are trying to snuff out a CDBG, which will be
    electronic. They can only compete for the tax evasion and
    spouse avoidance.
        Chairman Hill. The gentleman's time has expired.
        Mr. Sherman. I yield back.
        Chairman Hill. The gentleman from Kentucky, Mr. Barr, the
    Chairman of the Financial Institution Subcommittee, is
    recognized for 5 minutes.
        Mr. Barr. Mr. Guynn, let us just start with Mr. Sherman's
    concern that the STABLE Act might be inconsistent with
    Congress' power to coin money. Can you set the record straight
    about why the STABLE Act is consistent with Article I, Section
    8 and Section 10 of the Constitution?
        Mr. Guynn. For over 250 years or so, close to 250 years,
    States have chartered banks to issue private money in the form,
    first, of paper money, and second, as demand deposit claims. In
    fact, as I mentioned earlier in my testimony, that private
    money accounts for anywhere between 80 and 90 percent of the
    U.S. money supply, be it coins, the paper money, the claims
    against the Fed actually only account for a small fraction of
    it.
        Mr. Barr. Thank you for setting the record straight there.
    I totally agree with Mr. Cascarilla's point that stablecoins
    are a national security imperative for the United States, not
    only to modernize our financial system, but ensure the
    maintenance of the dollar's dominance, not just against
    bitcoins or digital currencies, cryptocurrencies, but also
    CBDCs that are competitors, potentially, to the dollar, the
    digital yuan, for example. I do care about banks, and I care
    about the economic growth that is sourced from our banks, and I
    think of community banks in Kentucky and the deposit base that
    is used to then extend loans. Some of the community bankers out
    there expressed concern about CBDCs and maybe even payment
    stablecoins in terms of the risk of eroding the deposit base.
    Ms. Butler, how might stablecoins issued under the STABLE Act
    be different than a central bank digital currency in terms of
    eroding or the potential to erode the deposit base?
        Ms. Butler. Thank you very much, Congressman, for that
    question. I think there are a couple of reasons. First, there
    is consistency of applying the same set of standards across the
    ecosystem. Whether you are banks or nonbanks or the size of a
    bank, you can actually participate in the ecosystem with
    clarity of what you can and cannot do. That is super important.
    Second, the asset protection rules that are proposed in the
    legislation are very important to protect that safety and
    soundness of the ecosystem, including the customer protections,
    AML, BSA. We are committed to making sure that those are always
    protected at all times, carrying over what we do in the
    traditional financial system into the digital financial
    ecosystem, and then finally allowing innovation to grow with
    the competitiveness at the backbone, right? That is how markets
    thrive when you have competitive solutions coming to the
    market.
        Mr. Barr. Ms. Butler, what role do you see banks actually
    playing in the payment stablecoin ecosystem under the STABLE
    Act?
        Ms. Butler. Thank you very much. We see ourselves
    performing a very similar role to what we do today, providing
    trust and confidence in the ecosystem and enabling our clients'
    needs to be met by a variety of different payment rails. Today,
    we offer a variety of payment rails. This is a new mechanism
    for payment and will continue to evolve payment rails as
    technologies evolve.
        Mr. Barr. Mr. Guynn, another question for you. Last Friday,
    the OCC rescinded OCC Interpretive Letter 1179, which required
    OCC charter banks to receive supervisory non-objection before
    engaging in digital-asset-related activities, including payment
    stablecoins. In addition, the OCC withdrew from two interagency
    statements as they applied to national banks and Federal
    savings associations, the joint statement on crypto asset risks
    to banking organizations and the joint statement on liquidity
    risks to banking organizations resulting from crypto asset
    market vulnerabilities. Mr. Guynn, what do these actions mean
    for the banking system?
        Mr. Guynn. This means that the banks can now, without
    uncertainty, act as custodians, act as service providers, act
    as issuers of stablecoins, which I think is a good thing. In my
    view, it should never have been put on hold, and it is a good
    thing, and it is a good experimentation. The OCC is a perfectly
    competent regulator to manage and supervise the risks of those
    activities.
        Mr. Barr. What other actions could both regulators and
    Congress take to ensure that banks have the clarity necessary
    to engage with the digital asset ecosystem while maintaining
    compliance with other bank related laws?
        Mr. Guynn. I think they could do something very simple.
    They could issue a regulation that says that acting as an agent
    or principal with respect to digital assets, including
    stablecoins, is financial in nature for purposes of the Bank
    Holding Company Act.
        Mr. Barr. As you see from my questions, I think that the
    STABLE Act is a very important step in the right direction, and
    I think banks can participate in the stablecoin ecosystem in a
    way that fosters innovation and includes banks in this process.
    With that, I yield.
        Chairman Hill. The gentleman yields. The gentleman from New
    York, Mr. Meeks, the Ranking Member on the House Foreign
    Affairs Committee, is recognized for 5 minutes.
        Mr. Meeks. Thank you, Mr. Chairman. Let me start out with
    Ms. Butler. There has been a lot of concern about debanking
    crypto companies, with mixed messaging from the Federal
    regulators on how traditional finance can integrate with and
    provide essential services to the crypto industry. Bank of New
    York is a New York State-chartered bank that has been actively
    working with crypto companies. This has been facilitated by
    clear guidance to banks from the New York's Department of
    Financial Services and has led to a vibrant crypto ecosystem in
    New York for crypto companies and traditional financial
    institutions. New York's leadership here demonstrates the
    importance of a strong State pathway for stablecoin regulation.
    Can you talk about the importance of working with the New
    York's DFS in building a strong, well-regulated crypto
    ecosystem in New York?
        Ms. Butler. Thank you very much, Congressman, for your
    question. We work very closely with the New York DFS and with
    all our regulators. Given the evolving nature of this space, it
    is very important to have that very engaged dialog on a
    continuous basis, to ensure that, again, we know the clarity
    that we can operate in. As these rules evolve and as the
    ecosystem evolve, we can make sure that there is a two-way
    communication. Clear and consistent framework across the entire
    ecosystem needs to be upheld at all times, and it needs to not
    be whether you choose a State pathway or whether you choose 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.
        Mr. Meeks. Thanks for that. Let me go to Mr. Cascarilla.
    You spoke about Paxos' history with the New York State DFS in
    your testimony. What do you see as the advantages of State
    regulation as a stablecoin issuer?
        Mr. Cascarilla. Thank you, Congressman, for the question.
    The New York DFS was the first regulator in the world to
    approve the issuance of a regulated stablecoin, and I think
    that underscores the importance of having a State pathway that
    allows innovation to happen and continue to happen. In fact,
    the regulations and the framework that the DFS has constructed
    have been, I think, the cornerstone for a number of regulators
    around the world as they have built their frameworks. I think
    that really shows how important it is for the States to be able
    to lead. If we did not have New York leading, today there would
    not be a prudentially regulated stablecoin issued from the
    United States.
        Mr. Meeks. I, like many of my colleagues, have concerns
    about the use of stablecoins and other digital assets by
    illicit actors. I appreciate that you and I have had the
    opportunity to discuss the importance of including strong
    illicit financing protections in any stablecoin bill that
    becomes law. What is your perspective on where the greatest
    risks are, and how should we think about addressing them?
        Mr. Cascarilla. I think it is very important to make sure
    that there are bank standards, which today, Paxos adheres to,
    for AML, KYC, and BSA. The last thing we want is for anybody to
    use these products illegally. I think, also, this 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, and on the one hand, we will
    create new ways for people to have access to this, which is
    important. On the other hand, it could create new ways for
    people to use it illegally. With the right types of protections
    and the right types of banks like standards for knowing your
    customer, I think you can have a framework that allows you to
    marry both the risks and the rewards in the right way.
        Mr. Meeks. Let me also, with the time I have left, go to
    Mr. Collison. We talk a lot about stablecoins here in a
    theoretical sense, but the practical, real-world applications
    for everyday people are often overlooked, in my opinion. From
    your perspective, how can stablecoins broaden access to
    essential financial services for communities, both domestically
    and internationally, particularly in underserved regions and in
    countries experiencing severe currency volatility?
        Mr. Collison. Yes. I think there are extensive applications
    here in the United States where many forms of payment are slow
    and expensive. Dan Awrey, a professor at Columbia, describes
    the U.S.' payment system as the most expensive in the G20. Even
    more importantly, internationally, precisely as you point out,
    a very large fraction of the world's population lives in a
    country with a significantly unstable or inflationary currency,
    and providing those who have access to, one, a stable reserve
    currency, that is to say the dollar, but then second, the
    ability to engage on a level playing field in the world
    financial system is a huge deal for them.
        Mr. Meeks. Thank you. My time has expired.
        Chairman Hill. The gentleman yields back. The Chairman of
    the Small Business Committee, Mr. Williams of Texas, is
    recognized for 5 minutes.
        Mr. Williams of Texas. Thank you, Mr. Chairman. Chinese
    involvement in digital assets and the blockchain could raise
    serious national security concerns for the United States, and
    blockchain technology has the potential to revolutionize
    various industries like finance, supply chains, and
    infrastructure. If China gains a competitive advantage over the
    United States, it could have leverage over economic, national
    security interests through surveillance and cyberattacks. It is
    key to maintain U.S. dominance and keep bad actors from
    jeopardizing our national security. Mr. Cascarilla, would you
    describe the consequences of stablecoins being primary
    denominated in the Chinese and not the U.S. dollar?
        Mr. Cascarilla. I think, fortunately, right now, 98 percent
    of transactions that are happening in the crypto-related space
    are happening against U.S. dollars. Of course, that does not
    always need to be the case in the future, and if the United
    States has not set a clear framework, that does open up the
    possibility for other nations and other types of currencies to
    gain not just a foothold, but even a predominance, which, of
    course, would be problematic for the United States.
        Mr. Williams of Texas. All right. Stablecoins are becoming
    extremely popular in the payments network and are operating on
    the decentralized network, giving users a degree of financial
    freedom. Whereas a central bank digital currency gives the
    government more control over private citizens' transactions,
    and can lead to increased consequences with privacy,
    supervision, and overall financial freedom. We must allow for
    more innovation in the digital payments world, not constructing
    growth with a central bank for digital currency. Mr. Collison,
    does Stripe have any examples of customers using Stripe's
    stablecoin orchestration platform to break free from
    authoritarian governments or deflationary national currencies?
        Mr. Collison. Thanks for the question. We see many examples
    of this. I think of the comparison to the petrodollar system,
    where, starting back in the 1970s, the series of agreements
    with Gulf States created an enormous new source of secular
    demand for dollars. We are seeing the same thing happening
    today in emerging markets, where people are taking enthusiastic
    advantage of this new liberty and this new capability where
    they can hold dollars and they can, again, get direct access to
    the world's preeminent reserve currency. I think this is a
    really big deal for double liberty and for double prosperity.
        Mr. Williams of Texas. Quickly, this committee feels
    strongly that the interact of Federal regime for stablecoin
    issuers will ultimately inhibit China's ability to control the
    space. We have seen countries around the world take action to
    establish national regimes for stablecoins. EU, Japan, U.K.,
    Singapore have all taken steps to establish the regulatory
    framework for stablecoins' recognized potential to modernize
    payments and enhance financial. Mr. Collison, again quickly, as
    a global payments company, could you elaborate on how important
    it is for the United States to establish a Federal framework to
    maintain U.S. competitiveness?
        Mr. Collison. I think this is important for two reasons.
    One, there are the practical benefits for American consumers
    and for American business today, and I think it is simply on
    those merits worth putting forth a formalized Federal framework
    that enables the stablecoin ecosystem here in the country, but
    then I think there is a second reason. I think this is what you
    are getting at that while it is the case that an overwhelming
    majority of transactions today are, in fact, denominated in
    dollars, and that is enormously to the U.S.' benefit, there is
    a risk that if the United States adopts a posture of
    discouraging and inhibiting stablecoin adoption, that the rest
    of the market will respond and adapt. Perhaps we are here in 5
    years and the preeminent stablecoin currency is euros or
    renminbi or some other global currency, and I think that would
    be to the U.S.' detriment.
        Mr. Williams of Texas. Mr. Chairman, I yield my time back.
        Chairman Hill. The gentleman yields back. The chair
    recognizes the gentleman from Georgia, Mr. Scott, for 5
    minutes.
        Mr. Scott. Thank you very much, Mr. Chairman. First of all,
    let me say, I totally agree with Ms. Waters. She gave a
    brilliant opening statement, and I hope everybody heard that.
    It was plain. It was clear.
        First of all, I did a little research. Stablecoins are
    often promoted as safe, but they are not. For example, the
    stablecoin, Beanstalk, suffered a heist in which attackers
    manipulated governance mechanisms, and they stole $182 million
    in crypto assets. Another Bridge hack resulted in a theft of
    $320 million. You think that is safety? Here is another one: in
    2023, Curve Finance, which is a major platform with exposure to
    multiple stablecoins, fell victim to a vulnerability that led
    to tens of millions of dollars in losses due to an exploit in
    its smart contract. Do you all know this? Now, Ms. House, am I
    scoring some points here?
        Ms. House. Yes.
        Mr. Scott. How in the world can we say they are safe when
    we are losing all of the millions of dollars? My first question
    is, given these vulnerabilities, what regulatory frameworks can
    be applied to protect consumers and financial stability in the
    face of ongoing stablecoin heists losing millions of dollars in
    our economy?
        Ms. House. Yes, Congressman. Thank you for the question.
    This was a critical issue in priority, certainly at the
    National Security Council, also seeing hundreds of millions and
    billions being stolen by illicit actors and, in some cases,
    nation-states who were fueling their proliferation activities
    with these heists. One of the most critical things that is
    being exploited specifically in these heists is poor
    cybersecurity. Many of these heists are being exploited because
    of poor key management and, basically, just basic information
    security practices not being put in place in some cases, and
    there has not been enough of a focus in organization around
    standards and security. The prudential protections, largely the
    ones that I outlined earlier, and which are present in the
    McHenry-Waters Bill in a more fulsome way, I think will help to
    reinforce some of the security measures and protections that
    need to get put in place to defend against these exploits.
        Mr. Scott. Let me ask you this. Should the United States
    consider requiring stablecoin issuers to hold fully audited
    reserves at insured banks to prevent castigating risk in the
    event of a breach?
        Ms. House. Roger, yes, Congressman. I do believe that the
    full reserve holdings are critical, and I am glad to see that
    being reflected across several pieces of proposed legislation.
        Mr. Scott. How can Federal agencies ensure that stablecoin
    issuers adopt industries' best practices in cybersecurity and
    risk mitigation?
        Ms. House. Great. The first would be to ensure that Federal
    agencies have a line of sight for oversight on especially
    systemically important and very large stablecoin actors that
    will serve as very high-value targets and have the
    responsibility to custody many of these assets, so making sure
    that, at least on some of those critical components, that there
    is the Federal arm of oversight. Beyond that, I do think that
    there are work-like standards, that there is an absence, to a
    certain extent, of standards. Decentralized communities have a
    tougher time organizing, so I think that some prompting and
    encouragement from the government side to help to identify
    where certain vulnerabilities are being exploited and also to
    create new standards that are bespoke and unique to the
    blockchain space.
        Mr. Scott. Well, let us hope you are right, and thank you
    for your excellent testimony. Thank you very much.
        Chairman Hill. The gentleman yields back. The chair
    recognizes the distinguished Republican Whip of the House, Mr.
    Emmer of Minnesota, who is also the author of the Anti-CBDC
    Surveillance Act, is recognized for 5 minutes.
        Mr. Emmer. Thank you, Mr. Chairman. Thanks for those words
    and for holding this important hearing today to study the
    promises of stablecoin technology to unlock economic
    efficiencies and the risks of central bank digital currencies
    to our privacy and freedom. I appreciate the committee's
    efforts to incorporate my feedback into the stablecoin bill
    over the past several Congresses, and I am grateful to this
    committee for noticing my bill, the Anti-CBDC Surveillance
    State Act, in this hearing today.
        The bill is simple. It halts the efforts of unelected
    bureaucrats from ever issuing a central bank digital currency
    that could upend the American way of life. This bill has the
    support of over a 100 Members of Congress and groups ranging
    from the Independent Community Bankers Association and the
    American Bankers Association to Club for Growth, Heritage
    Action, and the Blockchain Association. CBDC technology is
    inherently un-American, and I am grateful to President Trump
    for understanding this and signing an executive order banning
    CBDCs as one of his first actions as President. My bill would
    codify the executive order into law and prevent a future
    administration from creating such an obvious tool for financial
    surveillance against its own citizens.
        Great to see you, Mr. Cascarilla. Proponents of the U.S.
    central bank digital currency often cite global competition and
    the race to extend the dollar status as the world's reserve
    currency as promises of a CBDC. Do you think there is anything
    a potential U.S. CBDC could accomplish that a privately issued
    stablecoin cannot?
        Mr. Cascarilla. Thank you for the question, Congressman
    Emmer. I do not think so. I think, historically, innovation in
    the United States, in both technology and in the financial
    services landscape, has come from the private sector, and I
    think that is what we should continue to embrace. I think that
    is what the bill would enable.
        Mr. Emmer. Well, speaking of stablecoins, Section 15 of the
    STABLE Act, the proposed legislation, requires Federal
    regulators to create and implement reciprocal agreements
    between the United States jurisdiction and jurisdictions with
    substantially similar regulatory frameworks for dollar backed
    payment stablecoins. Can you explain the impact this section
    will have in extending the status of the dollar as the world's
    reserve currency?
        Mr. Cascarilla. Thank you. Yes, I think the important point
    is that everybody wants the dollar. The United States is, of
    course, the home of the dollar. We are exporting dollars or
    exporting American values. We want to make sure we have the
    same set of rules in the United States as we have around the
    world so that there is not some arbitrage that is possible to
    issue from another jurisdiction. By having that same set of
    rules that everyone has to meet in order to access the U.S.
    market, it will actually create a race to the top, not a race
    to the bottom.
        Mr. Emmer. Thank you, Mr. Cascarilla. CBDCs introduce
    significant privacy risks and are fundamentally the antithesis
    of American values. On the other hand, this stablecoin bill can
    bring traditional finance on chain at a global scale while
    preserving privacy, individual sovereignty, and free market
    competitiveness. This underscores why we must prioritize pro-
    stablecoin legislation alongside anti-CBDC legislation. I want
    to thank Chairman Hill again, and especially for working with
    me on the anti-CBDC Surveillance State Act, both in this
    Congress now and in the last Congress. I would like to applaud
    the efforts of Representative Warren Davidson, Representative
    Andy Ogles, and former representative and a good friend of the
    chair and myself, Representative Alex Mooney, for their
    contributions to this text and for helping make it a stronger
    legislative proposal. I yield back the rest of my time.
        Chairman Hill. I thank the gentleman. The gentleman yields
    back. The gentleman from Massachusetts, Mr. Lynch, the Ranking
    Member of the Digital Assets Financial Technology and
    Artificial Intelligence Subcommittee, is recognized for 5
    minutes.
        Mr. Lynch. Thank you, Mr. Chairman. Ms. House, currently,
    just a couple of stablecoins have about 90 percent of the
    market. Is that correct?
        Ms. House. Yes, sir. Yes, Congressman.
        Mr. Lynch. Yes. This market is susceptible to
    concentration.
        Ms. House. It does. Yes, Congressman.
        Mr. Lynch. Yes. We are looking at Meta. Meta has 3.9
    billion subscribers across all its platforms, Instagram and
    WhatsApp, as well as Facebook, and Apple probably has a billion
    paid monthly subscribers. What would be the impact if both
    those firms came in and just established stablecoins? What
    would happen to the competitiveness of the market here in
    stablecoins?
        Ms. House. It is an interesting exercise. I think, first
    off, it depends on whether there is a regulatory framework that
    would help to enable competition and enable protection for some
    smaller players to come in. Without protections against it, I
    think that the potential for them to come in and leverage very,
    very large market shares with their devices and applications
    and others, it is possible that they could take over. Of
    course, without protections, there are still very major
    players, especially foreign operating ones, that have currently
    been operating without much transparency or customer protection
    that they will be coming up against.
        Mr. Lynch. Well, stablecoins operate a lot like deposits,
    so that would break down the separation between banking and
    commerce, would it not?
        Ms. House. Yes, absolutely. That is also a major risk. If
    you start to conflate those and you do not have the kinds of
    protections that we do in the banking system, for good reasons,
    to divorce and separate banking and commerce, then that would
    present those major challenges as well.
        Mr. Lynch. Mr. Guynn, is that how you pronounce your name?
    I do not want to pronounce your name wrong.
        Mr. Guynn. Sorry, it is Guynn.
        Mr. Lynch. Guynn, I am sorry. First of all, thank you for
    your testimony. To all the panelists, you mentioned a couple of
    times that stablecoins should be as safe and as secure as
    Federal Deposit Insurance Corporation (FDIC)-insured deposits,
    but in the past several years, I sat up here and I saw the
    collapses. We have had at least 20 stablecoins just collapsed.
    We have had every single major stablecoin in the world depeg
    from the dollar. We watched as the Federal Reserve and FDIC had
    to go in and rescue Silicon Valley Bank. I mean, did that not
    happen?
        Mr. Guynn. It certainly did.
        Mr. Lynch. Yes, okay, because this is the first time any of
    you have said that happened. Look, the idea of scientific
    method is when you try something and it does not work, and it
    blows up and it causes people damage, you adjust and you
    develop improvements, but we keep doing the same thing over and
    over with stablecoins. They keep blowing up.
        Mr. Guynn. I do not think that is the case.
        Mr. Lynch. My time. Now we want to just expand that, and it
    just seems like it is inviting a disaster, I guarantee you. I
    read the Guiding and Establishing National Innovation for U.S.
    Stablecoins (GENIUS) Act over in the Senate. I am a little wary
    about anything called ``genius'' coming out of the U.S. Senate,
    but there were so many problems with that, and I am hopeful
    that my colleagues, Mr. Hill and others, will amend that
    vigorously because it had huge, huge problems. The other piece
    of this is stablecoins, especially if they offer interest. Do
    you support stablecoins that offer interest, that are actual
    deposits?
        Mr. Guynn. Are you asking me that question?
        Mr. Lynch. Yes. Yes.
        Mr. Guynn. I think if they had----
        Mr. Lynch. Yes or no. It is pretty clear, interest-bearing
    stablecoins.
        Mr. Guynn. I think it is yes if they have appropriately
    calibrated capital requirements.
        Mr. Lynch. Okay. That is what I was fearful of. Instead of
    traditional banks, here is the difference. Stablecoins, it is
    going to take deposits, and it is going to use those deposits
    as reserves, right? That is how this thing is going to work,
    and it is going to have to hold those for protection. A normal
    bank, traditional bank, would take those deposits and lend them
    out to small businesses, mortgages, and that type of activity.
    I am afraid it is going to siphon off a lot of the credit
    market, and we will be using those deposits to back the
    stablecoins to prevent disaster instead of putting that money
    to work. Ms. House, is that a legitimate concern?
        Ms. House. I think the concerns are founded and why
    bipartisan legislation on a good regulatory framework is
    critical.
        Mr. Lynch. Thank you. I yield back. Thank you.
        Mr. Steil [presiding]. The gentleman yields back. The
    gentleman from Georgia, Mr. Loudermilk, is recognized.
        Mr. Loudermilk. Thank you, Mr. Chairman. Thank you all for
    being here. This is a very timely discussion we are having. In
    fact, while you guys were giving your statement, I was meeting
    with some middle school students talking about financial
    markets. Obviously, these students, as I was Zooming into them,
    their eyes were glazed over, until I got to the point about
    digital assets. That is when they perked up and listened. Why?
    Because this is their age. This is the technological revolution
    they are growing up with, and either we fall way behind in
    technology, as we have in previous decades, or we try to keep
    up with it and we make the inevitable part of a viable free
    market system and our economy.
        I would like to kind of follow up on the previous
    questions, Mr. Guynn. Both stablecoin depegging events and the
    2008 Reserve Primary Fund crisis involved the loss of
    confidence in an asset that is supposed to maintain a stable
    value. When the Primary Reserve Fund broke the buck, it led to
    investor panic and liquidity crisis in money markets.
    Similarly, when stablecoin depegs, such as what we saw in
    Terra, United States dollar (USD) investors rushed to redeem,
    potentially destabilizing the markets. Mr. Guynn, can you
    compare and contrast the risks posed by these two events in
    terms of systemic impact and redemption dynamics?
        Mr. Guynn. Yes, definitely. The Reserve Primary Fund is a
    money market fund. They are not required to have capital
    requirements, and so when their assets fell below parity,
    basically, they had less than what they needed to redeem all
    the interest. Terra USD is an algorithmic stablecoin issuer,
    and so it did not have a 100 percent reserve with safe assets
    like would be required here, so that would not have been a
    payment stablecoin. Here, in contrast, the entities would have
    a 100 percent reserve requirement, they would have a properly
    calibrated capital requirement, and they would have
    restrictions on their non-stablecoin activities. Those three
    things make them fundamentally different from the Reserve
    Primary Fund, Terra USD, and the stablecoins that he was
    talking about earlier.
        Mr. Loudermilk. Okay. Thank you. That is why I want to give
    you some time to actually respond to the question. follow up:
    while the types of assets that can be used to back stablecoins
    in the STABLE Act are recognized as highly liquid cash
    equivalents, it seems like there could be slight variations in
    the liquidity of these assets at times. At a high level, how
    would different asset mixes affect redemption mechanics during
    a mass redemption event, and how can we avoid liquidity
    mismatches?
        Mr. Guynn. I think the permitted assets now are very short-
    term. In fact, as I said in my opening statement, I think they
    are overly restrictive, but I do think that they need to have a
    duration of something like 6 months or something like that on
    an average basis. They need to be short term so they can be
    liquidated so that even if interest went up and their value
    went down, they could be liquidated pretty much at par or close
    to par. Then to the extent they are not exactly at par, instead
    of having the situation with the Reserve Primary Fund, they
    would have a capital buffer that would allow them to make up
    the difference.
        Mr. Loudermilk. Okay, last question. The STABLE Act
    requires stablecoin issuers to periodically publish information
    on the reserves backing a stablecoin. Can you explain how this
    might mitigate risk related to mass redemption events?
        Mr. Guynn. Yes. Public disclosure is critically important
    to that and also to distinguish a payment stablecoin issued
    under this act and other stablecoins. As I said earlier, the
    goal is to structure payment stablecoins so that they are what
    economists call no questions asked money so you can have
    absolute confidence in them. I think that is what needs to be
    done, and I think that the STABLE Act should accomplish that.
        Mr. Loudermilk. Okay. Thank you. Ms. Butler, for the few
    moments I have remaining, on Friday, Treasury Secretary Scott
    Bessent said that stablecoins would help ensure that the U.S.
    dollar remains the world's reserve currency. How would the
    demand for Treasuries created by the new stablecoin
    collateralization requirements affect the demand for U.S.
    dollars and U.S. dollar foreign exchange rates globally?
        Ms. Butler. Thank you very much for the question. Given
    that U.S. Treasuries are actually one of the non-cash assets
    held in the reserve, it would stand to reason that as the
    demand for U.S. dollar represented on chain, i.e., a
    stablecoin, grows, that you would see the underlying reserve
    grow as well. That backbone of the global economy today, in
    terms of trust and security, being the U.S. Treasury, would
    continue to be there in the form of a U.S. stablecoin.
        Mr. Loudermilk. Okay. Thank you. I yield back.
        Mr. Steil. The gentleman yields back. The gentleman from
    Missouri, Mr. Cleaver, the Ranking Member of the Housing and
    Insurance Subcommittee, is recognized for 5 minutes.
        Mr. Cleaver. Thank you, Mr. Chairman. Is there anyone here
    who does not believe that in 2008 the central focus of the
    economic collapse in our country had nothing to do with
    housing? [No response.]
        Mr. Cleaver. Is there anyone who believes that housing was
    the central fact?
        Mr. Guynn. I think it was housing combined with very
    leveraged investments in real estate.
        Mr. Cleaver. Okay. Everybody else agrees? Thank you. From
    the Ranking Member, Maxine Waters, and all the way down to me,
    we were here on the day that the Secretary of Treasury came in
    and told us that we were in a position where we had to act very
    quickly. We might have a worldwide depression, and I have come
    to believe over my career and life that experience is the very
    best teacher. The worst experience teaches us the best lessons,
    and that causes me to have great concern. There was a
    ProPublica article that came out recently, and over at U.S.
    Department of Housing & Urban Development (HUD), there were two
    officials who believed that HUD needs to start using
    cryptocurrency, and that was actually a meeting. They went into
    great detail on how this would function, and it would be a
    trial run, but would not this be just another unregulated
    security in the housing market? Anybody?
        Mr. Collison. I will just briefly say that I think the
    dynamic you are highlighting actually relates to one of the
    reasons to be enthusiastic about stablecoins. Because of, and I
    think Mr. Guynn makes the points very clearly and well, the
    extremely tight controls about how stablecoin deposits can be
    managed, I think some of the duration mismatch and other
    fractional reserve-related risks in the financial system can be
    significantly mitigated.
        Mr. Cleaver. Okay. HUD now wants to start doing their
    funding through cryptocurrency.
        Mr. Collison. I do not know anything about the HUD-specific
    dynamics.
        Mr. Cleaver. Well, they are. I mean, that is kind of a
    fact, and so I am concerned, just because of experience, and
    when you look at this sheet, you cannot see it, I do not think,
    but this is congressional intergovernmental relations staff.
    Right now, Ms. House, there is a move to shut down the CFPB, as
    I think everybody in the world knows, and their only job is
    protecting consumers. If ProPublica did not just make this up,
    and that HUD is planning on trying to respond to funding by
    giving them the funding through crypto, and we have all of
    these positions with HUD unfilled, deputy assistant secretary
    for congressional intergovernmental relations, congressional
    relations specialist, congressional relations specialist 1048,
    congressional relations specialist 10148. We are talking about
    cryptocurrency. We do not have a staff. They are trying to shut
    down the whole operation of CFPB. I mean, don't you think
    somebody is having a nervous breakdown? I mean, you do not have
    to tell me who is having a nervous breakdown.
        Ms. House. Just to reinforce some of the issues that you
    have been highlighting about this, the need for us to make sure
    that we have strong consumer protections, and especially in a
    space like with stablecoins and other digital services, we are
    getting more and more reliant and interconnected with these
    digital services with even more data and more access and reach.
    Ultimately, what that demands is a stronger capacity to be able
    to protect consumers, so, ultimately, I do not think that it is
    wise to make arbitrary decisions to shut down things that are
    protecting consumers. If they want to drive more, like,
    effectiveness and efficiencies, there is the place to do it.
        Mr. Steil. The gentleman's time has expired.
        Ms. House. Apologies.
        Mr. Steil. The gentleman's time has expired. The gentleman
    from Ohio, Mr. Davidson, Chair of the National Security,
    Illicit Finance, and International Financial Institutions
    Subcommittee, is recognized for 5 minutes.
        Mr. Davidson. I thank the Chairman. I thank our witnesses
    for your testimony and frankly, your work in the marketplace.
    It is inspiring, and I am glad we are finally here today to
    talk about important legislation protecting, frankly, the
    ability to transact in the United States, and let us just begin
    with first principles. In a State of nature, people can
    transact. The government is not the giver of the right to
    transact. Does anyone believe that? Do we believe permission to
    conduct a transaction is given to us by the government? [No
    response.]
        Mr. Davidson. Okay. No takers, so it is a private sector
    right. It is a natural right. In our country, that is kind of
    the way our country was founded, that we recognize our rights
    come from a Creator, that among them are life, liberty, and the
    pursuit of happiness, and the Constitution protects them.
        We are in a period where there is a lot of debate about how
    much control should the government have over the transactions,
    and the market has moved on. Stablecoins are a thing. They are
    not as big as we think they should be because they are less
    than 10 percent of all the market capitalization of all digital
    assets right now, but they hold a lot of promise. For that
    reason, we are trying to get regulatory clarity beyond the
    State of New York and here across the Nation, and, frankly,
    with international agreements.
        Mr. Cascarilla, I appreciate your recognition of how
    important it is to add the ability to recognize jurisdictions
    that do get it right. First, let me just start with cash
    because cash has been around for a long time, and you
    physically possess it in a permissionless way. You do not need
    permission from the government or even your bank to get it. Now
    it is almost illegal to get your own cash, but not entirely,
    right, and financial institutions have an interest in
    preserving the deposits. They want all the stuff deposited, but
    at the end of the day, so do the consumers. They want the
    deposit. Some portion they protect, and I think that is why
    self-custody is important.
        Ms. Butler, you have done a lot of work in custody of all
    sorts. How important is it for a permissionless transaction to
    be able to happen that we protect self-custody?
        Ms. Butler. Thank you very much, Congressman, for your
    question. I think self-custody is a very interesting topic, and
    I think there are two things that need to be considered. The
    asset underlying it is the custody and the protections of asset
    safety. If you can apply the asset safety protections in terms
    of segregation, in terms of AML and BSA, so you can protect the
    assets, then it is a customer choice, right? I think customer
    choice is always going to be important when there are a variety
    of different options in the market.
        Mr. Davidson. Yes, thank you. Mr. Collison, you guys are
    facilitating a large number of transactions, and certainly,
    consumers and vendors want to use your platform to do
    transactions. Some portion of that in the digital world, if you
    read the bitcoin white paper, you do not have to go very far.
    The goal was to facilitate permissionless transactions, not
    entirely permissioned. How do you see self-custody fitting in
    that framework?
        Mr. Collison. I appreciate you highlighting this. I think
    the self-custodial aspects of cryptocurrencies are an important
    liberty but also something that creates real challenges with
    respect to illicit activity and fraud and AML and so forth.
    With respect to stablecoins, in particular, something that I
    think is helpful and I think has been highlighted here is that
    because of the on-ramp/off-ramp dynamic, you have these natural
    points where some degree of system integrity can be ensured,
    and BSA and other requirements can be applied. To your point,
    there is a separate question as to how this should work with
    more traditional cryptocurrencies.
        Mr. Davidson. Yes. Thank you for that and, frankly, you
    have KYC responsibilities for your customers. Once they off-
    ramp it, just like cash, you might have some obligation to
    report that they did, but then you are not responsible for the
    entire network of money because whatever U.S. dollar coin is
    used for by anyone, you are only responsible for your
    customers. We want to safeguard that.
        The nice thing, to the point about what is it backed, we
    are here talking about stablecoins, and stablecoins are backed.
    Frankly, they are more secure than bank deposits. There is no
    fractional reserve lending against the deposits. It is 1-to-1
    in the case of a dollar, and you do not have any liquidity or
    time period horizon, 6 months T-bills versus repo markets,
    reverse repo markets with commodity-backed stablecoins like
    gold. It is a redemption of 1 ounce of gold claim, and so it is
    very secure. You are, essentially, by self-custody, signing
    ownership.
        The last thing, I definitely want to associate myself with
    Mr. Emmer's remarks on central bank digital currency. We do not
    want them to design it, develop it, implement it, or impose it.
    It is the polar opposite of the system. It is a system for
    surveillance, coercion, and control. We certainly do not want
    that form of money anywhere, and I yield.
        Mr. Steil. The gentleman yields back. Mrs. Beatty, the
    Ranking Member of the National Security Illicit Finance and
    International Institution Subcommittee from Ohio, is recognized
    for 5 minutes.
        Mrs. Beatty. Thank you, Mr. Chairman and Ranking Member.
    First, all the witnesses, thank you for being here today. Ms.
    House, like you, I care about economic and technological
    security. I take very seriously the national security concerns
    posed by emerging technology and the unknowns that exist within
    the digital asset ecosystem. The existence of the digital
    market is not going to change, and the public appetite for it
    is not waning any time soon, it appears. Like you, I agree that
    we need to establish mechanisms for victim resources and ways
    to track illicit funds and patch security vulnerabilities in
    smart contracts.
        It is clear that the current administration is going all in
    on crypto. The President and the First Lady made over a billion
    dollars on a Trump and Melania coin, defrauding his supporters
    on their hard-earned money and allowing him to make more money
    than he has ever in his past failed businesses. Eric Trump has
    also used his social media pages to promote coins, and he is
    invested in under the guise of good investment. To me, this is
    a direct example of fraud, market manipulation, and conflict of
    interest.
        Now, Ms. House, you noted in your testimony that pump-and-
    dump schemes endanger market integrity. My question, how can we
    ensure the stablecoins uphold their integrity through
    regulation when the surrounding ecosystem is the wild, wild
    West?
        Ms. House. Great. Thank you, Congresswoman, for the
    question, and, ultimately, it is really the purpose of this
    hearing, putting in place, as timely as possible, the
    prudential framework that we need quickly for stablecoins to
    make sure that we have the necessary protections for consumers
    to ensure the integrity of the asset. That means things like
    bankruptcy and resolution capabilities. It does mean things
    like 1-to-1 reserves, and also prevention of and the
    prohibition on rehypothecation of assets, so many of the
    protections that are outlined, some of them in the STABLE Act,
    and more holistically in the Waters-McHenry Bill.
        Mrs. Beatty. Okay. While I have you, as the chairman
    mentioned in introducing me, I serve as the Ranking Member on
    the Subcommittee of National Security, Illicit Funds, and
    International Financial Institutions. As we know,
    cryptocurrency is the favorite payment method for bad actors
    and criminals engaging in cybercrime, money laundering,
    sanctions of evasions, bribery, embezzlement, and I could go on
    and on with that. The stablecoin legislation that was
    negotiated between our ranking member and former Chairman
    McHenry included critical protections for anti-money laundering
    and counter financial terrorisms that we stripped in
    Republican-led bills that we are considering today. Can you
    discuss the provisions in which the AML/combating the financing
    of terrorism (CFT) protections should be included in any
    stablecoin framework?
        Ms. House. Absolutely, Congresswoman, something I cared
    very much about when I led crypto policy at FinCEN, AML
    regulator. I think what we need is certainly very clear
    guidance and expectation on the holistic framework for
    countering illicit finance, so that is both AML/CFT and on
    sanctions applicability. Looking to things like
    extraterritorial application, that, ultimately, is critical,
    including for rewarding the good actors, many of which have
    been U.S. firms that have long been operating more compliantly
    versus others. We need to make sure that anyone who is
    purporting to be administering a U.S. dollar-backed stablecoin
    does not allow for U.S. dollars to become accessible to the
    greatest threats to our national security, so strengthening
    those provisions, making sure that we are clear about who is
    implementing those regulations and controls, and ensuring that
    they are as strong or on parity and equivalent to things like
    our banking requirements, and then also making sure that freeze
    and recovery capability is in place, which will help AML and
    also fraud and consumer recovery and recourse.
        Mrs. Beatty. Thank you. As an expert, that certainly helps
    me, and for me, it confirms or reconfirms that the Waters-
    McHenry critical protections that they were putting in their
    proposed legislation is something we really need. Hopefully,
    Mr. Chairman, you all would consider going back to what former
    Chair McHenry had proposed with Ranking Member Waters. Thank
    you, Mr. Chairman. I yield back the rest of my time.
        Mr. Steil. The gentlewoman yields back. The gentleman from
    Tennessee, Mr. Rose, is recognized for 5 minutes.
        Mr. Rose. Thank you to Chairman Hill and Ranking Member
    Waters for holding this hearing and thank you to our witnesses
    for taking time from your schedules to join us today. The
    STABLE Act forges a path forward based on both innovation and
    accountability. While we have heard a lot regarding the
    innovation that this bill would unlock, I also think it is
    important to highlight the accountability that this brings to
    the stablecoin industry. The STABLE Act would require reports
    regarding the stablecoin issuer's reserve composition to be
    publicly disclosed, audited, and attested to by the issuer's
    executives. Mr. Guynn, how will these requirements hold the
    stablecoin issuers accountable to the bill's reserve
    requirements?
        Mr. Guynn. Well, first of all, the market will be looking
    at these disclosures quite intensely because they are required
    monthly, so the market, in many ways, will impose a certain
    discipline on them. Also, the certifications, if they are
    willfully or knowingly misleading, they are subject to criminal
    penalties. I think that would deter any CEO or CFO from making
    misleading certifications. I am glad you asked that question
    because I kind of left off an important thing to one of the
    other questions on the disclosure. It is very important in the
    disclosure 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 the label ``stablecoin''
    on it that may not actually be subject to the same standards.
        Mr. Rose. Thank you. Mr. Guynn, you spoke about the success
    and clarity of the U.S. dual banking system. Under the STABLE
    Act, issuers licensed by a State regulator must respect the
    sovereignty of other States who may choose to harmonize their
    requirements. Do you think this is the correct approach to a
    true State pathway, and potential issues could arise if a State
    is able to preempt another State's laws?
        Mr. Guynn. I actually think the scenario you are painting
    is probably very difficult because at least the way the act is
    written now. There is a baseline of Federal standards that are
    actually quite comprehensive, and to the extent there is a
    State-level regime. It is required to equal or exceed the
    standards in the Federal. For instance, it would be very
    difficult for one State to say, I am going to attract a bunch
    of stablecoin issuers by having a lax regulatory framework.
    They just cannot do it consistently with the STABLE Act.
        Mr. Rose. Thank you. I appreciate the insights. While
    blockchain-based solutions, like stablecoins, offer compelling
    new capabilities, traditional dollar payments will, in my
    opinion at least, remain dominant for the foreseeable future,
    likely accounting for the vast majority of transactions for
    years to come. However, our current system lacks many features
    that are being contemplated by the STABLE Act and could be
    available with proper regulatory modernization and rightsizing.
    Mr. Collison, what do you think Congress should focus on when
    aiming to modernize the payments world?
        Mr. Collison. Thank you for the question. With respect to
    stablecoins, I think simply putting in place a clear framework
    with prudent rules for the road will do a tremendous amount of
    good. More broadly on payments, to your question, Stripe
    strongly supports the concept of some sort of Federal payments
    charter. There is no single clear framework for payments
    companies like Stripe today, and we think that the Federal
    Government has a significant interest in ensuring that across
    our ecosystem effective standards are upheld. We also think
    that with access to things like the Fed's payment system, we
    can provide better services to businesses and to consumers, so
    I think a Federal regulation payment system could be very
    beneficial.
        Mr. Rose. When you say a Federal payments charter, do you
    mean chartering institutions for that purpose?
        Mr. Collison. Correct. Payments today are primarily, not
    solely, but primarily regulated at the State level, and that
    has a lot of benefits. We do not think that should go away. We
    think in addition to that, there should also be a Federal
    framework.
        Mr. Rose. Okay. Thank you. The next decade will bring
    significant innovation in financial services and products.
    These innovations will require regulatory clarity and
    appropriate risk-based supervision matching how payments work
    in a digital economy. Mr. Collison, the same way that a
    stablecoin charter will jumpstart stablecoin innovation, what
    would a payments framework do for the modern economy?
        Mr. Collison. There are analogs to the payments charter in
    other jurisdictions like Europe, Canada, other places as well.
    We can see that this works well in practice, and in places like
    Europe. They have been an incredible stimulus for vibrant
    innovation in consumer financial services broadly. I recognize
    that the time is about to expire here, but I think there are
    many ways in which this would be helpful in the United States.
        Mr. Rose. Thank you. If you would like to expand on that
    off the record, I would appreciate it.
        Mr. Rose. Mr. Chairman, I yield back.
        Mr. Steil. The gentleman yields back. The gentleman from
    Illinois, Mr. Casten, is recognized for 5 minutes.
        Mr. Casten. Thank you. I appreciate you all being here. I
    want to start a little wonky. There has been some academic
    discussion sort of linking stablecoins to Eurodollars as
    something that exists outside of the normal payment system. Ms.
    Butler, I just want to start with you. Do you agree that the
    U.S. correspondent banking system, as it sits right now, has
    sufficient guardrails to make it difficult for illicit actors
    to access the global dollar system?
        Ms. Butler. Thank you very much for your question,
    Congressman. I do believe that the rules that we operate today
    in the traditional banking services, including corresponding
    banking, are applying the right safety guards and rules.
        Mr. Casten. Okay. I agree with you. I raise that because
    stablecoins, as they are structured right now, do not have that
    same sort of nexus of control, right? They can hop across the
    river, if you will. They can be transferred on public
    blockchain networks. There is no central operator, no entity.
    Ms. House, I think you had alluded to some of this in your
    testimony, and I wonder if you could just share with us how you
    think Congress should address that gap in our sanctions and
    anti-money laundering networks so that stablecoins do not just
    become a backdoor for the bad actors to get into the U.S.
    dollar system.
        Ms. House. Thank you, Congressman, for the question. You
    are right that I started on the earlier answer, but, basically,
    the most important provisions, I think, that are necessary are
    making sure that the issuer and the administrator of the
    stablecoin is implementing some AML requirements, and
    especially for sanctions requirements, making sure that we are
    not facilitating transactions denominated in U.S. dollars to
    sanctioned jurisdictions and sanctioned wallets, which is
    happening right now, so making sure that freeze and recovery
    capabilities are in place and then making sure that the U.S.
    dollars are not being made accessible to the greatest threats
    to this country.
        Mr. Casten. Okay. Mr. Guynn, you had alluded earlier to
    saying that some of the algorithmic stablecoins that had broken
    the buck, if you will. Unless I missed it, you did not mention
    the fact that the most recent breaking of stablecoins was when
    Silicon Valley Bank (SVB) and Signature Bank runs happened and
    you had a bunch of stablecoins that were sitting there in
    uninsured deposits. Is it your position that any liquidity that
    is in cash deposits should be absolutely 100 percent insured?
        Mr. Guynn. It is interesting. I do think that----
        Mr. Casten. I am just looking for a ``yes'' or ``no''
    because I want to get through a couple of things.
        Mr. Guynn. I do not know that I have a ``yes'' or ``no'' to
    that. I think that one has to be more careful with uninsured
    deposits. The SVB had 95 percent of its deposit uninsured.
        Mr. Casten. Well, we have liquidity underpinning these
    things. Stablecoins need to be boring to work. We do not want
    fractional banking and blow this thing up. Ms. House, correct
    me if I am wrong, dollars deposited in European accounts are
    not insured by the FDIC, correct?
        Ms. House. That is correct.
        Mr. Casten. I want to turn now to the fact that we just
    witnessed the largest cryptocurrency heist in history when
    North Korean hackers stole $1.5 billion from Bybit. Mr.
    Cascarilla, maybe you can just share, what is Paxos' policy for
    freezing funds that have been used for illicit activity?
        Mr. Cascarilla. We have a couple of different guardrails in
    place. The first is we have terms of condition that set forth
    how we could freeze and then seize funds, which we have done in
    the past. We also have this overseen by our prudential
    regulator. When we receive a subpoena from a lawful
    jurisdiction, we can freeze the funds, and when that is
    adjudicated, we can seize them.
        Mr. Casten. Is it your policy that you will freeze them
    only if a regulator directs you to, or will you take proactive
    action to seize them as well if you detect illicit activity?
        Mr. Cascarilla. We will contact a regulator when we have
    seen illicit activity. An example would be our Pax School
    product. When we saw it moving after the Futures Exchange (FTX)
    collapse, we contacted our regulator. I think it was the
    Department of Justice (DOJ), actually.
        Mr. Casten. I just want to understand because we are all
    Americans here. If you knew that North Koreans were laundering
    money to finance their nuclear program and the regulator had
    not yet said to stop, would you shut it down immediately or
    would you wait for someone to call you?
        Mr. Cascarilla. We have these conversations in real time
    with the regulator, so we would, of course, talk to them and
    make sure that we were doing it appropriately.
        Mr. Casten. Okay. Well, all of us, if we are participating
    in the banking system or want to participate in the banking
    system, need to address that. Given the speed at which some of
    these people go through, particularly, right, because it is one
    thing to say we are having real-time conversations, but, I
    mean, these things can pop through in an instant, running
    through mixers, running through D5 protocols, chain hopping.
    Ms. House, does Congress need to consider requirements to, at a
    minimum, make sure that stablecoin issuers have the
    technological capabilities to freeze these funds and that
    stablecoin issuers are compelled to act proactively, not just
    after the horse is out of the barn?
        Ms. House. Absolutely, yes, sir, and to a certain extent, I
    think that they already are obligated to do that. Sanctions
    carry strict liability, and AML programs require a reasonable
    program to detect and prevent money laundering through their
    systems, but those things need to be enforced, need to be
    clearly articulated and implemented.
        Mr. Casten. Okay. I am almost out of time, but I just want
    to say to the whole committee, stablecoins, A, have to be
    stable; B, have to be structured, not in ways that would
    destabilize the global financial system; and C, should not
    provide a backdoor to money laundering. I hope that any
    legislation stays true to those three principles. I yield back.
        Mr. Steil. The gentleman yields back. I now recognize
    myself for 5 minutes for the purpose of asking questions.
        I thank all of our witnesses for being here. It is
    exciting. We are in the golden age of digital assets, and we
    have a huge opportunity to move forward on two really important
    pieces of legislation in this committee and to see them
    ultimately signed into law, in particular stablecoin in market
    structure. I want to dive into a little bit on the stablecoin
    legislation, and I will start with you if I can, Mr. Collison.
        I believe that stablecoins, in particular, give us a real
    opportunity to maintain dollar dominance across the globe, and
    we have talked a little bit about use cases. As a policymaker
    in general, I might not be concerned about the way that someone
    in Mexico, Panama, Peru, Nigeria, or another location is
    engaged in transactions, but what we actually see is when
    Stripe has a neobank in Mexico or Bridge is used to distribute
    payments to workers across Latin America, that actually
    strengthens the U.S. dollar. Would you agree? Can you comment
    on that briefly?
        Mr. Collison. Yes. I think it strengthens the United States
    in two ways. One, many of the companies engaged in the activity
    you are describing are themselves American businesses, and so
    they become stronger, but second, and I think this is what your
    question is getting at, it increases dollar demand, increases
    the demand for U.S. Treasuries, and it, in turn, lowers U.S.
    borrowing costs.
        Mr. Steil. Thank you very much. I am going to come over to
    you if I can, Ms. Butler. Sometimes you will hear people say
    that the banks do not like stablecoins, stablecoins do not like
    the bank. You get all this back-and-forth, but BNY Mellon is
    very engaged in the stablecoin space. Could you just put a
    little color as to what the value proposition is to your
    customers at your bank?
        Ms. Butler. Thank you very much, Congressman. Yes, indeed,
    there are a number of different things. First, the value
    proposition in the kind of near term is providing trust and
    security to stablecoin issuers as the reserve custodian. We
    also manage many different types of payment vehicles, so
    whether it is the instant payment vehicles provided through the
    Fed and a variety of different options for our clients. We want
    to be able to participate in the new and evolving options and
    mechanisms, stablecoins and blockchain technology, just being
    an example of that, so that we can continue to meet the
    evolving needs of the markets and our clients.
        Mr. Steil. Thank you very much. I want to come to you, Mr.
    Cascarilla, if I can, to talk about how do we make stablecoins
    stable. In the updated draft that Chairman French Hill and I
    introduced, we were tweaking the language of what can be held
    by a stablecoin to back it. Could you provide a little bit of
    color, based on your experience, about stability, liquidity,
    and investor confidence in the Pax dollar, and what you are
    backing that with, and what we should be looking at?
        Mr. Cascarilla. Yes. We have issued a number of different
    regulated dollar tokens. They all have the same exact reserve
    parameters, generally having a maturity of less than 20 days,
    having overnight liquidity available through overnight repos
    that are over collateralized by Treasuries, plus having T-bills
    and minimizing the amount that is held in bank cash and where
    possible buying private insurance to supplement FDIC insurance.
    When you do that, you basically have, I think, the safest
    dollar in the world. It is safer than a dollar in a money
    market fund. It is certainly safer than a dollar that is above
    an FDIC limit at a bank, and I think that creates the
    confidence to be able to use a stablecoin as if it is cash in
    your pocket, and that is the whole point.
        Mr. Steil. Thank you very much. I want to use the remaining
    time that I have. I want to just touch base here with you, Ms.
    House, if I can. You were commenting earlier about the
    importance of BSA, AML. I could not agree more with the
    importance of it. I think the question then is what policies we
    put in place to get this right. I think, in part, my big
    concern here is that we let perfection be the enemy of the
    good. What I mean by that is across the globe, people can
    engage in illicit behavior regardless of what technology is
    being used. If we think about when the Obama Administration in
    2016 sent literal pallets of cash to Iran, the first shipment,
    I think, had $400 million in pallets of actual cash went to the
    Iranian regime, an amazing and disastrous policy decision, in
    my personal opinion, but remove the commentary. Let us just
    analyze the cash. What controls were in place to track that
    cash once it left U.S. custody and entered the custody of Iran?
    Any?
        Ms. House. Honestly, I would not be familiar with that. I
    was in the Army.
        Mr. Steil. In general, you are familiar with cash. Would
    there be any tracking mechanism in place as that cash floated
    around the country of Iran?
        Ms. House. Generally, no. It would be very difficult.
        Mr. Steil. It would be really, really difficult, right? If
    Iran was taking literally those pallets of cash provided by the
    Obama Administration and was doing something illicit, like
    funding terrorism, we know Iran is one of the or probably is
    the number one funder of illicit finance, that is a really bad
    scenario. Although we could pick and choose and critique other
    legislation, we know, actually, that stablecoins is a major
    step forward from cash transactions, and I think we need to
    make sure that we do not allow perfection to be the enemy of
    the good.
        Recognizing the time, I yield back. I will now recognize
    the gentlewoman from Michigan, Ms. Tlaib, for 5 minutes for
    questions.
        Ms. Tlaib. Thank you so much, Mr. Chair. Everybody on the
    panel, do you all agree that market manipulation is bad? Raise
    your hand if you agree market manipulation is bad. [Hands
    raised.]
        Ms. Tlaib. Oh, great. Okay. I want to get to conflict of
    interest. Ms. House, I do not know if you know about this, but
    I want to talk about a billionaire crypto entrepreneur, Justin
    Sun. In March 2023, the SEC charged Sun with market
    manipulation. Last year, Sun started investing millions of
    dollars in the Trump family crypto business. They call it World
    Liberty Financial. Are you familiar with Trump's crypto
    business?
        Ms. House. Yes.
        Ms. Tlaib. Yes. He starts putting money into that, and
    then, in total, I think Sun's investments have put more than
    $50 million--not $1 million, not $2 million--$50 million in
    Trump's pocket. Then just last month, SEC announced that it was
    dropping its charges against Sun. Ms. House, how is this not a
    conflict of interest? Do you think those who are regulated by,
    and in some cases investigated by, Federal regulators should be
    able to invest ventures directly benefiting the President of
    the United States?
        Ms. House. On the second question, on whether they should
    be able to and if that is conflict of interest, it definitely
    sounds like it, and that there should be protections there. I
    encourage those responsible, forcing them to look into it.
    Then, on the first question about it, I would go back to my
    earlier comment that when we are in government, we hold a
    sacred duty to uphold public trust, and that we need to make
    sure that we are held to a higher standard, and we need to make
    sure that we uphold it.
        Ms. Tlaib. Yes. I mean, we have the Emoluments Clause. You
    would think that the President would have no idea that it is in
    the Constitution and that he is violating it. Then there is the
    meme coin. Just days before he is sworn in, the President, he
    issues his own meme coin. While investors suffered more than $2
    billion in losses, Trump and his partners made $100 million on
    trading fees alone. Now, the SEC has declared that the meme
    coin is not subject to oversight. It is now dropping crypto
    cases and investigations left and right. Check this out, even
    where the CEO already pleaded guilty, they dropped the charges
    on them.
        Trump and Musk have also gutted the CFPB, as you know, Ms.
    House, and the Commodity Futures Trading Commission (CFTC) has
    announced that they are meeting directly with crypto CEOs to
    further reduce regulations of crypto. Ms. House, yes or no,
    does President Trump stand and benefit when none of the
    regulators are providing rigorous oversight of the crypto
    market? He benefits personally, right?
        Ms. House. It sounds like the financial interests may,
    although I will say that there have been instances where more
    regulation and clarity have benefited the market also.
        Ms. Tlaib. The President of the United States has no
    oversight over this meme coin, all this investment right now,
    none. Does the fact that foreign nationals, Ms. House, have
    invested in Trump's meme coin and other crypto businesses have
    national security implications? Foreign nationals have invested
    in the meme coin.
        Ms. House. Sorry, I am not an attorney. I recognize that
    there are legal implications there, but I would say that there
    are definitely some hallmarks of concern about influence and
    where it makes sense for those with the authority, like those
    in this room, to look into this in a bipartisan way.
        Ms. Tlaib. During the last election, the crypto industry
    spent over $130 million backing Trump and others. It looks like
    that investment is paying off, to me. I mean, $130 million.
    Last week, President Trump issued an executive order creating a
    strategic reserve of cryptocurrencies. Ms. House, given that
    President Trump has a personal stake in the success and the
    perceived legitimacy of crypto industry, is this not a conflict
    of interest? I mean, he is in the industry, and he just did an
    executive order.
        Ms. House. Roger. It definitely sounds like there may be
    conflicts of interest, and, again, I hope that the offices with
    the authority for oversight, like Office of Government Ethics
    and Congress, consider looking at that. I know, obviously, I
    had a bank account, and we still regulated banks, so there are
    other places, but, ultimately, for an industry that is highly
    speculative, there are a lot of questions. There are a lot of
    questions.
        Ms. Tlaib. Ms. House, given that interests of the President
    and the crypto industry are so closely aligned, how can
    investors trust that their interests are prioritized by
    financial regulators?
        Ms. House. I think the trust there needs to demonstrate,
    that regulators need to demonstrate dispassionate, putting in
    place of the guardrails that will protect them, that will
    protect consumers, and that are going to benefit the American
    public, and not appear to serve only public officials or those
    who are in. I think that there is a great opportunity here with
    stablecoin regulation to do both.
        Ms. Tlaib. Thank you. I yield.
        Mr. Steil. The gentlewoman yields back. The gentleman from
    Indiana, Mr. Stutzman, is recognized for 5 minutes.
        Mr. Stutzman. All right. Thank you, Mr. Chairman, and thank
    you to the panel for being here. Mr. Collison, I would like to
    come to you. You built quite a family business--
    congratulations--and to have your dad with you is pretty neat.
    I come from a family business background as well. I work with
    my family, and some days it is great, and some days they are my
    family. I want to go to your testimony, because I see, as you
    wrote in your testimony, back in 2014, that you put a pause on
    supporting Bitcoin, and you saw limited demand, but you kind of
    relaunched it again with Stripe. We did the stablecoin pay-ins
    in April 2024 and you saw more volume in stablecoin payments
    over the first week than you saw in Bitcoin over a year and a
    half. Can you talk a little bit about that? Like, what do you
    think that was, and why?
        Mr. Collison. Yes, it was not very popular in the Bitcoin
    community when we sort of removed support from Stripe, but that
    was not because of any ideological principle or position. We
    are very responsive to what our customers want and what we
    observe user behavior as trending towards, and we saw declining
    usage of Bitcoin. Again, back in 2014, it was a very different
    time, and so we have obviously been paying close attention to
    the ecosystem, and the world is becoming more densely connected
    and globalized. The crypto ecosystem has matured substantially,
    and we have been very struck, as you mentioned, as we have
    gradually, over the past 2 years or so, rolled out new support
    for stablecoins. There is very real usage, there is very real
    appetite, and again, we are seeing use cases outside of what
    one might traditionally consider the crypto industry, and it is
    really expanding into the economy as a whole.
        Mr. Stutzman. I also want to touch on, down later in your
    testimony, you say that stablecoins enable faster, cheaper
    money transfers for international workers. You touched on that
    a little bit. Are you seeing global activity, like, in emerging
    markets? I mean, Africa is a place that I believe that the
    world is looking at for stability and opportunity. What are you
    seeing within your company and the activity around the world?
        Mr. Collison. Yes. I understand those exhibits are
    discouraged. I will just note that I have a little chart of the
    naira-USD exchange rate here, and over the last 15 years, the
    Nigerian naira has depreciated by about 90 percent against the
    U.S. dollar. There are a lot of people in Nigeria, and they
    very understandably want access and recourse to stable savings
    and some secure way to store their hard-earned money. We are
    seeing substantial adoption across jurisdictions like this
    where people are seeking to improve their lives and their
    livelihoods with what stablecoins make possible.
        Mr. Stutzman. Yes. A little bit further, you talk about
    fighting crime and online fraud, which, obviously, we are all
    very, very concerned about that. You mentioned that we see
    other countries, especially in Europe, already putting their
    legal framework into motion to regulate stablecoins. Can you
    touch on, what are they doing that we are not?
        Mr. Collison. Well, I think the most important thing is
    simply having a clear, established, formalized framework, and
    that is, by far, the most significant consideration. I think
    the second aspect, in particular to the fraud and illicit
    activity considerations you bring up, is recognizing that this
    is a new transport layer for money, but, ultimately, it is
    still the same money. We should bring and apply the same AML,
    CFT, BSA considerations and apply them co-equally here, but it
    is still money.
        Mr. Stutzman. Yes. Very good. Mr. Guynn, I would like to
    come to you. Fortunately, this committee is aligned with the
    great State of Indiana and President Trump and its opposition
    to a CBDC and has taken several steps to facilitate development
    in private sector alternatives. In your view, would a private
    sector-driven model for payment stablecoins foster more
    innovation and efficiency than a government-issued CBDC?
        Mr. Guynn. I think the private sector has always been the
    innovator in money for centuries, if not longer. I think that
    fostering private innovation with stablecoins is very important
    and critical.
        Mr. Stutzman. Would you have any concern of monopoly at
    all?
        Mr. Guynn. I do not see any now. I think it is best for
    Americans for there to be a lot of competition among stablecoin
    issuers. I think having a clear framework and clear pathways to
    entry is the best policy in order to foster competition.
        Mr. Stutzman. All right. Thank you. Mr. Chairman, I will
    yield back.
        Mr. Timmons [presiding]. Thank you. The gentleman from New
    York, Mr. Torres, is now recognized for 5 minutes.
        Mr. Torres. Thank you, Mr. Chair. No technology should be
    judged solely by its abuses or worst possible uses. Every
    technology has constructive uses and destructive uses, and
    crypto is no exception. Take as an example the automobile,
    which has a death toll of more than 40,000 Americans every
    year. The proper legislative response to the automobile is not
    to ban it. It is not to sabotage it. It is to regulate it. It
    is to make it safer. As far as I am concerned, the proper role
    of Congress is not to sabotage digital asset transactions, but
    to make them safer to strike a careful balance between
    financial stability and innovation.
        There is a narrative that crypto and blockchain have no use
    cases beyond criminality, no benefit, that these technologies
    are nothing more than a fraud and a grift and a scam. That is
    the caricature of crypto that often pervades mainstream media
    coverage. I have a few questions about the use cases of crypto.
    I will start with Stripe. Does blockchain, and these are
    ``yes'' or ``no'' questions, does blockchain have the power to
    enable better, cheaper, and faster payments and remittances?
        Mr. Collison. Yes.
        Mr. Torres. Would you consider that a beneficial use case?
        Mr. Collision. Yes.
        Mr. Torres. For Paxos, there are billions of people in the
    Global South who lack access to a stable currency, whose
    countries are plagued by hyperinflation. Does blockchain have
    the power to afford those impoverished people access to a
    stable currency and protection from runaway inflation?
        Mr. Cascarilla. Yes.
        Mr. Torres. Would you consider that a beneficial use case?
        Mr. Cascarilla. Yes.
        Mr. Torres. For Stripe, does blockchain have the power to
    exponentially expand the market for U.S. Treasuries and lower
    the cost of U.S. debt?
        Mr. Collison. That is certainly what it looks like today.
        Mr. Torres. Would you consider that a beneficial use case?
        Mr. Collison. Very much so.
        Mr. Torres. Bank of New York, does blockchain have the
    power to tokenize real-world assets and facilitate custodial
    banking?
        Ms. Butler. Yes, it does.
        Mr. Torres. Would you consider that a beneficial use case?
        Ms. Butler. Absolutely.
        Mr. Torres. Now, Bank of New York is the bank of Alexander
    Hamilton. It is the oldest bank in the United States, the
    ultimate expression of the traditional financial system. I
    imagine you are obsessed with regulatory compliance. As the
    oldest bank in the world with more than $50 trillion in assets
    under custody and administration, would the Bank of New York
    waste its valuable time and resources and reputation on a
    technology that had no use cases beyond criminality? Does that
    sound remotely plausible?
        Ms. Butler. No, we would not.
        Mr. Torres. Now, tokenization is becoming the future of the
    global financial system. As more and more assets become
    tokenized and more and more financial transactions become
    blockchain-based, does the lack of regulatory clarity around
    blockchain put the United States at risk of losing its
    financial competitiveness? Bank of New York?
        Ms. Butler. Yes, it does.
        Mr. Torres. If the United States had gotten internet
    regulation wrong, do you think the United States would have
    gone on to dominate the internet-based financial system that
    eventually emerged, Stripe?
        Mr. Collison. It is very hard to say, of course, but quite
    plausibly not.
        Mr. Torres. It will stand to reason if the United States
    gets blockchain regulation wrong, do you think the United
    States will go on to dominate a blockchain-based financial
    system that might ultimately emerge?
        Mr. Collison. No, I do not think it will, and we have
    already seen some evidence that if the United States does not
    move here, the nexus of activity will move elsewhere.
        Mr. Torres. As far as I am concerned, in order for the
    United States to remain the superpower of the world, we must
    embrace emerging technologies. We must harness the power of
    emerging technologies to make America more productive at home
    and more competitive abroad, and any policy that has a chilling
    effect on experimentation with new technology could erode
    American competitiveness. I had a special hatred for Staff
    Accounting Bulletin (SAB) 121 because it essentially had the
    effect of prohibiting an institution like Bank of New York from
    even experimenting with blockchain technology. I feel we in
    Congress should have the intellectual humility to recognize
    that digital assets will develop use cases that none of us can
    foresee.
        Since there are limits to what we can know about the
    future, it is incumbent upon us as policymakers to foster a
    flexible and nimble regulatory environment that allows for the
    development of a new technology and allows for experimentation
    with an emerging technology. Telling an institution like Bank
    of New York that you cannot even experiment with blockchain
    technology is the worst thing we can do for American
    competitiveness. What are your thoughts?
        Ms. Butler. I appreciate the point, and I think it is
    important that we continue to innovate within the safety and
    soundness of the financial system. We need to do both, right?
    We need to innovate, and we need to protect the system, and
    absolutely, we should have the clarity of rules to enable us to
    do that. We should welcome competition, right? That competition
    drives our economy, and it enables the right types of outcomes
    for all consumers in the marketplace.
        Mr. Torres. I see my time has expired. Thank you.
        Mr. Timmons. I now recognize myself for 5 minutes. First, I
    want to thank the witnesses for being with us today. I also
    want to align myself with the comments from my friend from New
    York, Mr. Torres. It is fantastic that this has become such a
    bipartisan issue. With multiple executive orders in last
    weekend's discussions at the White House Crypto Summit, it is
    clear that President Trump is making regulatory clarity in the
    digital asset space a top priority. Now Congress must follow
    through by passing legislation that cements this framework into
    law, ensuring that years from now neither rogue Senators nor
    power hungry SEC commissioners can stifle American innovation.
        As President Trump and many on this panel have emphasized,
    maintaining U.S. leadership in digital assets from stablecoins
    to tokenization to the future of blockchain, it is critical to
    our economic success and our future. A strong legislative
    framework will give entrepreneurs, investors, and businesses
    the certainty they need to innovate without fear of regulatory
    overreach or shifting political agendas. Without clear laws,
    the digital asset industry remains vulnerable to arbitrary
    enforcement actions that stifle growth and push talent
    overseas. Now is the time to act before regulatory uncertainty
    drives the next wave of groundbreaking technology to other
    countries.
        Mr. Cascarilla, how would clear and favorable stablecoin
    legislation affect the U.S. position in the global digital
    asset market, particularly in competition with regions like the
    EU and Asia?
        Mr. Cascarilla. I think the most important thing to
    remember is everybody wants the U.S. dollar all around the
    world, and the dollar is a product in a sense. In order for the
    product to continue to be usable in an internet-based economy,
    you have to make it work on internet-based rails, which is why
    blockchain is so important. If the United States does not do
    that, then other countries will, other currencies will. If you
    have the right frameworks to create trust and more ubiquity of
    adoption, then inevitably they could gain the reserve status
    that the United States has now. That is, I think, something the
    United States should want to avoid.
        Mr. Timmons. I could not agree with you more. One follow up
    for you. What are the most promising real-world applications
    where stablecoins are already being used in favor of
    traditional banking functions, and how can these models be
    scaled to include those who have been left out of traditional
    finance?
        Mr. Cascarilla. Well, right now, all you need to have is a
    wallet on your smartphone in order to be able to hold a
    blockchain-based dollar or a stablecoin. That means that people
    all over the world who do not have access to traditional
    financial system, who do not have access to a bank account,
    which, by the way, is billions of people, can now have access
    to the U.S. dollar. They want the dollar because most of those
    people who are unbanked or underbanked are potentially and very
    significantly in countries that have depreciated currencies, as
    Patrick was pointing out.
        Mr. Timmons. I am going to follow up on that. I kind of see
    this future where autocracies that use controlling their
    banking system as a means of controlling their population as
    being challenged by this future and the future of digital
    assets. Do you agree that is something that authoritarian
    governments are going to have as a challenge in the future once
    this becomes more commonplace?
        Mr. Cascarilla. Absolutely, and that is why I think it is
    so important to recognize that we are not just exporting
    dollars, we are exporting American values, and everyone who
    wants a dollar, they also want America. They want to be able to
    have access to our financial system and to our assets, and we
    should take advantage of that by making sure that we can give
    it to them in a way that actually has true utility for where
    the economy is going.
        Mr. Timmons. In addition to digital assets challenging
    authoritarian governments, I do believe that Starlink has
    potential to disrupt authoritarian governments' control of
    information. I think that the future that these technologies
    can provide us with has the potential to really reshape global
    politics for the better. Mr. Collison, how do we ensure that
    payment companies like yours are able to serve all types of
    businesses, no matter the uncertainty in Washington?
        Mr. Collison. I think that so long as there are clear
    regulatory frameworks in place and that those frameworks are
    stable, I think that the financial ecosystem as a whole is
    going to focus its efforts on serving American consumers and
    businesses.
        Mr. Timmons. Thank you for that. In my view, this
    committee's most important role in the DeFi space is to create
    stability and consistency in the market for stablecoins and
    tokenized real world assets. For years, the digital asset
    sector has suffered from the constant swings of the political
    pendulum. This uncertainty only harms American innovators and
    weakens the U.S. economy and marketplace. As Congress, we must
    use stablecoins to set clear precedent. Regulatory clarity is
    coming for the digital assets industry. President Trump has
    made this a priority, and we must follow through to ensure that
    blockchain innovation has a strong foundation here in the
    United States. By taking decisive action now, we can solidify
    America's leadership in the global digital economy for years to
    come.
        With that, I yield back, and the gentlewoman from Texas,
    Ms. Garcia, is now recognized for 5 minutes.
        Ms. Garcia. Thank you and thank you to all the witnesses
    here today. Especially, the two from Ireland, we will remember
    you next week. Mr. Chairman, I think we should have had them
    here on St. Patrick's Day rather than today. It would have been
    more fun.
        As you know, cryptocurrencies have the capacity to expand
    financial inclusion and bring digital assets to historically
    marginalized communities, much like those in my district.
    Despite this, for the average American consumer, all this is
    seen as very overwhelming and some of them quite do not
    understand what the crypto stuff is all about, especially when
    there is a new stablecoin or cryptocurrency created it seems
    like almost every day. The market continues to be unregulated,
    vulnerable to stablecoin runs and hacks. Aside from the
    structural and operational risk, most stablecoins do not offer
    enough consumer protection.
        Mr. Collison, I think you mentioned the need for
    transparency and consumer protection and so has Ms. House. Ms.
    House, if an issuer fails and there is no protection, what
    happens? What are we dealing with people's hard-earned dollars?
    I am not talking about investors. I am not talking about the
    millionaires or billionaires that are investing. I am talking
    about the average American. Why is strong regulation and
    enforcement authority critical in this stablecoin legislation
    to protect them?
        Ms. House. Thank you, Congresswoman, for the question. It
    is entirely critical to protect everyday Americans. The people
    that the cryptocurrency industry want to provide democratized
    access to financial services to. In order for them to do that
    safely and securely, they need to have a way other than ``do
    your own homework'' to know that a stablecoin is, in fact,
    stable. They also need to be able to trust that they are going
    to have recourse if they get defrauded or if they get stolen
    from and to be able to believe that there is going to be this
    means for redress, which is not possible without a
    comprehensive regulatory framework in place, enforced, and that
    we do the same with our international partners given the global
    reach.
        Ms. Garcia. Right, and one of the things that they have
    always used as a reason to really explore this whole option is
    replacement of remittances. Coming, again, from a 77-percent
    Latino district that does use remittances and other forms of
    ways to transmit money to their family members is that really
    real? I mean, I just do not see someone in my neighborhood
    going somewhere to use crypto or to transmit not knowing what
    is going to happen at the other end because, quite frankly, as
    there are risks in the banking system in many countries, there
    will also be risks in the crypto industry.
        Ms. House. Roger. I think that the point that you are you
    are speaking to is really why we are seeing most stablecoin use
    happening in settling trading on platforms rather than
    facilitating these remittances. We have not created the
    ecosystem for that trust. If a regulatory framework allows for
    that trust and for the people in your neighborhood to believe
    that if they send these remittances of their hard-earned funds
    overseas, that money is not going to be defrauded or it is not
    going to be stolen. If they trust this ecosystem, then they may
    start using it, but that business case has yet to prove out. I
    think that the regulatory framework is actually a pre-condition
    to allow for that mass adoption.
        Ms. Garcia. Right. We saw in the 2008 financial crisis that
    extraterritorial reach was needed to help regulate the impact
    that foreign institutions may have on domestic markets. Two out
    of the 3 proposed stablecoin bills lack extraterritorial reach
    and fail to address national security concerns. Given the
    global nature of stablecoins in this sector, the question is
    whether to regulate cryptocurrencies on the State or Federal
    level.
        Ms. House. In my view, the Federal level has to be
    involved. I support the State level happening and there being
    kind of a partnership, again, reflective of the McHenry-Waters
    bill that made room for there to be partnership, and the role
    for Federal agencies in creating the standards. Given the
    global reach and allowing for global instant access payments
    and specifically purporting that these assets are a dollar
    substitute or representing a dollar, it makes sense that
    Federal regulators would want to have oversight into these
    assets, especially when they reach potentially systemic risk
    levels.
        Ms. Garcia. Do you see that we can really get to that
    balance of having, again, the broad Federal regulation, then
    still allow States to do some of the things that some of our
    State banks do?
        Ms. House. Yes, ma'am, I do believe so.
        Ms. Garcia. You do? I have 7 seconds. Quickly, in your
    opinion, who should oversee stablecoin issuers of less than $10
    billion?
        Ms. House. The Federal level should have oversight, but it
    makes sense for States to run the charters with some conditions
    for when the Federal Agency oversight comes to play.
        Ms. Garcia. What about for nonbank issuers less than $10
    billion?
        Ms. House. I think State charters and licenses would be
    appropriate.
        Ms. Garcia. Thank you.
        Mr. Timmons. The gentlewoman's time has expired.
        Ms. Garcia. Time has expired. Thank you.
        Mr. Timmons. The gentleman from Pennsylvania, Mr. Meuser,
    is now recognized for 5 minutes.
        Mr. Meuser. Thank you, Chairman. Thank you to you all very
    much for being here. It is a very worthwhile hearing and really
    important.
        Stablecoins, when properly regulated, can provide fast and
    more efficient payment options and help keep the U.S. dollar at
    the forefront of global financial systems. They can accomplish
    these goals without the privacy and free market concerns
    associated with the central bank digital currency. Whip Emmer,
    as we know, has introduced the Anti-CBDC Surveillance State Act
    that protects Americans' privacy by preventing the direct
    issuance of a CBDC, which I did co-sponsor. As well, States
    have taken different approaches to regulating digital assets.
    This patchwork, however, has gotten stablecoin ecosystems where
    it is today, but if we want to see the benefits of payment
    stablecoins nationally, Congress needs to act. We need to enact
    a Federal framework for stablecoin issuance.
        Ms. Butler, BNY is one of the oldest and largest custodians
    in the world. Can you describe how custody in the traditional
    financial system differs from custody in the payment stablecoin
    ecosystem?
        Ms. Butler. Thank you very much, Congressman, for your
    question. It does not differ because the custody that we
    provide for the reserve assets of a stablecoin, for example,
    taking cash deposits and then taking non-cash securities into
    our custody, applying asset safety and segregation rules, is
    the exact same that we would do for the traditional custody
    that we provide.
        Mr. Meuser. Great. BNY Mellon, of course, holds reserve
    assets for major stablecoin issuers like Circle. How did BNY
    Mellon and Circle decide to form this partnership, and what
    custody standards were agreed upon to ensure that Circle's
    reserves were securely held?
        Ms. Butler. Again, our custody standards were the same
    longstanding standards that we have for all custody that we
    provide globally around the world. In terms of deciding to take
    on the custody reserves for Circle, we followed our business
    practices and risk framework. We looked at the client, their
    legal permissibility and their regulatory coverage. We looked
    at the activities that they were performing and were those
    activities legal and permitted. We looked at the assets
    themselves, and in this case, given the assets are very
    traditional assets, so, again, cash and cash equivalents that
    fit right into the standard custody that we provide.
        Mr. Meuser. Great. Clearly, you believe it is important for
    banks and nonbanks to have the same custody rules for
    stablecoin reserves?
        Ms. Butler. We do, yes.
        Mr. Meuser. Okay, great. Thank you very much. Mr.
    Cascarilla, many argue--some anyway, less than the majority
    shall we say--the CBDC could strengthen the dollar globally,
    but they, of course, raise concerns about privacy and free
    market competition. How does a payment stablecoin approach
    these concerns differently?
        Mr. Cascarilla. I think the important point with the
    payment stablecoin issued by private issuers is that you are
    creating an innovation to respond to the market in a very
    timely manner, and we are still at a very early stage of the
    market where there is a lot of innovation that is still needed.
    I think that there have been some examples of attempt for CBDCs
    to be issued by other countries, and they have been perceived
    as surveillance coins and have not been widely adopted as of
    yet. I think that could potentially be a limitation to the
    United States being able to successfully issue a CBDC.
        Mr. Meuser. Can payment stablecoins strike a better balance
    between preserving individual privacy rights and maintaining
    the dollar's status as a leading global currency?
        Mr. Cascarilla. I agree with that.
        Mr. Meuser. You agree we could find a better balance?
        Mr. Cascarilla. I think that the right balance is to make
    sure that the private sector is leading and being able to
    create the innovation and being able to make sure that it is
    responding to the market as fast as possible, and I think that
    is going to be done from the private sector.
        Mr. Meuser. Do you think the protections are then enough
    within the STABLE Act and FIT21, for that matter?
        Mr. Cascarilla. I do think that they are fit for purpose. I
    think that they have the right BSA, AML rules, as well as the
    right reserving requirements, and the right international
    reciprocity can be put into place to make sure that the United
    States is setting the standards that everyone follows.
        Mr. Meuser. Okay. Thank you. Mr. Guynn, in States like
    Pennsylvania, for instance, digital asset regulations, limited
    money, transmitted licensing, State regulators often want
    Federal guidance on emerging technologies but also prefer to
    maintain their own authority. How does the Federal floor
    concept in the STABLE Act ensure consistent national standards
    for stablecoins while still respecting each State's ability to
    regulate according to local needs?
        Mr. Guynn. Yes. I would say that the States have more
    flexibility in the dual banking system to have alternative
    regulatory frameworks. There are Federal minimum standards in
    the banking, but they only cover a small part of the activity.
    Here, it is pretty comprehensive. I think it would be very
    difficult for a State to do much other than increase standards
    if they wanted to do so.
        Mr. Meuser. Okay, great. Thanks very much. Mr. Chairman, I
    yield back.
        Mr. Timmons. Thank you. The gentleman from California, Mr.
    Liccardo, is now recognized for 5 minutes.
        Mr. Liccardo. Thank you very much. I appreciate the
    progress in the political discourse over stablecoin. I
    represent a district that includes half of Silicon Valley.
    Obviously, we have a different view from many about certainly
    the importance of this technology, and I appreciate much of the
    testimony I have heard so far. I also appreciate we have moved
    from discussing whether to regulate to how to regulate. That is
    an important progression, and I want to thank my colleagues on
    both sides of the aisle for their hard work.
        For example, in the STABLE Act, we have protections that
    would require issuers to abide by standards relating to AML to
    Bank Secrecy Act, mandate 1-to-1 backing, cash and cash
    equivalents, enforcing transparent redemptions and audit
    disclosures. Those are all very important requirements, but my
    concern is we are in a world where we know issuers are out of
    the country. In fact, Tether, the largest, I understand, for
    U.S. dollar-linked stablecoin, is in El Salvador. I am trying
    to understand why we would not want those protections globally,
    given that the U.S. dollar, of course, is going to be linked to
    much of the stablecoin.
        Particularly, I appreciate your comments, Mr. Collison. In
    the written testimony, it says the United States should move
    quickly and seize the opportunity to lead on global standards
    for stablecoin payments regulation, reinforcing dollar
    dominance, ensuring American companies remain at the forefront
    of financial innovation. Typically, that includes a sense that
    our regulatory structures will also be the leaders, as they
    have been, in financial regulation globally. I guess I wanted
    to go to you first, Mr. Collison, and by the way, I think you
    were born in Tipperary County, where my grandmother was born
    also. She also managed to make it to San Francisco. You are on
    a well-trod path.
        Mr. Collison. I was far from the first Irishman in San
    Francisco.
        Mr. Liccardo. Yes, that is what I noticed. My question is,
    would not your customers want to know that there was
    extraterritorial enforcement and the capacity for the United
    States to be able to enforce beyond its borders?
        Mr. Collison. I think on the margins, they would prefer
    that for all the reasons that you are saying. I think in
    practice, they are so enthusiastic about the quotidian benefits
    they can realize, they are probably not going to block on that.
    If you ran a survey of them, yes, I think so.
        Mr. Liccardo. Could you help me understand--I know you do
    not speak for the whole industry by any stretch--why would not
    we want to have extraterritorial enforcement?
        Mr. Collison. Well, I think there is probably some degree
    of devil in the details, right, as to what precisely the nature
    of that framework and enforcement would be. To the analogy of
    States being the laboratories for various forms of innovation
    in the United States, there is probably some degree to which we
    do not want an excess of global cohesion, precisely because
    there should be some degree of variation permitted.
        By the way, I think it is helpful just in conversation
    generally to separate to some extent crypto from stablecoins.
    They are, of course, related, but I think there are important
    differences, but I think all stablecoin and, again, even crypto
    failures in any part of the world, they do not look great for
    the sector. Inasmuch as global frameworks can inhibit that and
    make it less likely, I think that is beneficial for everyone.
        Mr. Liccardo. I appreciate your candor. I know this is a
    concern that is shared on both sides of the aisle. We want to
    make sure that Americans sanctions are abided by and that U.S.
    dollar-linked stablecoin is not used to evade sanctions. We
    want to ensure that anti-money laundering provisions are
    enforced globally. We want to ensure that terrorism is not
    funded through stablecoin. We know it can be funded by any
    currency as well. Certainly, this is not unique to stablecoin,
    but I hope that we can work across the aisle to ensure that
    this bill could be improved with extraterritorial provisions.
    Thank you very much. I yield my time.
        Mr. Timmons. Thank you. The gentlewoman from California,
    Mrs. Kim, is now recognized for 5 minutes.
        Mrs. Kim. Thank you, Chairman. I appreciate the witnesses
    for joining us today. Let me ask my first question to Mr.
    Collison. According to Stripe's own annual letter and your
    testimony here today, your company processed $1.4 trillion of
    payment volume just last year, 2024. That represents roughly
    1.3 percent of global Gross Domestic Product (GDP), and that is
    significant. As we explore emerging technologies like
    stablecoins, the vast majority of the economy still relies on
    dollar payments. This is an industry that is currently
    regulated by the State-by-State patchwork that is designed for
    pre-internet era, and that creates unnecessary friction and
    costs that ultimately affect American consumers and businesses.
    Can you talk to us about how Congress can think about solutions
    to those issues?
        Mr. Collison. Thank you for the question. I think that
    providing a clear framework for stablecoins that enable U.S.
    businesses and U.S. consumers to realize some of the benefits
    of cheaper and faster and more efficient and even more
    innovative transaction technology. I think that will be
    extremely beneficial. I really appreciate Congress' curiosity
    in exploring this issue and the kind of bipartisan nature of
    this discussion. Beyond that, I think that looking at the
    payment system more holistically and broadly, possibly up to
    and including a Federal payments charter construct, would be
    very helpful, either complement, or maybe a succeeding action
    to stablecoin legislation. I am really glad that the proposals
    under consideration here today are being seriously----
        Mrs. Kim. Can you also talk about some of the challenges
    that this will bring to the industry?
        Mr. Collison. Which, that the----
        Mrs. Kim. This approach that you are talking about.
        Mr. Collison. Oh, that the patchwork brings. I see. One of
    the most inhibitory forces in the financial services industry
    is ambiguity and a lack of clarity, in that if something is
    clearly permitted that is great, if it is clearly forbidden and
    proscribed that it is clear. One can build a business, and one
    can plan around that. I think the current patchwork that is not
    very cohesive makes it difficult for businesses to know how
    seriously they should invest, and I think it is very admirable
    that BNY Mellon has built such a successful practice here. I
    think it should be easier for others to do the same thing.
        Mrs. Kim. Let me ask my question to Mr. Cascarilla. My home
    State of California is a leader in issuing remittance payments,
    and in 2022, Californians sent over $18 million in remittance
    payments to Latin America. However, our modern-day system of
    payments can make dollar transfers abroad costly and time
    consuming, and it can lack the appropriate legal oversight.
    That is why, obviously, we are talking about stablecoins that
    can offer so much promise, and studies have estimated that
    stablecoins could reduce remittance costs by as much as 80
    percent, right? Can you talk to us about what makes the
    traditional payment rail so costly and time consuming for
    cross-border payments, and how would stablecoins solve those
    problems and reduce the remittance costs?
        Mr. Cascarilla. I think what is important to think about,
    the way the dollar moves today is really analog. It is almost
    moving like the post office. It takes 2, 3, 5 days in some
    cases for money to move from one point to another, especially
    when there are international jurisdictions, and, of course,
    there are high costs and fees. With the stablecoin, it will
    move instantaneously 24/7, almost for no cost at all. By some
    estimates, right now, as much as 30 percent of remittances are
    using a stablecoin rail in which the end user might not even
    realize it because, ultimately, a blockchain is just a rail.
    You do not have to use it as a stablecoin, as something that,
    yet, at the same time, have it move in a way that is utilizing
    the technology, and that is the real promise here.
        Mrs. Kim. Thank you. Let me ask one more question to Mr.
    Collison. I know that there is a concern that these funds were
    being sent to or from bad actors. How do innovative payment
    companies work to keep bad actors from accessing funds from
    untrustworthy sources?
        Mr. Collison. I think it is important that we recognize
    that stablecoins are another transport layer for money, the
    same money, but moved in a different way, and we should bring
    across the exact same frameworks, BSA, AML, CFT, and so forth,
    and apply them equally.
        Mrs. Kim. Thank you. My time is up. I yield back.
        Mr. Timmons. Thank you. The gentleman from Illinois, Mr.
    Foster, the Ranking Member of the Financial Institutions
    Subcommittee, is now recognized for 5 minutes.
        Mr. Foster. Yes. Thank you, Mr. Chair, and to our
    witnesses. Mr. Cascarilla, Paxos has the ability to block,
    freeze, and recover fraudulent or mistaken transactions. Could
    you explain how this works technically, both for hosted and
    unhosted wallets, and, for example, could this be used to stop
    the use of stablecoins for ransomware and other illicit
    activities?
        Mr. Cascarilla. Thank you for the question. I think this is
    an important point, and as the issuer of various regulated
    stablecoins, about 5 of them right now, we have the ability as
    the issuer because we control the smart contract, and this is
    an important point. We control the smart contract. We are able
    to decide if an address should be frozen or if funds should be
    seized.
        Mr. Foster. All right. For example, if someone's screen
    locks up with ransomware and it says transfer money into this
    wallet, this much of one of your stablecoins to this wallet,
    the person who has that screen can go and contact you and say
    freeze that wallet, and it is done?
        Mr. Cascarilla. We have a process for that, but correct,
    yes.
        Mr. Foster. Correct. You have the ability to put a crowbar
    in, for example, ransomware or other. If you could get sort of
    some technical information sort of at the level of Congress'
    actual blockchain programmer, I would be very interested in how
    that is implemented. Obviously, you have huge cybersecurity
    issues on your end because if someone gets a hold of the
    ability to throw that crowbar into your whole payment
    ecosystem, all holders of their asset could be wiped out. It is
    also my understanding that the Senate, which has the GENIUS
    Act, that was, I guess, introduced yesterday on a bipartisan
    basis, has a mandate for that, and if you could comment on how
    that compares to what your practices are and what the pros and
    cons of putting that mandate. Since it was issued yesterday, if
    you have had a look at it, I am interested.
        Mr. Cascarilla. I think it will be nice for our staff to
    come back and----
        Mr. Foster. Yes, that is fine. For the record, please
    respond to that.
        Mr. Cascarilla. Thank you.

        [The information referred to was not received prior to
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        Mr. Foster. Now, many of you mentioned financial inclusion
    and local transaction cost as really the desirable things that
    you are going for. Now, among the G20, India is by far the
    leader in that. Essentially, 100 percent of households are
    banked in India, more than a billion people, and the only group
    that is not banked are women whose husbands do not want them to
    have a bank account, which is not exactly a financial problem.
    In India, if you want to give a pauper 3 rupees, you both get
    out your cellphones, you do your biometric log in, you
    authenticate your bank account, you transfer 3 rupees zero
    cost, and, essentially, a 100 percent penetration.
        Could you explain what the advantages of a blockchain
    system are over the system that exists for a billion people in
    India in terms of just everything? It is also my understanding
    that the system in place in India based on bank accounts is not
    usable for ransomware, it is not usable for $1.5 billion hacks,
    and I was just wondering if you could, like, contrast that and
    particularly describe how a blockchain system would have
    advantages over that system.
        Mr. Cascarilla. Is that a question for me?
        Mr. Foster. Yes, sure. Yes.
        Mr. Cascarilla. I think main advantage is that----
        Mr. Foster. Oh, yes, Mr. Collison.
        Mr. Cascarilla. Sure. I will----
        Mr. Foster. Well, either one of you. Mr. Collison, why do
    not you have a swing at that one?
        Mr. Collison. I think what India has done with Unified
    Payments Interface (UPI) is extremely impressive, and actually,
    we are starting to see similar systems emerge in other
    countries.
        Mr. Foster. Yes, they are giving it to other countries,
    which are adopting it, at which point, you will have zero cost
    payment rails across borders, which is another use case for
    stablecoins.
        Mr. Collison. Yes. Today, these systems are not globally
    interoperable, and I think the most fundamental advantage that
    stablecoins confer is this global universality and this global
    ubiquity. You do not need to wait on a country-by-country basis
    to roll it out, get adopted, and then----
        Mr. Foster. You regard that as a feature or a bug? If you
    are trying to prevent payments for fentanyl precursors, it is
    nice to have a measuring point at the border. I was just
    wondering if an absolute cross-border zero surveillance regime
    is really the end point we should head forth.
        Mr. Collison. I think global access is a huge advantage,
    but to your prior questions, I think the ability for stablecoin
    issuers to ensure that proper controls are applied and that
    system integrity is maintained is also really important.
        Mr. Foster. Mr. Guynn, during the 2008 financial crisis,
    how long did it take AAA rated mortgage-backed security
    tranches to become toxic assets, and how does that compare to
    the monthly reporting requirement contemplated in this bill?
        Mr. Guynn. Sorry. It took a lot longer than the monthly
    reporting, but those assets were very different from reserve
    assets here. Those were not U.S. Treasuries. Those were
    Collaterized Debt Obligations (CDOs) or CDO-squared, very
    illiquid assets----
        Mr. Davidson [presiding]. The gentleman's time has expired,
    and I now recognize the gentleman from Wisconsin, Mr.
    Fitzgerald, for 5 minutes.
        Mr. Fitzgerald. Thanks to all the witnesses. I know it is a
    long morning-afternoon. Thanks for being here. We have seen
    countries like Brazil allow payments not just from digital
    wallets or payment apps, but, as was discussed a couple times
    this morning, also directly to and from bank accounts as well
    as instantly between digital wallets from different non-bank
    providers. As you know, stablecoins, the lower fees, more
    payment provider competition, wider accessibility, and because
    stablecoins reduce the cost of the transactions to nearly zero,
    I think there are a lot of members that are trying to wrap
    their minds around this. It just frees up retail businesses,
    right, with frictionless, low-cost alternatives. Mr. Collison,
    I know you have touched on this already, but can you discuss
    how providing kind of the regulatory clarity through the STABLE
    Act could increase or will increase consumer adoption?
        Mr. Collison. Absolutely. I think in financial services,
    ambiguity is the greatest inhibitor to adoption. Things that
    are clearly permitted or clearly proscribed that is clear. I
    think we have seen in stablecoins is a lot of enthusiasm, a lot
    of excitement, but also significant hesitation because, well,
    it is not clear how the ecosystem is going to unfold within the
    United States. I think the single best way to ensure that U.S.
    dollar stablecoins are broadly adopted around the world is for
    Congress to provide that regulatory clarity.
        Mr. Fitzgerald. Right, and in a regulatory framework, we
    will also give businesses more incentive to use the stablecoins
    for operational transactions, right, would you not agree? I
    know that some of the issuers are establishing kind of
    strategic partnerships. I guess you would call them and try to
    link up with traditional payment companies. Mr. Cascarilla, can
    you discuss some of Paxos' partnerships and explain how these
    kinds of relationships that you guys have been able to develop
    help with the integrations and incentivizing, the adoption of
    all this technology, right?
        Mr. Cascarilla. Well, I think one of the interesting
    components about a stablecoin is that the interest is being
    kept by the issuer as a general matter. In our case, we are
    setting up partnerships where the interest is being returned to
    the distributor, whoever might be controlling the end user as a
    payment company or otherwise.
        Mr. Fitzgerald. Right.
        Mr. Cascarilla. That is an opportunity then to eventually
    maybe pass that on further through rewards to the end user. You
    create an ability not just to democratize access to dollars,
    which is I think what stablecoins do, but you could even start
    democratizing access to the risk-free rate. That is a really
    important way of changing how the financial system works and
    how individuals are able to access it.
        Mr. Fitzgerald. Let me go back to Mr. Collison. There has
    been some confusion as to the difference between U.S. CBDC, a
    stablecoin, and the FedNow system, right? I mean, again, I hate
    to pick on the Financial Services Committee, but I think it
    would be hard pressed to get somebody to come up with a
    definition for all three. Would you describe the differences
    between the three and the issues that they are seeking to
    resolve in the U.S. payment system? How do you view those three
    topics or headings, I guess?
        Mr. Collison. I think FedNow provides a valuable service
    for making interbank transfers within the United States more
    streamlined, and that is very helpful. It does not provide the
    same degree of global access that stablecoins or, in principle,
    CBDCs could. With respect to stablecoins versus CBDCs, I think
    that the United States gets, basically, all of the benefits of
    a notional CBDC without some of the attendant downsides that
    have been discussed here today. My view is that there is very
    little downside and tremendous degree of benefit to formalizing
    stablecoins along the lines of what is proposed. Beyond that, I
    do not really see how a CBDC would help against some of the
    points made. I think it could easily, inadvertently inhibit
    innovation.
        Mr. Fitzgerald. Thank you very much. Thank you all, and I
    yield back, Mr. Chairman.
        Mr. Davidson. I thank the gentleman. The gentleman from New
    Jersey, Mr. Gottheimer, is now recognized for 5 minutes.
        Mr. Gottheimer. Thank you, Mr. Chairman. Mr. Guynn, if I
    can start with you, you have emphasized the importance of
    legislation in the stablecoin industry. I have been a supporter
    of the stablecoin legislation for a long time, introducing one
    of the original pieces of legislation and being supportive of
    the Payments Stablecoins Act in this committee last year. Could
    you explain to us what your experience has been with the
    current status quo? What would happen if there was a further
    delay in congressional action?
        Mr. Guynn. I think the problem is that until we bring
    stablecoins into the regulatory perimeter, we risk having
    stablecoins that are not structured appropriately the way this
    bill would do it, and, for instance, your bill would have done
    it. I think that the real benefit is having a regulatory
    structure that sets a minimum that anyone who is identified as
    a licensed stablecoin issuer would be adhering to.
        Mr. Gottheimer. Are there any specific oversight measures
    you think should be included in that comprehensive framework?
        Mr. Guynn. Well, I think the framework now allocates the
    oversight to either State regulators or one of the Federal
    regulators, with a Federal framework that really is the anchor
    for it. There can be alternative State regulatory frameworks,
    but they have to satisfy the same standards. I do think that
    there is a good anchor there and it seems like there is much
    oversight in this framework as there is in the dual banking
    system.
        Mr. Gottheimer. Would you support requirements for regular
    audits and transparent reserve reporting, which I believe to
    help prevent banking failures like we saw in 2023?
        Mr. Guynn. Yes, I think those are absolutely critical, not
    only for preventing that, but also just publicizing in some
    ways to the public who wants to use this as to which are the
    safe stablecoins and which are not. They can look at the
    disclosure and make informed decisions.
        Mr. Gottheimer. Thank you. Mr. Cascarilla, as someone
    heavily involved in the international payment system, you are
    familiar with threats to the dollar's role as a global reserve
    currency. China is heavily promoting digital payment systems
    from Alipay and Tencent in countries that are involved in the
    Belt and Road Initiative. They are also, as you know, seeking
    to make Hong Kong into a major player in global crypto markets.
    How might a clear U.S. regulatory framework for stablecoins
    affect international adoption and strengthen the dollar's
    global position?
        Mr. Cascarilla. Well, I think it will be a very significant
    boost because it will create a level of trust in the usage of
    stablecoins that right now still does not exist. If you look
    around the traditional financial system and the desire to be
    able to use stablecoins, it is very significant. Until you have
    this regulatory clarity, traditional financial institutions, as
    well as more widespread consumer adoption, it is just going to
    be limited, and that, of course, creates opportunity because
    other nations and other currencies can take advantage of that.
        Mr. Gottheimer. Thank you so much. Ms. Butler, you
    discussed BNY stablecoin activities out of its New York State-
    chartered bank. State-chartered banks play a critical role in
    New Jersey, where I am from, and the economic opportunities
    that stablecoins offer are continuing to grow. Do you believe
    the proposed dual Federal-State structure in the STABLE bill is
    sufficient for both bank and non-bank stablecoin issuers?
        Ms. Butler. We support Federal consistency, no matter what
    pathway you choose, whether it is State or Federal, but we need
    to have Federal standards applied consistently to all.
        Mr. Gottheimer. Thank you. If I can move quickly to Mr.
    Collison, one of my primary concerns is that without proper
    guardrails, more crypto companies will flee overseas to
    jurisdictions like Bermuda, the Bahamas, or France, who already
    have comprehensive regulatory systems in place. I worry that
    giving them first-mover advantage will allow them potentially
    adversarial jurisdictions to set the playing field on a global
    scale. What specific competitive advantages are other countries
    gaining in the digital asset space, and what does the United
    States need to do to maintain its financial leadership?
        Mr. Collison. Well, most importantly, I concur. I think
    that is a risk, and I think by far the most important thing
    that the United States can do and that Congress can do is to
    provide a clear and effective framework for stablecoins here in
    the country. I think in broad strokes that which is under
    discussion today does that.
        Mr. Gottheimer. Thank you so much, and I yield back. Thank
    you.
        Mr. Davidson. I thank the gentleman. The gentleman from
    Nebraska and also the Chairman of the Housing and Insurance
    Subcommittee, Mr. Flood, is now recognized for 5 minutes.
        Mr. Flood. Thank you, Chairman. My interest in stablecoins
    goes back to the work I did in the Nebraska unicameral
    legislature on this very issue. After my bill entitled, The
    Nebraska Financial Innovation Act, passed, Nebraska became the
    second State to have a regulatory structure for a new kind of
    State-chartered bank called a digital asset depository
    institution. A Nebraska digital asset depository institution
    can issue stablecoins, which puts my State in a unique position
    as it relates to the broader debate about a State pathway
    within this bill. Due to the laws in our State, I am interested
    in the State pathway, specifically as it relates to State-
    chartered bank issuers. My hope is that any Federal stablecoin
    legislation will work hand-in-glove with our Nebraska
    Department of Banking and Finance and the work they are already
    taking on these very issues. I appreciate the continued dialog
    we have had with Chairman Hill and his team on ensuring that we
    strike just the right balance.
        Mr. Guynn, can you please walk through your understanding
    of how the STABLE Act would regulate a State-chartered bank
    subsidiary that issues a stablecoin pursuant to the bill's
    State pathway?
        Mr. Guynn. As I understand it, there are sort of two
    possible regulatory frameworks. One is 4(a), which sets Federal
    standards, and then 4(b) that would allow a State to have an
    alternative regulatory regime that would satisfy or exceed
    those standards. It is a little bit more restrictive than the
    dual banking system, where States have a little bit more
    freedom because the Federal standards simply. It is not that
    they do not apply, it is that they cover a much narrower field
    of applicability, whereas here the standards are pretty
    comprehensive.
        Mr. Flood. Good answer because you answered my second
    question about how it compares to the dual banking system, so
    thank you. I would like to emphasize a few things about the
    State pathway before moving on to my next question. One is that
    State regulars must get a certification approved by the
    Treasury, as you have said, showing that their State regime is
    in line with the bill's Federal requirements or exceeding the
    Federal requirements. In addition, there is an exigent
    circumstances provision in the bill that would allow a Federal
    regulator to step in over a State regulator and enforce
    directly on State issuers in certain circumstances. Quite
    honestly, this has concerned me, just what is an exigent
    circumstance, but in other words, even the State pathway has a
    very extensive Federal involvement.
        With that caveat, I would like to highlight a line in Mr.
    Cascarilla's testimony which said the following as it related
    to cross-border regulation of State-chartered stablecoin
    issuers, ``Primary oversight should remain with State-chartered
    issuers, home State regulator, avoiding redundant regulatory
    burdens.'' Mr. Cascarilla, if a State pathway for insurance
    does not include some form of regulatory primacy for the rules
    of their home State regulator, would State issuers juggling
    several State regulatory laws be at a disadvantage relative to
    issuers that receive a Federal charter?
        Mr. Cascarilla. Yes, they would, and I think that is the
    exact point, which is today as a State issuer. You have to
    juggle a number of different State approvals and exams, and
    that is a conflicting process that takes up a lot of resources
    and could certainly snowball in a situation like this.
        Mr. Flood. I appreciate that answer, and let me just say
    this: does anybody in this room not think that the New York DFS
    could handle this? I mean, we have to respect the rights of
    States to have their own regulatory regime. Mr. Guynn, can you
    comment on the same question, juggling all these different
    regulators? Does it put the State-chartered issuers at a
    disadvantage?
        Mr. Guynn. Look, we get this question all the time from
    State issuers as a law firm. There is always a choice, but
    having a choice between a State and a Federal regulatory
    authority is a good choice to have. It may well be that a
    particular institution decides I have more freedom to innovate
    if I am regulated by a State, even if I have to go through the
    headache of looking at all these different State laws, whereas
    if I go with a national regulatory, then it will be preempted.
        Mr. Flood. Totally agree, and let us remember, what makes
    America the best financial market in the world, what makes us
    so successful is we have diversity in our banking. We have the
    G-SIBs, we have the regional banks, we have the community
    banks, we have the Federal chartered, we have the State
    chartered, and we have innovation. When you control all of
    that, you get Europe, with a couple of banks and a couple of
    board of directors that are making the decisions for every
    consumer on the continent. Let us celebrate what makes America
    strong by encouraging diversity, relying on States to manage
    and regulate State issuers of stablecoins with appropriate
    safeguards.
        I want to compliment Chairman Hill, Brian Steil, Mr.
    Davidson, Allison, and all of the work that the staff has done.
    We are in a good place because of the hard work of this
    committee, and I am excited to see this bill pass. With that I
    yield back.
        Mr. Davidson. I thank the gentleman. The gentleman from
    Texas, Mr. Green, who is also the Ranking Member on the
    Oversight and Investigation Subcommittee, is now recognized for
    5 minutes.
        Mr. Green. Thank you, Mr. Chairman. I thank the Ranking
    Member as well, and I am grateful to the witnesses for
    appearing today. I would like an expression of whether or not
    it is beneficial for us to be concerned with the use of
    cryptocurrency in certain areas. More specifically, is it
    beneficial to use cryptocurrency of some type in money
    laundering, terrorist activities, ransomware attacks, illegal
    trafficking of drugs, sex, weapons, illegal gambling, and
    evasion of taxes? Ms. House, let us start with you. Is it
    beneficial for us to be concerned about the use of some sort of
    cryptocurrency with this type of criminality?
        Ms. House. It is beneficial for us to be concerned about
    it, if that is what you mean. If it is beneficial for us for
    its use in that way, no, it is not. It is only beneficial to
    those who are currently exploiting it. It is not inevitable to
    stay that way, but the current State of compliance across the
    ecosystem makes it attractive for those users.
        Mr. Green. Explain what you mean by the ``State of
    compliance.''
        Ms. House. Yes, sir. Basically, I was the head delegate to
    the Financial Action Task force (FATF), the United Nations, for
    anti-money laundering. If you are not familiar with it, we
    created the first international standards for virtual assets
    and anti-money laundering. The standards exist. The policy
    exists. It just has not been implemented internationally. If we
    had wide-scale, cross-global implementation of our requirements
    to detect and prevent illicit activity and to stop use of, let
    us say, sanctioned actors in North Korea's use of
    cryptocurrency and that successful ability to launder, we would
    not be in this current position. Unfortunately, it has not been
    implemented internationally.
        Mr. Green. Does the bill in question prevent this type of
    illicit activity?
        Ms. House. I do not feel that the anti-money laundering
    measures in it are strong enough. It makes a reference to them
    being regulated under the Bank Secrecy Act, but there is not
    clarity on who is purporting the regulations or how strong they
    need to be.
        Mr. Green. As a result, would we still have exposure to the
    criminality that I call to your attention?
        Ms. House. I fear that if we do not strengthen the
    measures, that could be an outcome, especially the
    extraterritoriality provision.
        Mr. Green. Is there a rush to judgment here, meaning--I
    should not say judgment--a rush to get this done such that we
    do not have the time to carefully craft legislation that will
    help us prevent this type of criminality?
        Ms. House. I would hope that even with the exigency of the
    issue, that given the years of bipartisan work that have been
    done by many members of this committee and those sitting in
    this room, we would be able to leverage that work. I feel that
    the outcome of that work was more reflected in the McHenry-
    Waters bill, which had a more holistic coverage of these
    protections. I am not certain why the new legislation does not
    integrate some of those stronger provisions, which I think
    would be beneficial.
        Mr. Green. Would implementing those stronger provisions
    somehow weaken that legislation, this new legislation?
        Ms. House. I do not feel so. I think it would strengthen it
    and make it truly comprehensive.
        Mr. Green. Do you think that the McHenry-Waters legislation
    had other redeeming value?
        Ms. House. Absolutely. I think that it had a much more
    fulsome, holistic list of different measures. There was some
    good overlap, too, things like 1-to-1 capital reserve
    requirements and a restriction on rehypothecation and
    investment of depositor's assets, basically. Unfortunately, I
    feel that the STABLE Act is missing some of the most important
    provisions also that are outlined in the McHenry-Waters bill.
        Mr. Green. When this illicit activity takes place and there
    is a transfer of money in an illegal fashion or illegal
    purposes, more appropriately, who benefits from that in the
    system?
        Ms. House. Currently, the illicit actors benefit from it. I
    think that no responsible actor wants to be a platform for
    money laundering or for North Korean sanctions evasion and
    proliferation financing. So really, it is the illicit actors
    that are benefiting from lax controls.
        Mr. Green. All right. Quickly to my last question. When
    this occurs, does the person, the people who are purveyors of
    the currency, the person with the system, do they get punished
    in any way?
        Ms. House. There should be enforcement actions that can be
    taken if they fail to meet compliance obligations.
        Mr. Green. Thank you, Mr. Chairman. I yield back.
        Mr. Davidson. I thank the gentleman. The gentleman from
    Montana, Mr. Downing, is now recognized for 5 minutes.
        Mr. Downing. Thank you, Mr. Chairman, and thank you to the
    witnesses. I came out of technology. In my formative years, I
    was part of a company that built really one of the world's
    first massively scalable computer systems. It was an exciting,
    innovative time. I have always said that the United States of
    America needs to be, must be the hotbed of innovation, and we
    cannot cede leadership over emerging technologies to other
    countries, and that starts with Congress passing clear laws
    governing cryptocurrencies. I applaud Chairman Steil for his
    leadership on the STABLE Act, which continues to receive
    industry feedback.
        I am going to start, Mr. Collison, one notable change in
    the discussion draft of the STABLE Act from the 118th Congress
    is making the OCC the primary regulator and supervisor of
    nonbank payment stablecoin issuers. Can you discuss the
    benefits of allowing the OCC to serve as the primary regulator
    and supervisor for non-bank stablecoin issuers?
        Mr. Collison. We do not really have a strong view on what
    the best primary regulator is. I think the two things that are
    of greatest importance are, one, that there is an effective
    State-based framework for experimentation, and then, second,
    there is simply a clear framework at the Federal level. Within
    those kind of two principles and within reason, I think there
    are probably multiple avenues that could work.
        Mr. Downing. Thank you. I want to move on to central bank
    digital currencies, or CBDCs, which represent one of the
    greatest threats to civil liberties in our lifetime. The
    American people expect our payment system to operate
    efficiently without offering the Federal Government a window
    into their day-to-day transactions and look no further than the
    authoritarian countries pursuing CBDCs, which are not being
    used for innovation, but for surveillance, for stopping
    dissent, like China and Russia. I do not trust the Federal
    Government with any of my data, let alone financial data. I
    once got a letter from the Federal Government telling me we are
    sorry, but all your data from your security clearance has been
    released to a foreign actor. Here, we will give you a couple of
    years of credit monitoring. You are welcome. I have got issues
    there.
        I am going to go to Mr. Cascarilla. Some CBDC advocates say
    that issuing CBDC is the only way to improve the efficiency of
    our payment system because stablecoins are some sort of wild
    West where crime and money laundering will run rampant. First,
    is that true, and then second, are law enforcement officials
    incapable of combating bad actors in the stablecoin ecosystem?
        Mr. Cascarilla. Well, I think that from studies that have
    been shown and done, they have shown that the amount of illicit
    activity that is happening in crypto, stablecoins, and
    blockchain is less than in the traditional financial system,
    precisely because there is an ability to be able to track
    movements on chain forever. That is an important way to create
    a new set of tools as well as being able to create a new set of
    products to be able to track what is happening. Second, there
    really is not an analog to the government offering something to
    the end user, aside from physical cash. It does not run its own
    banking system. It does not offer mutual funds, money market
    funds, et cetera. In the same way, I do not think that we are
    going to promote innovation by having the central bank issued
    digital currency compete with private issuers.
        Mr. Downing. Well, thank you. Would the Federal Reserve's
    issuing CBDC discourage or crowd out digital asset innovation
    in the United States?
        Mr. Cascarilla. I think that it will actually crowd out
    innovation and slow the adoption on a global basis of using the
    dollar, precisely because I think some of your fears would also
    be shared by others outside the United States.
        Mr. Downing. Let me go back to stablecoin regulations. The
    prior administration was no fan of digital assets and payment
    stablecoins. The SEC under Gary Gensler tried to treat all
    cryptocurrencies the same as a security, despite many
    cryptocurrencies clearly serving different purposes. Section 14
    of the STABLE Act clarifies that payment stablecoins are not
    security. I am going to go to Mr. Guynn. Can you explain why
    regulating payment stablecoins as securities is impractical?
        Mr. Guynn. The whole goal with payment stablecoins is for
    it to be accepted as a no-questions-asked payment instrument,
    just like a bank deposit. If it is treated as a security, it
    will be subject to all kinds of disclosure requirements, which
    is completely inconsistent with that. The disclosure here are
    the disclosure requirements in the STABLE Act and the structure
    saying the stablecoin has to be 100 percent backed by safe
    assets and things like that. Actually, having it be a security
    would actually undermine the ability of achieving a no-
    questions-asked money standards.
        Mr. Downing. Well, thank you. Unfortunately, my time has
    expired, so I yield.
        Mr. Davidson. I thank the gentleman. The gentleman from New
    York, Mr. Lawler, is now recognized for 5 minutes.
        Mr. Lawler. Thank you, Mr. Chairman. As a New Yorker, I am
    interested in gaining some insight into New York Department of
    Financial Services, who has been on the leading edge in the
    reality of how their processes are working in practice. Mr.
    Cascarilla, since Paxos received the first limited-purpose
    trust charter for digital assets from the New York Department
    of Financial Services in 2015, can you tell us a bit about how
    Paxos' experience working with them has been?
        Mr. Cascarilla. Well, we were the first trust that was
    approved, really, in the country, and it was by New York. The
    idea had been at the time that as an infrastructure provider,
    this would be a very strong way to be able to hold client
    assets, not just for dollars. We also have a gold stablecoin
    and others, and we have been able to successfully create some
    of the most innovative products in the financial system and in
    the crypto space because of the Oversight of the New York
    Department of Financial Services.
        Mr. Lawler. What specifically would you attribute as
    working well, and what do you think could be improved?
        Mr. Cascarilla. Well, I think, when you launch a new
    product, there are many different concerns you have to take
    into account around customer protections, around safety and
    soundness, and around the ability to operate. New York has put
    in place a framework for issuing stablecoins that has now been
    the basis for really the frameworks that have been adopted in a
    number of other jurisdictions. We also issue stablecoins out of
    both the UAE and Singapore, and they are very substantially
    similar to what New York pioneered.
        Mr. Lawler. I know in your opening statement you touched on
    your support for reciprocity with other jurisdictions globally
    that have strong frameworks. Do you think the New York
    Department of Financial Services should be looking at approving
    stablecoins that are already approved by other jurisdictions
    with high standards?
        Mr. Cascarilla. Yes, and I think that creating a common
    level of reciprocity for tokens that are issued at the same
    type of safety and soundness level is just critical. You do not
    want to balkanize the market. You balance the market; I think
    you then create opportunities for other currencies and other
    types of countries to take advantage of it.
        Mr. Lawler. One of the stories that we have consistently
    heard from opponents of digital assets is how it provides a
    significant source of financing for terrorist groups and other
    illicit activities. While we must ensure we are combating
    malign actors, according to recent reports, illicit activity is
    down, with analysts estimating that crypto transaction volume
    associated with illicit activity is only .34 percent. Mr.
    Cascarilla, you have already detailed a bit of the work you are
    doing on due diligence with Mr. Casten. Mr. Collison, can you
    describe some of the issues that are considered when
    institutions are working through these KYC/AML requirements,
    and how do companies like Coinbase approach these requirements?
        Mr. Cascarilla. In our case, we are approving customers
    through bank-like standards. We are regulated in New York under
    banking law. That is AML, KYC and BSA rules, similar to any
    other financial institution, and that is important. We want to
    make sure we know our customers. We want to make sure that we
    are doing our best to stop illegal or illicit activity from
    happening through our products, and so far, I think we have
    been able to show that to a number of large enterprises that
    use us as infrastructure. The importance of making sure that
    you have those right types of controls in place is what then
    gives the world the confidence to use these products on a
    broader basis.
        Mr. Lawler. Mr. Collison?
        Mr. Collison. We have a very strong incentive to not only
    cure the bar of complying with the law, but to do everything
    possible to reduce and to eliminate fraud in our ecosystem
    because, actually, customers come to us if they are
    implementing some platform or some little product suite. They
    often find the fraud that they experience online themselves to
    be unmanageable, and they come to us for assistance. We try to
    lead the industry in this respect, and just like Mr. Cascarilla
    said, we apply the exact same BSA, AML, KYC, CFT, et cetera,
    standards for our sector.
        Mr. Lawler. Great. Thank you. I yield back.
        Mr. Davidson. I thank the gentleman. The other gentleman
    from New York, Mr. Garbarino, is now recognized for 5 minutes.
        Mr. Garbarino. Thank you, Chairman. Thank you all to the
    witnesses for being here today. Ms. Butler, New York was the
    first State regulator to come out with guidance related to
    stablecoin issuers. I know you have chatted with Mr. Meuser on
    this topic before. However, as a New York-regulated bank, could
    you please discuss how you comply with sound custody disclosure
    practices?
        Ms. Butler. Thank you very much for the question. We comply
    with sound custody practices by ensuring that there is asset
    segregation. We apply AML, BSA and KYC practices. We have
    robust risk and control infrastructure around record keeping as
    an example.
        Mr. Garbarino. Sounds like you do quite a bit.
        Ms. Butler. Yes.
        Mr. Garbarino. In January 2023, New York DFS released
    additional guidance, reiterating expectations for sound custody
    and disclosure practices for payment stablecoin issuers. Mr.
    Cascarilla, you were just talking with my colleague about some
    of these. Can you discuss the released guidance in particular
    and highlight what changes were required for issuers?
        Mr. Cascarilla. The guidance actually did not change
    anything. From our perspective, we were already following that
    guidance, but I think what it set was a framework that other
    jurisdictions and other issuers could then follow, so----
        Mr. Garbarino. It raised the bar for other people?
        Mr. Cascarilla. Yes. I think there were a number of other
    stablecoin issuers who were not following the idea of backing
    their stablecoins with cash and cash equivalents on a true 1-
    for-1 basis or with something that would be readily redeemable.
    While it did not change what we were doing, it certainly led to
    other issuers changing how they operated.
        Mr. Garbarino. Great. That is good. The recent draft of the
    STABLE Act updates permissible reserves outlined in the
    previous draft released by Chairman Hill and Steil. These now
    include Treasury bills with an issued and remaining maturity of
    3 months or less, reverse repo transactions backed by these
    Treasury bills as collateral, and money market funds invested
    in approved assets. Mr. Guynn, can you explain how these
    reserves function as cash equivalents and ensure stablecoins
    are truly backed 1-to-1?
        Mr. Guynn. First of all, in some ways I think that is too
    restrictive, but if you actually had a reserve where the
    maximum maturity is 3 months, typically an issuer would
    actually ladder those securities. The average maturity is
    probably more layered to something called duration, is probably
    more like a month or 1 1/2 months. That means that if, even if
    there is a pretty big swing in interest rates, the value of
    those assets only goes down by a modest amount. So, it makes it
    very easy then to liquidate those, if you needed to liquidate
    and to redeem stablecoins. To the extent there is any drop in
    the value below par, the STABLE Act would require at least a
    modest capital buffer that would be used to make up the
    difference.
        Mr. Garbarino. Right. Our dual banking system, regulatory
    system, where State and financial regulators share, supervisory
    and regulatory authority has worked well as it utilizes the
    strengths of both Federal and State regulators, while allowing
    States like New York to remain laboratories for innovation.
    Guynn, would you comment on how a national, Federal framework
    can complement the work that has already been done at the State
    level?
        Mr. Guynn. 4(a), I think, is consistent with the State
    regulatory framework in New York, so I do not think it changes
    things, but it would create a floor for all other States.
    States would not be able to create regulatory frameworks that
    were more relaxed than the Federal standard in Section 4(a) of
    the STABLE Act. What States would be allowed to do is to have
    more rigorous standards or just apply things differently in a
    way that allows for more innovation.
        Mr. Garbarino. Is that something like setting the floor,
    but not a ceiling?
        Mr. Guynn. Yes, it is a floor, not a ceiling.
        Mr. Garbarino. You agree with them?
        Mr. Guynn. Look, I think in the dual banking system, there
    is a little more leeway for the States to actually have their
    own regulations. I could see allowing more leeway for the
    States here, but that is not what the bill is doing, no.
        Mr. Garbarino. Okay. I appreciate that, and with that, I am
    going to end early because I know the conference chair would
    like to ask questions before votes are called. Mr. Chairman, I
    yield back.
        Mr. Davidson. I thank the gentleman. The gentlewoman from
    Michigan, also the Chair of the Republican Conference, Mrs.
    McClain, is recognized for 5 minutes.
        Mrs. McClain. Thank you, Mr. Chair, and thank you all for
    being here today. I appreciate it. I want to start with Mr.
    Cascarilla. I want to understand and explore more. Many
    stablecoin issuers, including Paxos, have set up operations in
    foreign jurisdictions. Why did you decide to make that decision
    to set up additional operations abroad? What was the thought
    process behind that?
        Mr. Cascarilla. There are a number of different reasons. I
    think the first important one is those jurisdictions had a
    clear set of rules. We had the clarity, the consistency and the
    certainty to be able to invest for a long period of time. We
    have operated out of Singapore for over 10 years, so we have
    been there for quite a long period of time, and the Monetary
    Authority of Singapore is a very credible regulator. At the
    same time, there was not a Federal framework to be able to
    operate inside the United States, and as well-intentioned as
    the New York Department of Financial Services has been, it is
    still a State regulator. In order to be able to operate on a
    global basis, you need to be able to have, I think, a Federal
    framework.
        Mrs. McClain. Thank you. In your view, what would happen if
    we failed to enact a Federal framework?
        Mr. Cascarilla. Well, I think you are ceding leadership and
    potentially ceding the position of the dollar as a world
    reserve currency.
        Mrs. McClain. Interesting. Thank you. Mr. Collison, how are
    small businesses and entrepreneurs using stablecoin to
    facilitate more international operations?
        Mr. Collison. We sometimes discuss an idea at Stripe via
    the micro multinational, in that, if you employ 10,000 or
    100,000 people, it is possible to serve 100 markets or
    something like that. As a much smaller business, or a business
    just getting started, that is much more difficult. I think part
    of the promise of stablecoins is that for those businesses that
    are just getting off the ground, it enables them to serve a
    global audience from day one, and that can multiply their
    market and thus their revenue quite significantly.
        Mrs. McClain. Which is a good thing. Yes. Ms. Butler, BNY
    is one of the world's largest custodians. It is essential that
    the Reserve Bank backing stablecoins are secure and
    transparent. Can you describe how BNY Mellon keeps the
    stablecoin reserves that it manages safe, and that is fully
    able to meet all of the redemption requests at any time?
        Ms. Butler. Thank you very much, Congresswoman, for your
    question. We are the custodian of the reserve, and as such we
    apply longstanding custody practices around asset safety.
    Similar to what we do for the $52 trillion of assets we have
    under custody. We are not the reserve manager of the reserve
    itself that is held by the, either the stablecoin issuer or a
    separate reserve manager.
        Mrs. McClain. Okay. Is there a concern about meeting
    redemption requests, or do you feel there is enough regulation
    around that and how the system is set up?
        Ms. Butler. We support the proposals in the bill to make
    sure that there are the right safeguards on how you manage the
    reserves, what assets are in the reserves, how you disclose
    them, and ensure that there are regular audits on those
    reserves.
        Mrs. McClain. Transparency is good then.
        Ms. Butler. Yes.
        Mrs. McClain. It is good. Mr. Guynn, it is my understanding
    that STABLE Act establishes a Federal floor of requirements
    that all payment stablecoin issuers must meet in order to issue
    in the United States, so I think that floor is extremely
    important. Can you explain in layman's terms why it is
    important to ensure that regulatory framework for payment
    stablecoin establishes a baseline across State and Federal
    jurisdictions?
        Mr. Guynn. Sure. Basically, having a Federal floor creates
    uniformity across the United States and across different
    stablecoin issuers. I think that is important so that it will
    be easy to compare and say everybody is subject to the same
    standards. There could be some dis-uniformity, but only by
    increasing the standards from State-to-State.
        Mrs. McClain. It provides a level playing field. It is
    easier to operate, to do business, to figure out how to
    function, if I am a----
        Mr. Guynn. Much easier to understand to and apply, yes.
        Mrs. McClain. Okay. Thank you. Last question, if I can, Mr.
    Cascarilla, there is a tremendous concern about the use of
    digital assets in money laundering. How can stablecoins be used
    to reduce illicit financial transactions, and what protections
    are included in the Stablecoin Act to inhibit nefarious
    financial actors, in essence, keep out the bad actors?
        Mr. Cascarilla. I will try to be fast. There are
    requirements for AML, KYC and BSA, and then, second, because it
    is on a blockchain, it is a forever ledger. You are always able
    to track movements, and so you can now use different tools to
    be able to understand how illicit activity is happening.
        Mrs. McClain. Very good with that. I am over my time. Thank
    you, Mr. Chairman. I yield back.
        Mr. Davidson. Thank you. The gentleman from Iowa, Mr. Nunn,
    is now recognized for 5 minutes.
        Mr. Nunn. Well, thank you, Chairman Davidson, and I
    appreciate you all being at this very important hearing. We are
    on the cutting edge here. Stablecoins offer a powerful
    opportunity to build a modern and efficient payment system and
    shape our financial future. The United States will not and
    should not sit back while countries like China and Russia try
    and occupy this space. I am encouraged by this committee's
    thoughtful discussion and its action.
        Mr. Collison, as a leader, both as Co-Founder and now CEO
    at Stripe, you are on the forefront when it comes to financial
    innovation. In fact, you know what technology looks like
    because you have been doing it. Over the next decade, I believe
    we will see a dramatic shift toward real-time, data-driven
    payments and deeper integration in the financial services
    candidly in everyday life. By passing the STABLE Act, we can
    unlock a wave of American leadership in digital payments, all
    while upholding our Nation's high standards of consumer
    protections. Could you talk to us here about how you see the
    payments landscaping evolving over the next 5 years and what
    role stablecoins might play in shaping that future?
        Mr. Collison. Well, I think you summarized it very nicely
    yourself just there. I would maybe briefly add, first, I think
    there are immense opportunities within the United States to
    make things cheaper, more efficient, faster, easier to use. The
    United States today is one of the most expensive countries in
    the G20, I think the most expensive, in fact, for just basic
    money movement functionality. There is also a World Bank report
    this year showing that not only are remittance costs quite
    high, but they are actually increasing rather than decreasing
    over time, so there is lot of opportunity here. I think the
    second angle that is very compelling is the global access to
    dollars, which is going to enhance the status of the dollar as
    the world's preeminent reserve currency, and that has
    geopolitical benefits. It also has straightforward fiscal
    benefits in lowering U.S. borrowing costs, and so I think the
    benefit is very extensive.
        Mr. Nunn. I think an important point to drive home here is,
    this is American-dollar-backed stablecoins which really helped
    drive this space. God forbid we ever get into a renmi-backed
    stablecoin or ruble-backed stablecoin, or whatever else is
    going to be out there. Being able to help drive this is part of
    our economic engine here in the United States, along with the
    security that comes with that puts us in the driver's seat for
    decades to come. Thank you. Ms. Butler, you are head of digital
    assets at BNY. You operate globally. You have seen a lot of
    this stuff take place. How are your experiences working in
    other jurisdictions, particularly Europe, London, Singapore,
    others, compared to what we have here in the United States?
        Ms. Butler. Thank you very much for the question. There is
    increasing clarity in other jurisdictions that enable us to
    actually meet the needs of our clients in a more real way. With
    clarity coming out of the proposal here, we will be able to do
    the same and apply our services to U.S. dollar stablecoins, not
    just in the traditional space that we do today, but also
    increasingly across the whole spectrum of payment services
    related to stablecoins.
        Mr. Nunn. I would agree with you. Our inability to get some
    kind of framework here has driven great innovators, investors
    and opportunities to the Caribbean, to London, to Singapore,
    and in worst-case scenarios is actually pushing them into the
    arms of Pyongyang, Beijing and Russia. Look, Ms. House, you and
    I Had the opportunity to serve together on a number of national
    security aspects. Would you agree with me that lack of clarity
    in this area or lack of regulation could potentially jeopardize
    the future of America's ability to be competitive in this
    space?
        Ms. House. Yes. I think it already has.
        Mr. Nunn. With that, I know STABLE Act may not be exactly
    what you are looking at, but could you talk to us about some of
    the things that you think the STABLE Act is driving in building
    out that framework?
        Ms. House. Absolutely, and there are some points of
    commonality with other legislation that I like, and I know I
    have referenced the McHenry-Waters legislation. Things like the
    1-to-1, high-quality liquid reserve requirements are really
    great. The restriction on rehypothecation of assets is good.
    The reference to cybersecurity controls in the wake of $1.5
    billion hacks that have happened lately. I think that there are
    some good measures that are in there. There are just some other
    areas that I think bipartisan legislation that has been worked
    on in this committee can actually help fill the gaps.
        Mr. Nunn. Ms. House, and thank you for your work at the
    Atlantic Council. I do believe this is a bipartisan issue. More
    importantly, it is an American issue. If America does not start
    leading in this area, we have the opportunity to bleed out. Mr.
    Cascarilla, in our time left, I want to give a little more time
    to talk about-I look at illicit financing as being a real
    challenge in this space. How can STABLE Act actually help us
    clamp down on illicit financers?
        Mr. Cascarilla. Well, I think, first of all, it sets a set
    of rules for AML, KYC and BSA, which do not exist today for all
    issuers, and it also, I think, sets this floor for what people
    will be able to do and how they will issue on a global basis.
    For international issuance as well.
        Mr. Nunn. Very good. Thank you very much for the time
    today. Mr. Chairman, I yield back.
        Mr. Davidson. Yes. I thank the gentleman. The gentleman
    from North Carolina, Mr. Moore, is now recognized for 5
    minutes.
        Mr. Moore. Thank you, Mr. Chairman. Ensuring America
    continues to lead in financial innovation is not just about
    industry growth, it is also about giving consumers better
    choices, improving financial access and protecting consumer
    privacy. Blockchain technology and digital assets are already
    transforming the way Americans and businesses transfer value.
    That is why this week I plan to introduce the Financial
    Services Innovation Act. This bill aims to ensure the United
    States remains the home of financial innovation by establishing
    the Financial Services Innovation offices within each financial
    regulator and a Federal sandbox for innovative financial
    products and services. The regulatory sandbox approach has
    proven successful in States like North Carolina, which launched
    its financial and insurance regulatory sandbox through the
    North Carolina Innovation Council in 2021.
        I just have one question. Ms. Butler, in North Carolina,
    our regulatory sandbox has fostered innovative services that
    have reduced costs for consumers. They expand access to credit.
    My question simply is, how will at the Federal level a
    regulatory sandbox approach accelerate adoption while ensuring
    proper oversight?
        Ms. Bulter. Thank you very much for the question. I think,
    first and foremost, we are seeing a number of sandboxes where
    we can actually experiment in a controlled way, and that is
    giving us the ability to really test out the technology. In
    addition to that, though, we really do need the rules. We need
    to have clarity of the rules. We need to have those rules
    applied consistently across all players in the ecosystem, and I
    cannot underscore that enough. It is super important so that
    everybody, particularly, that is issuing and managing and
    custodying any part related to a U.S. stablecoin, those same
    rules and high standards are applied, and then you get to
    experiment within the safety of a sandbox.
        Mr. Moore. Thank you, and I want to thank all the witnesses
    for their testimony before the committee today. With that, Mr.
    Chairman, I yield back.
        Mr. Davidson. I thank the gentleman. Thanks to all the
    witnesses. I appreciate your testimony today.
        Without objection, all members will have 5 legislative days
    to submit additional written questions for the witnesses to the
    chairman. The questions will be forwarded to the witnesses for
    response, and witnesses, when you receive them, please respond
    no later than April 15.

        [The information referred to can be found in the appendix.]

        Mr. Davidson. This hearing stands adjourned.

        [Whereupon, at 1:46 p.m., the committee was adjourned.]

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