[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
printing.]
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.]
APPENDIX
----------
MATERIALS SUBMITTED FOR THE RECORD
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
[all]