Differing Opinions From Speakers at Congressional Hearing On Stablecoins
On Tuesday, the US Senate’s Banking, Housing, and Urban Affairs Committee held a hearing focused primarily on stablecoins and cryptocurrencies generally. The inquiry comes a few days after the House Finance Committee hearing featuring six crypto executives. The latest inquiry was titled “Stablecoins: How do they work, how are they used, and what are their risks?”
This meeting represents the latest move by Congress for making legislation to govern the crypto industry. The committee Chair, Senator Sherrod Brown, arranged the hearing with Professor Hilary J. Allen, Alexis Goldstein, Jai Massari, and Dante Disparte attending as witnesses. These witnesses all urged lawmakers to create a clear legislative framework, but they couldn’t agree on set limits for the laws.
Stablecoins Come In For Criticism
During the hearing, Senator Brown delivered a scathing assessment of stablecoins, arguing that they were duplicates of existing banking systems without regulation. The Ohio senator raised concern that the value of stablecoins is completely managed by private firms that generate “magic internet money.” Stablecoins, according to him, are neither decentralized nor transparent as critical information concerning them is withheld from buyers. He warned that holders could eventually lose their money with only ‘big guys’ benefitting.
“The only people to walk away unscathed are the big guys…If you put your money in Stablecoin, there’s no guarantee you’re going to get it back.”
One of the witnesses, Alexis Goldstein of the Open Markets Institute, argued that stablecoins had no benefits for promoting financial inclusion. She highlighted that high Ethereum network fees would make legacy banking firms like Western Union look affordable. She further argued that Decentralized Finance (DeFi) did not comply with anti-money laundering and know-your-customer (KYC) laws in the US. Hence stablecoins could be used to convert ransom payments between cryptocurrencies.
Senator Elizabeth Warren, a noted crypto skeptic, questioned the significance of stablecoins in DeFi. She called on regulators to show more concern about the associated risks involved and protect consumers. She took to Twitter after the hearing to further reiterate her sentiments
Possible Guideline On Future Regulations Offered
Senator Pat Toomey emerged as a proponent of the crypto industry, making a case for encouraging innovation in the stablecoin sector. He outlined a blueprint for future legislation to see stablecoin issuers register as money transmitters, subjecting them to state regulations. He further stated his belief that laws passed should address consumer protection and financial system vulnerabilities. However, they should be structured to create innovation in the fast-evolving digital economy.
The Republican senator pointed out that stablecoin issuers should have the option of either:
- operating under a conventional bank charter,
- acquiring a special-purpose banking charter designed in future stablecoin legislation, or
- registering as a money transmitter at the state level and a money services business at the federal level.
He also stated that non-interest-bearing stablecoins should not be regulated similarly to securities. He later tweeted his hope that the Senate would create a sensible regulatory regime to allow stablecoins to thrive.
Also in support of Stablecoins was Dante Disparte, chief strategy officer and head of global policy at Circle. He called on lawmakers to prioritize laws that encourage innovation without damaging the industry. He argued the importance of digital assets whose use cases include boosting women and minority entrepreneurs and delivering aid.
“I argue that we are winning [the digital currency] race because of the sum of free-market activity taking place inside the U.S. regulatory perimeter with digital currencies and blockchain-based financial services, the sum of these activities are advancing broad U.S. economic competitiveness and national security interests.”
A consensus from the hearing is a need for proper regulation to guide the industry into the next phase of its evolution.
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Crypto Space Reacts
All in all, crypto enthusiasts seem bullish on stablecoins with the accumulation of the assets causing a spike in its supply. Data from analytics blockchain platform CryptoQuant shows the total redeemed supply reached an all-time high of just over $5 billion before the hearing.
Observers will be watching the senate closely, with members clearly divided on which way to go regarding crypto regulation. It is clear that a decision has to be made to protect consumers and ensure the US reaps the benefits of the industry.
Do you see the Stablecoins as a threat to the Us financial system that needs regulating? Let us know in the comments.