Lawmakers Discuss Dollar-Backed Stablecoins

Lawmakers and industry experts discussed the importance of US dollar-backed stablecoins in the financial system and the urgency of a regulatory framework during a hearing convened by the US House Committee on Financial Services on March 11.

Hearing Overview

Titled “Navigating the Digital Payments Ecosystem: Examining a Federal Framework for Payment Stablecoins and Consequences of a U.S. Central Bank Digital Currency,” the hearing also covered concerns about a potential central bank digital currency (CBDC) in the US.

Stablecoins vs. CBDCs

The hearing highlighted the benefits of stablecoins while criticizing CBDCs. House Financial Services Committee chairman French Hill stated that stablecoins promote competition and innovation—contrasting with CBDCs, which would centralize financial power.

> “Unlike stablecoins, which operate in a competitive market, a CBDC would concentrate financial power within the federal government, restrict consumer choice, and undermine innovation.”

Hill asserted that, with proper regulation, stablecoins could enhance US dollar dominance and modernize payment systems without overreach.

Representative Bill Huizenga noted that stablecoins could simplify the US payment system, while Congressman Andy Barr emphasized their role in maintaining the US dollar’s status against foreign competitors like the digital yuan.

Charles Cascarilla, CEO of Paxos, dismissed CBDCs as offering no additional benefits over stablecoins, stating,
> “Historically, innovation in the US, both in technology and the financial system, has come from the private sector.”

Congressman Tom Emmer advocated for prohibiting CBDCs in the US, expressing gratitude to President Trump for signing an executive order banning them.

Regulatory Considerations

The hearing emphasized that stablecoins need a clear legal framework to ensure stability and encourage adoption while preventing government overreach.

Representative William Timmons highlighted the need for regulatory clarity to prevent enforcement actions that could drive innovation overseas. The STABLE Act, central to the discussion, aims to regulate stablecoins by allowing banks and nonbanks to issue them while ensuring they are fully backed by US dollars or approved assets.

Caroline Butler, head of digital assets at BNY Mellon, emphasized the importance of asset segregation in the STABLE Act to protect client assets.

Cascarilla agreed, stating that legal protections for reserve holdings are vital for maintaining stablecoin value.

Randall Guynn pointed out that STABLE Act requirements could make stablecoins a reliable form of money. Carole House acknowledged the Act’s cybersecurity provisions as crucial for securing digital financial infrastructure.

Stablecoins and Financial Inclusion

The hearing also highlighted stablecoins’ role in promoting financial inclusion, as they provide unbanked individuals access to digital dollars via smartphone wallets.

Butler noted that banks can be pivotal in the stablecoin ecosystem, offering trust and confidence as payment mechanisms evolve alongside traditional methods.