Putting the “Stable” in “Stablecoins:” How Legislation Will Help Stablecoins Achieve Their Promise (U.S. House Committee on Financial Services, Subcommittee on Digital Assets, Financial Technology, and Inclusion)

Hearing	Putting the “Stable” in “Stablecoins:” How Legislation Will Help Stablecoins Achieve Their Promise
Committee	U.S. House Committee on Financial Services, Subcommittee on Digital Assets, Financial Technology, and Inclusion
Date	May 18, 2023

 

Hearing Takeaways:

• Stablecoins and Other Digital Forms of Money: The hearing focused on the growing popularity of stablecoins and other forms of digital money. Stablecoins are cryptocurrencies whose values are tied to another asset (such as U.S. dollars). The hearing largely considered the current use, impact, and regulation of stablecoins and similar digital assets (such as tokenized deposits and local currencies). While stablecoins are not currently widely being used for payments, many Subcommittee Members and the hearing’s witnesses stated that stablecoins could provide a better, cheaper, and faster payments system. Subcommittee Ranking Member Stephen Lynch (D-MA) expressed concerns however that stablecoins could be used more for speculative purposes rather than for payment purposes.
  • Impact of Stablecoins on the U.S. Dollar and the U.S. Treasuries Market: Several Subcommittee Members, Mr. Homer, Mr. Portillia, and Ms. Wang remarked that stablecoins pegged to the U.S. dollar can support demand for U.S. dollars and U.S. Treasuries. They stated that this demand will ensure that the U.S. dollar remains the world’s reserve currency, support the U.S.’s ability to impose effective sanctions, and enable the U.S. to continue its deficit spending.
  • Potential Threats to Monetary Policy, National Security, and Financial Stability: Several Subcommittee Democrats expressed concerns that the widespread adoption of U.S. dollar-backed stabelcoins could pose threats to federal monetary policy, national security, and financial stability. They stated that stablecoins could compete with the U.S. dollar (which could reduce demand for U.S. dollars) and that stablecoin issuer problems could result in abrupt bank withdrawals (which may trigger financial instability).
  • Susceptibility of Stablecoins to Inflation, Illicit Activity, and Fraud: Rep. Brad Sherman (D-CA) also emphasized that stablecoins have their values tied to the U.S. dollar, which makes them susceptible to inflation. Rep. Sherman and Rep. Sean Casten (D-IL) also asserted that the financial privacy of stablecoins makes these assets suspectable to be used in illicit activities and that the lack of regulation for stablecoin issuers can make these assets suspectable to fraud. Subcommittee Vice Chairman Warren Davidson (R-OH) and Mr. Homer argued however that well-regulated stablecoins are unlikely to lose all of their values absent fraud and that federal stablecoin legislation could drastically reduce the likelihood of fraud occurring.
  • Recent Challenges in the U.S. Digital Assets Market: Several Subcommittee Democrats highlighted how there have recently occurred several collapses of prominent digital asset companies (including FTX). They stated that federal stablecoin legislation must address the issues underlying these collapses (such as improper co-mingling of customer funds). However, Rep. Ritchie Torres (D-NY) largely attributed these failures to poor oversight from the U.S. Securities and Exchange Commission (SEC).
  • U.S. Development of Stablecoin Technologies: Rep. Bryan Steil (R-WI) expressed interest in ensuring that stablecoin products are being developed domestically. He stated that stablecoin products that are developed domestically will be easier to oversee, have American values, and create U.S. jobs.
  • Access to Banking Services for Digital Asset Firms: Subcommittee Vice Chairman Davidson and Mr. Homer expressed concerns that many digital asset firms (including stablecoin issuers) are facing challenges obtaining banking services. They warned that these challenges will lead digital asset companies to seek out alternative providers of banking services (which may include offshore options). 
  • Current Federal Regulation of Stablecoins: Rep. Steil, Rep. Torres, Mr. Homer, and Mr. Portilla raised concerns over efforts to apply securities laws to stablecoins. Rep. Steil and Mr. Homer stated that stablecoins have no expectation of profit and therefore should not be considered securities under the U.S. Supreme Court’s SEC v. W.J. Howey Co. decision (known as the Howey test).
  • Current State Regulation of Stablecoins: Mr. Homer discussed how several states (notably New York) maintain robust regulatory frameworks for stablecoins. He highlighted how New York’s regulatory framework for stablecoins involves reserve requirements, redemption rights, and public transparency requirements. He added that New York subjects stablecoin issuers to “robust” supervisions and examinations.
  • Foreign Regulation of Digital Assets: Subcommittee Members, Mr. Homer, and Ms. Reynolds Hand highlighted how other jurisdictions, including the European Union (EU) and Singapore, have adopted robust regulatory frameworks for digital assets. They expressed concerns that these more developed regulatory frameworks for digital assets could attract digital assets activity away from the U.S. They stated that the U.S. should consider these regulatory frameworks as it develops its own regulatory framework for digital assets. Mr. Homer also expressed interest in how some of these foreign regulatory frameworks for digital assets impose different regulatory requirements for stablecoin issuers based on their number of stablecoins issued.
  • Tokenized Bank Deposits: Mr. Morgan recommended that the U.S. consider pursuing tokenized bank deposits as a way to bring the innovations associated with blockchain technology into the traditional banking space. He remarked that tokenizing bank deposits would facilitate the creation of a real-time and blockchain-based payments infrastructure that can improve the delivery of banking services. He elaborated that this infrastructure could facilitate faster and cheaper payments, programmable payments, and atomic settlement. He also explained that these tokenized deposits will not trade on exchanges and will not be held by the general public (in most cases).
  • Community and Local Currencies: Ms. Wang recommended that the U.S. consider promoting community and local currencies. She noted how these currencies are not legal tender and complement national currencies through providing local mediums of exchange. She highlighted how the U.S. dollar disproportionally benefits big banks and large corporations. She commented that these community and local currencies will better ensure that money circulates and remains within local communities.
• Stablecoin Policy Proposals: Most Subcommittee Members and the hearing’s witnesses expressed interest in working to develop bipartisan federal stablecoin legislation. The hearing considered two pieces of draft stablecoin legislation: one from Full Committee Chairman Patrick McHenry (R-NC) and one from Full Committee Ranking Member Maxine Waters (D-CA). These Subcommittee Members and the hearing’s witnesses expressed hope that these two draft bills could serve as starting points for the development of bipartisan federal stablecoin legislation.
  • State Regulation of Stablecoins: Subcommittee Republicans, some Subcommittee Democrats, Mr. Homer, Mr. Portilla, and Ms. Wang remarked that federal stablecoin legislation should provide state banking regulators with a robust role in approving and overseeing stableocoin projects. They stated that state regulators can develop policies that best meet their local needs and that permitting states to oversee this space can drive regulatory innovation. They further contended that the U.S. can establish federal minimum standards that prevent regulatory arbitrage without subordinating state regulators to the U.S. Federal Reserve. Some Subcommittee Democrats and Ms. Reynolds Hand expressed concerns however that a state-based regulatory system for stablecoins could lead stablecoin issuers to seek out jurisdictions with weak regulations. They stated that the U.S. Federal Reserve should be provided with more authority to reject stablecoin projects that do not meet certain standards.
  • Federal Regulatory Oversight of Stablecoin Issuers: Subcommittee Republicans, some Subcommittee Democrats, Mr. Homer, and Mr. Portilla expressed concerns that Full Committee Ranking Member Waters’s draft stablecoin legislation would provide too much authority to the U.S. Federal Reserve. They stated that the U.S. Office of the Comptroller of the Currency (OCC) should serve as the primary regulator of stablecoin issuers and should oversee these issuers as national bank trusts. Rep. William Timmons (R-SC) and Mr. Homer further expressed concerns over proposals that would use more open-ended and subjective factors when reviewing stablecoin applications and warned that these factors would foster uncertainty for stablecoin issuers. However, some Subcommittee Democrats and Ms. Reynolds Hand argued that multiple federal regulators should have a role in overseeing the stablecoin market considering the potential problems that stablecoins can pose to the broader financial system. 
  • Integration of Stablecoins into the Traditional U.S. Banking System: Some Subcommittee Democrats and Ms. Reynolds Hand expressed concerns that federal stablecoin legislation could increase linkages between the digital assets space and the traditional banking space. They raised particular concerns over how Full Committee Chairman McHenry’s draft stablecoin legislation would provide non-bank stablecoin issuers with access to U.S. Federal Reserve services. Mr. Portilla stated however that providing non-bank payment stablecoin issuers with access to master accounts at the U.S. Federal Reserve could help them to provide more efficient payment services to their customers. He suggested that legislation could provide these non-bank stablecoin issuers with access to U.S. Federal Reserve bank services while limiting these services in both scale and scope.
  • Pathways for Becoming a Stablecoin: Mr. Homer contended that stablecoin legislation should promote competition through providing pathways for new parties to enter the stablecoin space and challenge incumbents. He suggested that the Subcommittee consider creating a safe harbor for new entrants to test new products or services at limited scale and with a limited number of customers before requiring comprehensive regulation. However, Ms. Reynolds Hand raised concerns over proposals that would not provide a separation of banking and commerce and that would not prohibit non-financial commercial businesses (such as Facebook and Walmart) from owning a payment stablecoin issuer.
  • Stablecoin Transparency: Subcommittee Members, Mr. Homer, and Mr. Portilla expressed interest in adopting transparency requirements for stablecoins to ensure that they are actually backed by their promised reserves. Mr. Homer ssuggested that the U.S. could conceivably move toward more real-time or near real-time dashboards that provide insights into the backing assets of a stablecoin and the financial condition of the issuing firm. Rep. Bill Foster (D-IL) expressed concerns that merely requiring real-time monitoring of stablecoin reserves would not preclude fraud. He suggested that the U.S. require that any proposed stablecoin minting operation not be considered cryptographically valid until the minting is accompanied by an attestation of reserves from the U.S. Federal Reserve.
  • Bank Adoption of Blockchain Technologies: Mr. Morgan commended the legislative proposals under consideration for affirming the ability of banks to leverage blockchain technology for traditional banking applications. He lamented however that there does not currently exist a clear regulatory pathway for banks to adopt blockchain technology. He called on Congress to work with federal banking agencies to ensure that there exists a clear and credible pathway for banks to adopt blockchain technology. Ms. Wang remarked that blockchain technology can replace outdated banking and payments infrastructure over the long-term and commented that this outdated infrastructure is currently limiting the ability of smaller banks to innovate and compete effectively against big banks and financial technology (FinTech) firms.
  • Bankruptcy Protections for Stablecoin Holders: Mr. Portilla and Ms. Reynolds Hand remarked that federal stablecoin legislation should provide stablecoin holders structural priority over an issuer’s other creditors in bankruptcy proceedings. He commented that this prioritization should exist to the extent to which payment stablecoins are designed or perceived to be effectively free of credit risk.
  • Diversity and Inclusion Disclosures for Stablecoin Issuers: Ms. Reynolds Hand called on the Subcommittee to include requirements to promote diversity and inclusion as part of federal stablecoin legislation. Rep. John Rose (R-TN) and Mr. Portilla argued however that a requirement for financial regulators to consider a stablecoin issuer’s diversity and inclusion statistics would be irrelevant to the safety and soundess of a stableocin. 
  • Consideration of Central Bank Digital Currencies (CBDCs): Rep. Rose also criticized Full Committee Ranking Member Waters’s draft stablecoin legislation for requiring a study on CBDCs. He asserted that a CBDC would constitute an “assault” on financial privacy. Subcommittee Ranking Member Stephen Lynch (D-MA) argued however that federal stablecoin legislation should explore the feasibility of CBDCs.
  • Custodial Wallets: Full Committee Ranking Member Waters and Ms. Reynolds Hand called on the Subcommittee to adopt strong oversight provisions for custodial wallets. They noted how Full Committee Chairman McHenry’s stablecoin legislation does not cover all assets held by custodial wallets.
  • Traceable Identities for Digital Wallets: Rep. Foster further argued that digital wallets should have some form of traceable identities linked to them. He stated that law enforcement agencies should be able to obtain warrants to identify digital wallet owners if a digital wallet is involved in some form of fraud or criminal activity. He also stated that this approach could enable parties to recover ransomware payments more easily. He applauded Humanity Cash for its use of digital identities.

Hearing Witnesses:

1. Ms. Fennie Wang, Founder and CEO, Humanity Cash
2. Mr. Matt Homer, Managing Member, The Department of XYZ; former Executive Deputy Superintendent of Research and Innovation, New York Department of Financial Services
3. Mr. David Portilla, Partner, Davis Polk & Wardwell LLP
4. Mr. Robert Morgan, CEO, USDF Consortium
5. Mrs. Delicia Reynolds Hand, Director, Financial Fairness, Consumer Reports

Member Opening Statements:

Subcommittee Chairman French Hill (R-AR):

• He noted that while this hearing is only the Subcommittee’s second stablecoin hearing during the 118th Congress, he stated that Congress has been working to develop bipartisan stablecoin legislation since 2021.
  • He discussed how the Committee had developed a stablecoin legislative proposal during the previous 117th Congress and how the Subcommittee is now considering two stablecoin legislative proposals.
• He mentioned how U.S. Under Secretary of the Treasury for Domestic Finance Nellie Liang had stated that any regulatory framework for stablecoins must have strict requirements in place around reserves and capital to guard against potential stablecoin runs.
  • He indicated that these requirements have been incorporated into both of the stablecoin legislative proposals under consideration at the hearing.
• He also noted how U.S. Under Secretary of the Treasury for Domestic Finance Nellie Liang had stated that disclosures and attestations are critical for providing enhanced transparency for stablecoin issuers.
  • He indicated that both of the stablecoin legislative proposals under consideration at the hearing include disclosure and attestation provisions.
• He expressed his desire for payment stablecoins to be used for payments and noted how payment stablecoins are currently not being used for payments.
  • He asserted that the only way to accomplish this objective is through passing appropriate federal stablecoin legislation.
• He remarked that the Committee had made “extensive” progress on bipartisan stablecoin legislation in 2022 and stated that the Committee has continued to build upon this progress through incorporating Member and stakeholder feedback.
  • He commented that the legislative proposals under consideration at the hearing reflect this feedback.
  • He asserted that both Committee Republicans and Democrats are actively working in good faith to reach agreement on bipartisan stablecoin legislation.
• He also stated there exists a bipartisan agreement regarding the need to prioritize consumer and investor protections as part of any federal stablecoin legislation.
• He remarked that the stablecoin legislative proposals under consideration at the hearing build upon the Committee’s previous work.
  • He described Full Committee Ranking Member Maxine Waters’s (D-CA) stablecoin legislative proposal as “substantially similar” to the draft statable legislation developed in 2022 apart from three key changes.
  • He added that Committee Republicans have included these three key changes in their stablecoin legislative proposal.
• He stated that both of the stablecoin legislative proposals under consideration at the hearing have strong similarities.
• He then warned that Congress’s failure to pass stablecoin legislation will lead offshore and opaque stablecoin projects to continue to thrive and will undermine the viability of domestic stablecoin projects.
  • He commented that this situation would hinder the ability of stablecoin issuers to provide tokens that are actually stable.
• He remarked that the U.S. has an opportunity to reverse the aforementioned trend and maintain its global leadership in safe payments innovation.

Subcommittee Ranking Member Stephen Lynch (D-MA):

• He mentioned how the Committee had nearly reached an agreement on bipartisan stablecoin legislation during the previous 117th Congress.
  • He commented that while the legislation was “far from perfect,” he indicated that the Committee had reached agreement on some key issues.
• He noted however that many digital asset companies (including many stablecoin companies) have collapsed since the Committee had previously worked on bipartisan stablecoin legislation.
  • He asserted that future stablecoin legislation must address the issues that had caused these recent digital asset company failures (as well as recent bank failures).
• He remarked that the Subcommittee appears to be moving away from a consensus on federal stablecoin legislation and noted how the Subcommittee is now considering two different stablecoin legislative proposals.
  • He expressed hope that the hearing could help to align these two legislative proposals.
• He then stated that stablecoin issuers are falsely claiming that their products are pegged to reserve assets and used for the purpose of payments.
  • He noted how 80 percent of stablecoin volume is dedicated to facilitating cryptocurrency trading and commented that stablecoins instead are being used as speculative instruments.
• He also expressed concerns that stablecoins contain structural fragilities that make them vulnerable to runs and pose risks to monetary policy, national security, and financial stability.
  • He asserted that any stablecoin legislation must provide adequate safeguards to the U.S. financial system considering recent bank failures and threats to economic stability.
• He commended Committee Republicans for attempting to address issues raised during the Subcommittee’s April 2023 hearing on stablecoins, such as prohibiting non-bank stablecoin issuers from accessing U.S. Federal Reserve services.
  • He indicated that these services include access to master accounts and the discount window.
• He stated however that he still has several concerns over the stablecoin legislative proposal from Committee Republicans.
  • He indicated that these concerns include the legislative proposal’s custody provisions, the lack of acknowledgement of the SEC as the primary regulatory for digital assets, the lack of adequate consumer protections, and the removal of exploration of a CBDC.
• He expressed his preference for the legislative proposal from Full Committee Ranking Member Maxine Waters (D-CA) and highlighted how this legislative proposal includes specific rules that would require stablecoin issuers to protect the customer assets in their custody.
  • He also mentioned how this legislative proposal would restrict the co-mingling of customer and company assets.
• He then remarked that the Subcommittee must reach agreement regarding the role of state and federal regulators.
  • He expressed concerns over proposals to provide states with the sole regulatory authority over stablecoins and commented that this approach could lead stablecoin issuers to seek out jurisdictions with weak regulations.
  • He warned that this dynamic would create a moral hazard for states wishing to attract cryptocurrency businesses.
• He also stated that multiple federal regulators should have a role in overseeing the stablecoin market and called for alignment among these regulators.
  • He further raised concerns that non-bank issuers of stablecoins could have access to deposit insurance and called on the U.S. to separate digital assets from the traditional banking system.
• He expressed confidence that the Subcommittee can address many of his concerns through discussions and input from regulators, advocates, and banking experts.

Witness Opening Statements:

Mr. Matt Homer (The Department of XYZ; former Executive Deputy Superintendent of Research and Innovation, New York Department of Financial Services):

• He mentioned how he had first become familiar with stablecoins during his tenure as a regulator at the New York Department of Financial Services (NYDFS).
  • He noted how New York had been one of the first jurisdictions in the world to regulate stablecoins.
• He remarked that fiat currency-backed stablecoins represent an “important but incremental” improvement in the concept of money.
  • He commented that stablecoins are not very different from existing and popular stored value financial products, such as gift cards and prepaid cards.
• He stated that New York’s experience demonstrates that it is possible to effectively regulate stablecoins using “common sense” and time-tested practices and noted how New York’s regulatory approach for stablecoins involves three major prongs.
  • He indicated that the first prong involves reserve requirements to ensure that the assets backing stablecoins are held on a segregated basis on behalf of customers, are fully reserved on a 1:1 basis, and are composed of cash deposits or other cash equivalents.
  • He indicated that the second prong involves redemption rights to ensure that stablecoin users can redeem their stablecoins on a 1:1 basis for U.S. dollars in a timely manner.
  • He indicated that the third prong involves public transparency requirements, including monthly attestations from independent certified public accountants (CPAs).
• He further noted how the stablecoin issuers covered under New York’s requirements are subject to “robust” supervision and examinations.
• He remarked that there are eight important principles that should guide the development of federal stablecoin legislation.
  • He indicated that his opening statement would cover three of these principles.
• He first stated that stablecoin legislation and implementing regulation should recognize the dual banking system as an inherent feature of the U.S. economy that benefits consumers, innovators, and markets.
  • He asserted that the parallel system of state and federal banking regulation provides innovators and funds with optionality that can reduce barriers to launching new products on a small scale before rolling out these products on a national scale.
  • He also asserted that this system benefits consumers through providing access to financial services that are tailored to local needs.
  • He further asserted that this system protects consumers because states are quicker to respond to fill regulatory gaps.
  • He lastly asserted that this system benefits markets through encouraging healthy competition.
• He remarked that the legislative proposals under consideration at the hearing would preserve this dynamic.
  • He indicated that these legislative proposals would establish federal minimum standards while allowing for states to license and supervise stablecoin issuers and set even tougher rules within their own jurisdictions.
• He then stated that stablecoin legislation should promote competition within the U.S. financial system.
  • He lamented how the stablecoin market has trended toward oligopoly and noted how two stablecoin issuers currently compose over 80 percent of the U.S.-dollar denominated stablecoin market.
• He contended that stablecoin legislation should promote competition through providing pathways for new parties to enter the stablecoin space and challenge incumbents.
  • He suggested that the Subcommittee consider creating a safe harbor for new entrants to test new products or services at limited scale and with a limited number of customers before requiring comprehensive regulation.
• He further remarked that the Subcommittee should distinguish between the concepts of competitiveness and competition.
• He asserted that the U.S. has an interest in ensuring that U.S. dollar-backed stablecoin issuers remain in the U.S. so that it can regulate stablecoins on its own terms.
  • He suggested that the Subcommittee add the value of competitiveness to the official mandates of federal regulators and to the set of criteria to be used by federal regulators when considering whether to license stablecoin issuers.
• He lastly stated that regulatory capabilities must keep pace with market developments and commented that the U.S. may be able to more effectively supervise stablecoins using digital tools and technologies.
  • He suggested that the U.S. could conceivably move toward more real-time or near real-time dashboards that provide insights into the backing assets of a stablecoin and the financial condition of the issuing firm.

Mr. Robert Morgan (USDF Consortium):

• He discussed how his organization, the USDF Consortium, represents a group of community, mid-sized, and regional banks that are building build blockchain infrastructure for the responsible delivery of traditional banking services.
• He remarked that distributed ledgers can improve financial services through offering faster, cheaper, and more efficient products.
  • He commented that these products can help promote financial inclusion, drive growth in communities, and support the U.S. dollar’s role as the global reserve currency.
• He noted how most blockchain technology innovation to date has occurred outside of the regulated banking sector in novel cryptocurrency markets.
  • He commented that these markets have provided testing grounds that have proven the efficiency and stability that blockchain technology can deliver.
• He remarked however that financial services only deliver value when they facilitate real-world activities, such as small business capital formation and homebuying.
• He contended that there must be a trusted form of digital money that exists natively on blockchains to leverage blockchain technology for real-world transactions.
  • He commented that this need has facilitated the rise of stablecoins and has driven the policy discussion around CBDCs.
• He lamented that the debate surrounding the digitization of the U.S. dollar is too often pitched as a binary choice between the adoption of stablecoins and the adoption of CBDCs and remarked that there exists a third option that policymakers should consider.
• He discussed how bank deposits currently represent 73 percent of the money in the U.S. economy and emphasized that blockchain technology is essentially a ledger technology.
  • He noted how banks have long relied upon ledgers to record value and to facilitate transactions.
• He remarked that blockchain technology constitutes the next evolution in ledger technology and asserted that recording traditional bank deposits on ledgers can bring many of the benefits of stablecoins to the real economy.
  • He commented that this approach would maintain the numerous benefits and protections currently being provided by the U.S.’s two-tier banking system.
• He stated that tokenized bank deposits (unlike stablecoins) are not designed to connect the cryptocurrency ecosystem to the real world.
  • He described tokenized bank deposits as backend technology designed to improve the delivery of traditional banking services.
  • He also noted that tokenized bank deposits will not trade on exchanges and will not be held directly by the public in many cases.
  • He emphasized that tokenized bank deposits (like all deposits) are a liability of an insured depository institution.
• He remarked that bank deposits are a “cornerstone” of the U.S.’s monetary and financial systems that support the global dominance of the U.S. dollar.
  • He commented that these deposits play a critical role in supporting the ability of banks to lend into their communities, which drives economic growth and social mobility.
• He stated that the value of bank deposits is supported by stringent regulation and proactive oversight, which includes capital and liquidity requirements and technology risk management policies.
• He remarked that tokenizing bank deposits would facilitate the creation of a real-time and blockchain-based payments infrastructure that can significantly improve the delivery of banking services.
  • He elaborated that this infrastructure could facilitate faster and cheaper payments, programmable payments, and atomic settlement.
• He stated that the U.S. can only realize the aforementioned benefits when innovation is delivered responsibly and when regulatory guidelines are clear, certain, and consistently applied.
• He remarked that the legislative proposals under consideration at the hearing constitute would help to ensure that stablecoins are delivered responsibility and that consumers remain protected.
  • He called it important that these efforts do not inhibit the adoption of blockchain technologies for other applications, such as tokenized deposits.
• He commended the legislative proposals under consideration for distinguishing between stablecoins and tokenized deposits and for affirming the ability of banks to leverage blockchain technology for traditional banking applications.
• He lamented however that there does not currently exist a clear regulatory pathway for banks to adopt blockchain technology.
  • He noted how banks currently require formal regulatory approval for any blockchain technology projects.
• He called on Congress to work with federal banking agencies to ensure that there exists a clear and credible pathway for banks to adopt blockchain technology.
  • He expressed his Consortium’s interest in working with Congress to ensure that there exists an appropriate regulatory framework for novel assets (such as stablecoins) and regulatory clarity for banks to adopt new technologies that will benefit their customers and communities.

Mr. David Portilla (Davis Polk & Wardwell LLP):

• He commended the Subcommittee’s work to develop bipartisan stablecoin legislation and expressed confidence in the Subcommittee’s ability to achieve consensus on this issue.
• He remarked that stablecoins are special among financial products because they pose well-known risks (such as run risks).
  • He asserted that the U.S. can and should proactively mitigate these risks through establishing a regulatory framework before the risks grow even larger.
• He stated that while he could not definitively assert whether stablecoins will play a role in the future of payments, he called the current legal framework for stablecoins ill-suited for comprehensively regulating payment stablecoins.
  • He commented that legislation that enables fit-for-purpose regulation would help to foster an environment where payment stablecoin technology could develop at scale.
• He discussed how payment stablecoins offer many potential benefits, including programmable money, mobile-based real-time payments for consumers, and payments infrastructure on which further innovation can occur.
  • He commented that all of these benefits may amplify the potential for building a more efficient, competitive, and resilient payments system.
• He stated that stablecoin legislation should establish a spectrum of privileges and responsibilities.
  • He commented that greater privileges from the government should be coupled with more stringent regulatory oversight while a more tailored regulatory approach should be coupled with appropriately calibrated privileges from the government.
• He contended that non-banks should be permitted to issue payment stablecoins and stated that non-bank entities within a banking organization should be the entities issuing stablecoins.
  • He commented that the common conception of a payment stablecoin business (which involves the issuance and redemption of an instrument backed by a discrete pool of high-quality liquid assets) is distinct from the traditional banking business model.
• He then discussed how federal regulation of stablecoins would provide more uniform and consistent rules while state regulation of stablecoins could promote more diversity and innovation in regulation and supervision.
• He asserted that the U.S. does not need to choose between federal or state regulation of stablecoins and noted how many stablecoin legislative proposals would allow for both the federal government and state governments to regulate this space.
  • He commented that the U.S. could provide federal stablecoin regulation as a backup for state stablecoin regulation or determine the regulation of stablecoins based on the scale of the issuer.
• He then remarked that providing non-bank payment stablecoin issuers with access to master accounts at the U.S. Federal Reserve could help these issuers to provide more efficient payment services to their customers.
  • He suggested that legislation could provide these non-bank stablecoin issuers with access to U.S. Federal Reserve bank services while limiting these services in both scale and scope.
  • He also suggested that legislation could provide these non-bank stablecoin issuers with access to U.S. Federal Reserve bank services at the option or based on the preference or scale of an issuer.
• He further stated that the need for stablecoins to have deposit insurance may depend on the nature of the stablecoin’s backing reserves and the degree to which consumers expect their stablecoins to be redeemable on demand and at par.
• He then remarked that stablecoin holders should be provided with structural priority over an issuer’s other creditors in bankruptcy proceedings to the extent to which payment stablecoins are designed or perceived to be effectively free of credit risk.
  • He also stated that customers should know that the companies that help them hold stablecoins are doing so in a safe way.
• He noted how existing federal and state laws provide standards for custodians and commented that these standards should be useful in providing insolvency standards for payment stablecoins.
• He lastly discussed how payment stablecoins and related products present other common regulatory concerns, such as those related to consumer protection and illicit finance.
  • He asserted however that securities laws should not necessarily be applied to stablecoins and that policymakers should not be forced to resolve questions that permeate traditional financial products and services (such as how to regulate service providers that are adjacent to regulated firms).

Ms. Fennie Wang (Humanity Cash):

• She discussed how her company, Humanity Cash, works with community organizations to design local and community currencies.
  • She noted how community currencies are not legal tender and complement national currencies through providing local mediums of exchange to ensure that more money circulates and remains within local communities.
• She stated that the U.S. dollar often works minimally for local communities and instead disproportionately benefits big banks and large corporations.
  • She commented that the goal of a local currency may be to promote the patronage of small businesses and local banks, which circulate deposits back into local economies through productive loans.
• She discussed how the COVID-19 pandemic had imposed pressures on U.S. small businesses and had accelerated the shift toward contactless payments.
  • She commented that these trends cause money to leave local economies and highlighted how credit card payments often involve national banks and transaction fees.
• She remarked that the digitization of local currencies enables local currencies to better compete with credit cards and reduce transaction fees while ensuring that underlying U.S. dollar reserves are deposited and invested in local economies via local banks.
• She testified that the small business owners, community bankers, and ordinary citizens that she has spoken with are not interested in digital local currencies as a speculative investment.
  • She commented that these stakeholders are interested in digital local currencies because of their potential benefits for local communities.
• She remarked that the U.S. needs risk-appropriate regulations that will not be cost-prohibitive and protections from bad actors.
  • She stated that Full Committee Chairman Patrick McHenry’s (R-NC) legislative proposal for stablecoins appropriately balances these two needs.
  • She commented that this legislative proposal provides opportunities for local initiatives and state regulatory innovation, as well as a clear path for implementation.
• She also stated that this legislative proposal would enable community financial institutions and non-bank institutions (such as economic development groups) to combat the flight of deposits from local communities.
  • She commented that payment stablecoins enable higher quality deposits through allowing parties to transact among each other without needing to withdraw the underlying U.S. dollar deposits.
• She contended that the U.S. must work to keep banking deposits local in light of recent regional banking issues.
  • She mentioned how the Massachusetts community banks that work with Humanity Cash recirculate 70 cents of every dollar back into the local economy (as compared to just 20 cents for large banks).
• She remarked that blockchain technology can replace outdated banking and payments infrastructure over the long-term and commented that this outdated infrastructure is currently limiting the ability of smaller banks to innovate and compete against big banks and FinTech firms.
  • She asserted that the correct policies will enable the U.S. financial system to be more competitive and more responsive to local economies.

Mrs. Delicia Reynolds Hand (Consumer Reports):

• She remarked that the convergence of new technologies and new forms of assets have made cryptocurrencies particularly appealing for consumers that have been unserved by the traditional financial system.
  • She commented that the absence of digital asset rules and protections make consumers and investors more vulnerable to exploitation, especially in a volatile and stressed economic environment.
• She noted how the EU had recently succeeded in its efforts to bring crypto-assets, crypto-asset issuers, and crypto-asset service providers under a regulatory framework.
• She urged the Subcommittee to work on achieving an effective and comprehensive regulation for stablecoins.
  • She commented that this regulation is important for responsible innovation, financial stability, and financial inclusion.
• She asserted that appropriate regulation, supervision, and oversight must be implemented before stablecoins become a greater risk to financial stability, safety, and soundness and the smooth functioning of the payments system.
  • She commented that the U.S. will develop new regulatory frameworks for stablecoins and expressed hope that the U.S. could develop these frameworks proactively (rather than after a crisis has already occurred).
• She expressed support for the updates to the stablecoin legislative proposals under consideration at the hearing, including federal regulatory reviews to ensure the safety and soundness of stablecoin issuers.
  • She also encouraged the adoption of provisions that would grant the U.S. Federal Reserve with the authority to reject state licenses.
• She asserted that the Subcommittee’s failure to include these provisions would create regulatory arbitrage opportunities, which could result in a “race to the bottom.”
• She recommended that the Subcommittee adopt additional key requirements that would parallel requirements for traditional banking.
  • She noted that while both legislative proposals retain some equivalent requirements to provide information about the organizers, senior management teams, and capital adequacy, she called on the Subcommittee to include requirements to promote diversity and inclusion as part of a final compromise package.
  • She also expressed support for adding requirements for federal regulators to issue risk management infrastructure rules for stablecoin issuers.
• She then highlighted how one of the legislative proposals under consideration does not require stablecoin issuers to be insured depository institutions.
  • She expressed support for adoption of language that stablecoin issuers not represent stablecoins as insured deposits.
• She raised concerns over proposals that would not provide a separation of banking and commerce and that would not prohibit non-financial commercial businesses (such as Facebook and Walmart) from owning a payment stablecoin issuer.
• She further called on the Subcommittee to adopt consumer protections as part of stablecoin legislation.
  • She commented that the legislative proposals under consideration do not outline adequate consumer protections for stablecoin payment activities.
• She remarked that the Subcommittee should require that stablecoin payment regulation be technology neutral in order to promote interoperability and to ensure that stablecoin arrangements share common features with the traditional financial system.
  • She also called on the Subcommittee to adopt strong oversight provisions for custodial wallets and noted how the current legislative proposals do not cover all assets held by custodial wallets.
• She lastly urged the Subcommittee to clarify how and when the SEC can and should regulate the stablecoin space.

Congressional Question Period:

Subcommittee Chairman French Hill (R-AR):

• Chairman Hill noted how Mr. Homer had called on the U.S. to validate stablecoin reserves on an interday basis. He asked Mr. Homer to indicate whether stablecoin issuers have ready access to technologies that would enable them to provide interday valuations of their reserves.
  • Mr. Homer remarked that there is technology available that would enable stablecoin issuers to provide interday valuations of their reserves. He stated that these disclosures would have two aspects. He indicated that the first aspect would be the number of stablecoins issued. He commented that this information is available through public blockchains. He indicated that the second aspect would be technology showing that backing assets match an issued stablecoin on a 1:1 basis. He asserted that both aspects of these disclosures are feasible.
• Chairman Hill added that attestations, periodic reporting, and audits could back up these disclosures. He then mentioned how NYDFS Superintendent Adrienne Harris had previously testified before the Subcommittee on the role that state regulators can play in overseeing the stablecoin space. He called it important for the Subcommittee to strike the correct balance between federal and state oversight of the stablecoin space. He noted how the Republican stablecoin legislative proposal would have the OCC serve as the primary federal regulator for national trusts. He also noted that the bipartisan stablecoin legislative proposal from the previous 117th Congress would have required state-chartered stablecoin issuers to register with the U.S Federal Reserve. He asked Mr. Homer to provide his views on striking the correct balance between federal and state oversight of the stablecoin space.
  • Mr. Homer called it important for the U.S. to correctly balance federal and state oversight of the stablecoin space to ensure a competitive marketplace. He contended that both federal and state regulatory systems are important for the stability of the U.S. financial system based on his professional experience. He remarked that state regulators tend to have a better understanding of their local financial markets and are better able to calibrate regulatory requirements that address local realities. He asserted that state regulatory pathways are important because financial services companies receive their initial charters and licenses from their states.
• Chairman Hill interjected to respond to concerns that a state regulation of stablecoins could result in a “race to the bottom” with weakened regulatory standards.
  • Mr. Homer remarked that both legislative proposals under consideration at the hearing contain a “strong federal floor” for stablecoin standards. He asserted that a “race to the bottom” among states would not be possible under either legislative proposal.
• Chairman Hill then discussed how the OCC had provided conditional charters to two digital asset firms and noted that these conditional charters have subsequently lapsed. He mentioned how Committee Republicans had sent a letter to the OCC arguing that the Agency had taken an inconsistent approach in reviewing national trust bank charter applications. He asked Mr. Portilla to discuss the benefits of allowing the OCC to serve as the primary regulator for stablecoin issuers that receive an OCC national trust charter.
  • Mr. Portilla remarked that the main benefit of having the OCC serve as the primary federal regulator for stablecoin issuers with OCC national trust charters is streamlined regulation. He also stated that the OCC is fundamentally a supervisor and examiner of banks and trust companies, which makes them well qualified to oversee stablecoin issuers.

Subcommittee Ranking Member Stephen Lynch (D-MA):

• Ranking Member Lynch asked Mr. Homer to indicate how many stablecoins are registered in New York.
  • Mr. Homer indicated that there have been five stablecoins that have received charters from New York.
• Ranking Member Lynch asked Mr. Homer to indicate how many stablecoins are currently in existence.
  • Mr. Homer remarked that there exist numerous entities claiming to provide stablecoins.
• Ranking Member Lynch noted that there exist approximately 20,000 stablecoins in the market. He stated that the fact that only five of these stablecoins have undergone registration suggests the existence of a “race to the bottom” where stablecoin issuers are pursuing low-regulation jurisdictions. He stated that while New York’s stablecoin regulations are commendable, he expressed concerns that other jurisdictions may adopt weaker regulatory standards for stablecoins. He commented that this state-based regulatory approach would penalize New York for maintaining robust regulatory standards for digital assets. He also expressed appreciation for Subcommittee Chairman French Hill’s (R-AR) efforts to develop bipartisan stablecoin legislation. He then discussed how the U.S. Federal Reserve had offered guidance to its member banks in February 2023 regarding the use of digital assets within the federal banking ecosystem. He noted how the U.S. Federal Reserve had stated that this guidance was in response to rampant fraud. He indicated that this guidance had presumptively prohibited crypto-asset holdings based on safety and soundness concerns and had highlighted the risks of fraud, legal ambiguity, and volatility within the cryptocurrency sector. He further noted how the U.S. Federal Reserve had asserted that sentiment and future expectations are the main drivers of the value of most crypto-assets in the absence of a fundamental use case. He highlighted how many stablecoins have lost their U.S. dollar pegs, which have imposed financial stresses on their holders. He asked Ms. Reynolds Hand to indicate whether the U.S. should seek to incorporate stablecoins into the traditional financial system and provide stablecoin issuers with access to U.S. Federal Reserve services.
  • Ms. Reynolds Hand remarked that the U.S. should not initially provide stablecoin issuers with access to U.S. Federal Reserve services given the volatile and disruptive nature of stablecoins. She asserted that the stablecoin industry must prove itself to be safe and reduce its fraud levels before it can access U.S. Federal Reserve services. She called on the U.S. to first adopt clear “rules of the road” for stablecoins and strong consumer protections. She stated that the U.S. could adopt additional programs for stablecoin issuers once these rules and protections have proven to be safe and effective.

Subcommittee Vice Chairman Warren Davidson (R-OH):

• Vice Chairman Davidson remarked that the Subcommittee is attempting to provide a clear legal framework for stablecoins for the entire U.S. so that no individual state can provide inadequate standards. He also noted how many people will use foreign jurisdictions to pursue digital assets because these foreign jurisdictions provide greater certainty. He asserted that federal stablecoin legislation could address these concerns through providing domestic certainty for the digital assets market. He then remarked that the traditional banking industry has begun to take a hostile position toward digital asset companies. He stated that digital assets have been incorrectly blamed for the recent failures of Silicon Valley Bank and Signature Bank. He asked Mr. Homer to discuss the harms associated with cutting the digital asset industry’s access to banking services.
  • Mr. Homer remarked that it has become more difficult for digital asset companies to find banking services. He indicated that this difficulty extends to basic banking services (such as payroll services). He expressed concerns that these challenges will lead digital asset companies to seek out alternative providers of banking services (which may include offshore options).
• Vice Chairman Davidson emphasized how digital asset companies will need to deposit their money in offshore accounts if they cannot deposit their money domestically. He asserted that digital asset industry critics are preventing digital asset companies from accessing domestic banking services and are then complaining when these companies use foreign banking services. He then asked Mr. Homer to indicate whether it would be possible for a regulated stablecoin that is backed by high-quality liquid assets to lose all of its value.
  • Mr. Homer remarked that it would be very unlikely for a regulated stablecoin to lose all of its value under the legislative proposals being considered at the hearing.
• Vice Chairman Davidson interjected to comment that there would need to occur complete fraud for a stablecoin to lose all of its value. He asked Mr. Homer to indicate whether fraud constitutes the only way in which a regulated stablecoin would lose all of its value.
  • Mr. Homer stated that it would be very difficult for a regulated stablecoin to lose all of its value absent fraud.
• Vice Chairman Davidson remarked that the goal of establishing a regulatory regime for stablecoins is to protect against fraud, which will in turn significantly reduce the likelihood of stablecoins losing all of their value. He then discussed how the U.S.’s chronic deficits are reducing demand for U.S. Treasuries. He highlighted how U.S. Treasuries are the most common backing asset for stablecoins. He asked Mr. Portilla to discuss how stablecoins could create demand for U.S. dollar-denominated Treasuries.
  • Mr. Portilla stated that if stablecoins are required to hold their reserves in high-quality liquid assets (which includes short-term U.S. Treasuries), then there would be increased demand for such assets. He commented that stablecoins can therefore increase demand for U.S. dollar-denominated Treasuries.
• Vice Chairman Davidson then discussed how many people view stablecoins as superior to fiat currencies because fiat currencies lack sufficient guarantees against inflation. He noted how stablecions by contrast are fully backed by assets and indicated that this backing could include physical assets. He expressed hope that the Subcommittee could develop bipartisan stablecoin legislation.

Rep. Bill Foster (D-IL):

• Rep. Foster suggested that the U.S. require that any proposed stablecoin minting operation not be considered cryptographically valid until the minting is accompanied by an attestation of reserves from the U.S. Federal Reserve. He commented that this proposed requirement would not burden the U.S. Federal Reserve and the stablecoin issuer. He asked Mr. Homer to comment on this proposed requirement.
  • Mr. Homer remarked that Rep. Foster’s proposed stablecoin reserve attestation requirement could complement a requirement for real-time monitoring of stablecoin reserves. He asserted that both requirements are not mutually exclusive.
• Rep. Foster expressed concerns that merely requiring real-time monitoring of stablecoin reserves would not preclude fraud. He asserted that a stablecoin reserve attestation requirement would serve as a better guarantee against fraud and ensure that stablecoins maintain their values. He then discussed how Humanity Cash appears to have implemented two key principles: real-time reporting and traceable identities for wallets. He stated that these principles must be included to ensure controlled privacy and security and commented that these principles are necessary to avoid fraudulent and criminal use of stablecoins. He posited a scenario in which a person uses Humanity Cash to purchase a secret gift for their lover and that this purchase does not involve criminal activity. He asked Ms. Wang to indicate whether the person in this scenario can expect their purchase to remain private.
  • Ms. Wang answered affirmatively. She noted how Humanity Cash’s blockchain does not display any personal identifiable information (PII). She stated however that blockchains can be designed in ways to balance privacy with law enforcement needs. She noted how a department of motor vehicles (DMV) or bank can issue digital tokens that represent a user’s identity. She indicated that a digital wallet can hold this digital identity token to signal that the digital wallet owner is properly vetted. She further noted that the digital identity token would not need to be revealed unless there exists a compliance reason to reveal the data.
• Rep. Foster expressed his support for efforts to develop mobile forms of identification (ID). He then posited a scenario in which a ransomware attack is perpetrated and the perpetrator demands the ransomware payment in Humanity Cash. He asked Ms. Wang to discuss the current process for having a judge deanonymize the owner of the digital wallet that perpetrated the ransomware attack in this scenario.
  • Ms. Wang first commented that there is a low likelihood that ransomware perpetrators would demand ransomware payments in Humanity Cash because Humanity Cash can only be spent locally. She then noted how Humanity Cash transfers are traceable and can be frozen following a ransomware attack. She further noted how the underlying assets that back Humanity Cash would remain safe in the event of a ransomware attack.
• Rep. Foster interjected to acknowledge that his question period time had expired. He commended the design of the Humanity Cash project.

Rep. John Rose (R-TN):

• Rep. Rose criticized Full Committee Ranking Member Maxine Waters’s (D-CA) draft stablecoin legislation for requiring stablecoin issuers to disclose diversity statistics. He asserted that this information has no impact on the financial stability of the stablecoin issuer. He also criticized this draft stablecoin legislation for requiring a study on CBDCs and asserted that CBDCs would constitute an “assault” on financial privacy. He then stated that the U.S. dollar is the world’s reserve currency because it is backed by the full faith and credit of the U.S. government. He asked Mr. Morgan to indicate whether there will need to exist a less volatile asset (such as a U.S. dollar-backed stablecoin) if the U.S. is to use blockchain technology to facilitate payments.
  • Mr. Morgan remarked that stable assets are key to facilitating real-world value and commented that a tokenized deposit constitutes a viable stable asset. He noted how bank deposits currently account for 73 percent of the money in the U.S. economy and indicated that stablecoins are apart from these deposits. He contended that competition from well-regulated parties to provide payment options would be beneficial.
• Rep. Rose noted how Full Committee Chairman Patrick McHenry’s (R-NC) draft stablecoin legislation does not require a report on financial inclusion and does not require financial regulators to consider financial inclusion when evaluating a stablecoin issuer’s application. He asked Mr. Portilla to address whether information pertaining to diversity and financial inclusion have any bearing on whether the stablecoin issuer is capable of operating a stablecoin in a safe and sound manner.
  • Mr. Portilla remarked that the safety and soundness factors in both of the legislative proposals under consideration at the hearing are different from community benefit and financial inclusion standards. He stated that community benefit and financial inclusion standards do not impact safety and soundness and are instead addressing other policy goals. He commented that community benefit and financial inclusion standards are borrowed from other banking laws related to mergers and acquisitions. He explained that banking laws may contain community benefit and financial inclusion standards to ensure equitable lending decisions. He asserted however that community benefit and financial inclusion factors are not relevant to the operations of stablecoin issuers and questioned the wisdom of applying these factors to stablecoin issuers.
• Rep. Rose then asked Mr. Morgan to discuss the benefits of tokenized deposits and to explain how tokenized deposits differ from traditional stablecoins.
  • Mr. Morgan remarked that tokenized deposits (unlike stablecoins) are not designed to connect the cryptocurrency ecosystem to the real world. He elaborated that tokenized deposits will not trade on exchanges and will not be held by the general public (in most cases). He stated that tokenized deposits are merely backend infrastructure that can bring the innovations associated with blockchain technology into the traditional banking space.
• Rep. Rose then asked Mr. Homer to address how the U.S. could ensure that stablecoin issuers utilize an appropriate amount of on-balance sheet liquidity and concentration limits to offset the risk of withdrawals in a stress scenario.
  • Mr. Homer called it important for a prudential supervisor to serve as the primary regulator for stablecoin issuers. He stated that stablecoin issuers must strike an appropriate balance between stability and liquidity. He commented that prudential supervisors can support stablecoin issuers with scenario planning to ensure that these objectives are properly balanced.

Rep. Brad Sherman (D-CA):

• Rep. Sherman criticized cryptocurrencies and stablecoins and asserted that the term “stablecoin” is an oxymoron. He stated that the financial privacy accompanying digital assets enables illicit activities (including drug trafficking, sanctions evasion, and tax evasion). He remarked that the U.S. dollar’s global strength is key to enabling the U.S. to carry out international sanctions and warned that rise of cryptocurrencies will undermine the U.S.’s ability to carry out these sanctions. He stated that cryptocurrencies and stablecoins are designed to compete with the U.S. dollar. He highlighted how the U.S. has chronic budget deficits and commented that the U.S. dollar’s strength helps to alleviate the fiscal impacts of these deficits. He then criticized Full Committee Chairman Patrick McHenry’s (R-NC) proposed stablecoin legislation for enabling stablecoin issuers to choose their regulator among all 50 states. He warned that this state-based regulatory approach could lead stablecoin issuers to elect to receive weaker oversight. He also emphasized that stablecoins have their values tied to the U.S. dollar, which makes them susceptible to inflation. He added that stablecoins could have their values be reduced in the event of fraud. He then remarked that private digital wallets and private physical wallets are fundamentally different in that it is logistically very different to transfer funds into a private physical wallet. He expressed concerns regarding the fact that private digital wallets can instantaneously receive large amounts of funds without oversight. He commented that this capability can facilitate illicit activities. He further disputed the notion that stablecoins are not novel and asserted that stablecoins are merely a new iteration of bank-issued currencies. He also mentioned how there already exist money market funds and asserted that money market funds constitute a superior payment system to stablecoins. He noted how money market funds can be tied to debit cards and must comply with know your customer (KYC) rules. He commented that these KYC rules make money market funds ill-suited for tax and sanctions evasion.

Rep. Bryan Steil (R-WI):

• Rep. Steil stated that it will be much easier for the U.S. to oversee stablecoin products that are developed domestically and that domestically developed stablecoin products will have American values. He added that having stablecoins be developed domestically will result in the creation of U.S. jobs. He asked Mr. Homer to indicate whether Full Committee Chairman Patrick McHenry’s (R-NC) draft stablecoin legislation will provide stablecoin innovators with sufficient certainty to invest domestically.
  • Mr. Homer answered affirmatively.
• Rep. Steil mentioned how Singapore has enacted a regulatory framework for stablecoins and commented that Congress should study this framework as it works to develop its own regulatory framework for stablecoins. He asked Mr. Homer to identify any lessons from Singapore’s regulatory framework for stablecoins that can inform a potential U.S. regulatory framework for stablecoins.
  • Mr. Homer remarked that U.S. dollar-denominated stablecoins will continue to be developed regardless of whether the U.S. wants them. He elaborated that offshore entities are free to pursue these stablecoin projects. He contended that the U.S. should promote the domestic development of U.S. dollar-denominated stablecoin projects so that it can better oversee the development of these projects. He stated that the U.S. can take lessons from foreign stablecoin regulatory frameworks (such as those from Singapore and the EU). He noted how these foreign stablecoin regulatory frameworks have similar reserve requirements to the legislative proposals under consideration at the hearing. He noted however that foreign stablecoin regulatory frameworks have tiering systems for stablecoin issuers. He explained that the legislative proposals under consideration would treat all stablecoin issuers the same, regardless of how many stablecoins they issue. He noted how other jurisdictions impose different regulatory requirements for stablecoin issuers based on their number of stablecoins issued.
• Rep. Steil then mentioned how the SEC had recently issued a Wells notice to Paxos alleging that the company’s Binance USD (BUSD) is a security. He highlighted how one of the key prongs of the test for determining whether an asset constitutes a security under the Howey Test is that the asset has an expectation of profit. He asked Mr. Homer to indicate whether a stablecoin purchaser has an expectation of profit.
  • Mr. Homer stated that it is difficult to understand how a stablecoin user would have an expectation of profit.
• Rep. Steil asked Mr. Homer to indicate whether stablecoins constitute securities based on his previous answer.
  • Mr. Homer stated that stablecoins should not be considered securities.
• Rep. Steil then discussed how Full Committee Ranking Member Maxine Waters’s (D-CA) proposed stablecoin legislation would require federal regulation of payment stablecoin issuers, affiliates, and subsidiaries. He asked Mr. Portilla to confirm that this legislative proposal would require that an entity without an existing federal regulator be subject to regulation from the U.S. Federal Reserve.
  • Mr. Portilla confirmed that Full Committee Ranking Member Maxine Waters’s (D-CA) proposed stablecoin legislation would require that an entity without an existing federal regulator to be subject to regulation from the U.S. Federal Reserve.
• Rep. Steil asked Mr. Portilla to indicate whether this legislative proposal would cause entities that do not issue stablecoins but engage in other market activities to be subject to regulation from the U.S. Federal Reserve.
  • Mr. Portilla answered affirmatively.
• Rep. Steil asked Mr. Portilla to indicate whether such regulation would be outside of the scope of the U.S. Federal Reserve’s normal regulatory activities.
  • Mr. Portilla answered affirmatively.
• Rep. Steil asked Mr. Portilla to indicate whether the U.S. Federal Reserve has expertise in this area.
  • Mr. Portilla answered no.
• Rep. Steil questioned the wisdom of having the U.S. Federal Reserve engage in a regulatory oversight role that is outside of the central bank’s area of expertise. He cautioned that this additional regulatory oversight from the U.S. Federal Reserve would foster market confusion and potentially conflict with other regulators.

Full Committee Ranking Member Maxine Waters (D-CA):

• Ranking Member Waters mentioned how her draft stablecoin legislation would empower the U.S. Federal Reserve Board of Governors to decline any registration of a state-approved stablecoin issuer. She stated that this policy would align bank and non-bank stablecoin issuers with the current process for state-chartered banks and ensure strong federal minimum standards for stablecoin issuer registration. She commented that this policy would prevent stablecoin issuers from engaging in regulatory arbitrage. She asked Ms. Reynolds Hand to discuss the importance of empowering a federal agency (such as the U.S. Federal Reserve) to approve payment stablecoins before they are issued.
  • Ms. Reynolds Hand remarked that federal regulators play an important role in approving all banks. She stated that the U.S. Federal Reserve must address cryptocurrencies when banks hold cryptocurrencies on their balance sheets. She stated that the intersection between the traditional banking system and the decentralized finance (DeFi) space can create significant structural issues. She noted that while stablecoins may peg their values to certain real-world assets, she highlighted how stabilization mechanisms may vary greatly across issuers. She remarked that payment stablecoins can therefore impact the U.S. monetary system and asserted that the U.S. Federal Reserve must play a role in overseeing this space. She stated that the U.S. Federal Reserve must be able to reject payment stablecoins if the stablecoins do not meet certain requirements.
• Ranking Member Waters then discussed how a key factor behind the collapse of cryptocurrency exchange FTX was the absence of customer asset segregation. She noted how FTX had used customer assets to fund personal loans for senior FTX staff and to support former FTX CEO Sam Bankman-Fried’s hedge fund (Alameda Research). She highlighted how FTX’s collapse had caused these customer assets to vanish and commented that much of these customer assets are unlikely to ever be recovered. She noted however that FTX’s Japanese customers had largely been made whole following FTX’s collapse. She highlighted how Japan had adopted strong regulations to protect against the co-mingling of customer funds. She criticized the Republican draft stablecoin legislation for not providing oversight of stablecoin wallets. She asked Ms. Reynolds Hand to discuss the importance of stablecoin customer protections, such as the complete segregation of customer assets by issuers, exchanges, wallet providers, and other entities. She asked Ms. Reynolds Hand to address the dangers presented by firms co-mingling customer assets with their own assets.
  • Ms. Reynolds Hand remarked that custodial structures help to protect consumer funds and enable consumers to recover their funds in the event of a bankruptcy. She stated that Celcius’s bankruptcy process highlights ambiguities surrounding bankruptcy protections for customer funds. She asserted that the U.S. needs clear rules to protect customer funds (particularly surrounding custodial wallets).
• Ranking Member Waters remarked that Congress must work to address the dangers presented by firms co-mingling customer assets with their own assets.

Rep. Sean Casten (D-IL):

• Rep. Casten asked Mr. Homer to indicate whether a broker-dealer can unilaterally halt trading on a volatile security or must first receive approval from regulators to halt trading.
  • Mr. Homer indicated that he did not know the answer to Rep. Casten’s question.
• Rep. Casten stated that broker-dealers must first receive approval from regulators to halt trading on a volatile security. He commented that permitting broker-dealers to unilaterally halt trading on a volatile security could create conflicts of interest. He mentioned how Coinbase (who is registered as a broker-dealer) had made a unilateral decision in March 2023 to pause USD Coin (USDC) conversions after Circle (who is the issuer of USDC) had disclosed their exposure to Silicon Valley Bank. He indicated that the USDC had temporarily lost its U.S. dollar peg during this period. He asked Mr. Homer to indicate whether exchanges that are registered as broker-dealers within the cryptocurrency space should have special authorities to halt the trading of listed assets.
  • Mr. Homer commented that any party registered as a broker-dealer should experience a consistent set of regulations.
• Rep. Casten remarked that the implication of Mr. Homer’s response is that cryptocurrency exchanges should comply with securities laws and be registered with the SEC. He then asked Mr. Homer to indicate whether his venture capital fund invests in cryptocurrency firms.
  • Mr. Homer testified that his venture capital fund invests in cryptocurrency companies and does not invest in cryptocurrency tokens.
• Rep. Casten asked Mr. Homer to indicate whether his venture capital fund receives or purchases cryptocurrency tokens in connection with its investments.
  • Mr. Homer answered no.
• Rep. Casten asked Mr. Homer to indicate whether his venture capital fund would be receptive to receiving or purchasing cryptocurrency tokens in connection with its investments.
  • Mr. Homer stated that his venture capital fund would not preclude the possibility of receiving or purchasing cryptocurrency tokens in connection with its investments.
• Rep. Casten asked Mr. Homer to confirm that his venture capital fund would be able to sell its cryptocurrency tokens to the public after a contractual lockup period ends (assuming that the fund has received cryptocurrency tokens as part of an investment).
  • Mr. Homer stated that his venture capital fund could sell its cryptocurrency token holdings to the public under Rep. Casten’s proposed scenario.
• Rep. Casten noted that if Mr. Homer’s venture capital fund was subject to SEC registration, then the venture capital fund’s cryptocurrency token holdings would need to comply with Section 5 of the Securities Act of 1933. He further noted that if Mr. Homer’s venture capital fund were paid in cryptocurrency tokens, then the venture capital fund would not need to comply with Section 12(a)(1) of the Securities Act of 1933. He explained that this provision enables individuals that feel as if they have been defrauded to sue the venture capital fund. He expressed concerns that the lack of regulation within the cryptocurrency space enables cryptocurrency startup businesses to bypass regulation so that they can exit their positions quicker (even in the event of fraud). He asserted that neither of the legislative proposals under consideration at the hearing would address these issues. He then asked Mr. Homer to indicate whether non-bank stablecoin issuers possess a fiduciary responsibility to meet customer demands for redemption.
  • Mr. Homer answered affirmatively.
• Rep. Casten asked Mr. Homer to indicate whether Circle had been meeting its fiduciary obligations to its customers when it had attempted to withdraw funds from Silicon Valley Bank at the time of Silicon Valley Bank’s failure.
  • Mr. Homer answered affirmatively.
• Rep. Casten’s stated that it is possible for a stablecoin issuer to attempt to abruptly withdraw its funds from a smaller bank that is experiencing a failure. He raised concerns that such an abrupt withdrawal could destabilize the U.S. banking system. He also emphasized that the stablecoin issuer in this scenario would have a fiduciary obligation to pull their funds from the failing bank.
  • Mr. Homer remarked that Rep. Casten’s hypothetical scenario underscores the importance of prudential supervision for the stablecoin space.
• Rep. Casten interjected to express concerns over the linkages that stablecoins would have to the traditional financial system.
• Note: Rep. Casten’s question period time expired here.

Rep. Al Green (D-TX):

• Rep. Green raised concerns over the stability of the U.S. dollar and stated that hostile countries are seeking to challenge the U.S. dollar’s global supremacy. He commented that the U.S. dollar’s status as the world’s reserve currency plays a key role in the U.S.’s diplomacy efforts and facilitates investments in the U.S. He remarked that the U.S. must proceed with caution regarding stablecoins and asserted that the U.S. dollar (while imperfect) is worth preserving. He expressed particular concerns over how non-bank financial companies are issuing stablecoins. He asked Ms. Reynolds Hand to discuss the consequences of permitting non-bank financial companies to issue stablecoins.
  • Ms. Reynolds Hand expressed agreement with Rep. Green’s concerns regarding proposals to permit non-bank financial companies to issue stablecoins. She noted how there has been a continued proliferation of non-bank financial services since the 2008 Financial Crisis. She highlighted how these non-bank financial services have eclipsed traditional financial services in some areas. She stated that the U.S. needs clear rules to respond to this proliferation of non-bank financial services. She lamented how consumers have increased access to digital assets via mobile phones and asserted that consumers “severely” lack necessary protections in this space. She reiterated her call for legislation and new rules to address these risks. She remarked that the U.S. possesses a strong financial system and commented that regulatory gaps are making consumers vulnerable to new market entrants.
• Rep. Green called the U.S. dollar the “envy of the world.” He asked Ms. Wang to discuss the consequences of continuing to permit non-bank financial companies to issue stablecoins.
  • Ms. Wang discussed how many countries are seeking to reduce their use of U.S. dollars and make the U.S. dollar less influential in international trade. She stated that foreign stablecoin policy frameworks will seek to promote their own currencies and deemphasize U.S. dollar-denominated stablecoins. She remarked that federal stablecoin legislation would enable the U.S. dollar to remain globally competitive. She also stated that many non-bank financial institutions are community institutions that support the work of local community banks.
• Rep. Green interjected to indicate that his question period time had expired. He also expressed support for Full Committee Ranking Member Maxine Waters’s (D-CA) draft stablecoin legislation.

Note: The Subcommittee took an approximately 30-minute recess at this point of the hearing for votes.

Rep. William Timmons (R-SC):

• Rep. Timmons indicated that Subcommittee Democrats have called for all stablecoin issuers (including state-regulated stablecoin issuers) to register with federal regulators before conducting business. He noted how Full Committee Chairman Patrick McHenry’s (R-NC) draft stablecoin legislation would not require stablecoin issuers that pursue state pathways to register with the U.S. Federal Reserve. He asked Mr. Homer to discuss the role that the U.S. Federal Reserve would play in overseeing stablecoin issuers under Full Committee Chairman McHenry’s draft stablecoin legislation.
  • Mr. Homer remarked that the U.S. Federal Reserve would still play a significant role in overseeing stablecoin issuers under Full Committee Chairman McHenry’s draft stablecoin legislation. He noted how this draft legislation would provide the U.S. Federal Reserve with access to the books and records of state-regulated stablecoin issuers and the ability to intervene if they believe that these issuers are not being properly regulated. He also indicated that the U.S. Federal Reserve would be able to take enforcement actions against state-regulated stablecoin issuers under the legislative proposal.
• Rep. Timmons then noted how both legislative proposals under consideration at the hearing would establish a list of factors that federal regulators must use when considering a stablecoin issuer’s application. He asked Mr. Homer to discuss the factors included in Full Committee Chairman McHenry’s draft stablecoin legislation and how these factors would dictate what banking regulators may and may not consider when reviewing stablecoin issuer applications.
  • Mr. Homer noted how Full Committee Chairman McHenry’s draft stablecoin legislation’s factors for reviewing a prospective stablecoin issuer’s application include financial requirements (such as reserve asset requirements), the character and fitness of the stablecoin issuer’s management, and an analysis of risks and benefits.
• Rep. Timmons asked Mr. Homer to discuss the consequences of including more open-ended and subjective factors for federal regulators to use when reviewing an application for a given stablecoin issuer. He commented that Full Committee Ranking Member Maxine Waters’s (D-CA) draft stablecoin legislation includes such factors.
  • Mr. Homer remarked that the use of more open-ended and subjective factors would make it more difficult for prospective stablecoin issuers to develop a sufficient application. He also stated that the use of more open-ended and subjective factors would provide regulators with significant discretion to reject applications.
• Rep. Timmons asked Mr. Homer to indicate whether the two legislative proposals under consideration accomplish the objective of market certainty.
  • Mr. Homer commented that Full Committee Chairman McHenry’s draft stablecoin legislation would provide greater market certainty than Full Committee Ranking Member Waters’s draft stablecoin legislation.
• Rep. Timmons then noted how the President’s Working Group on Financial Markets’s (PWG) Report on Stablecoins had raised concerns over the lack of transparency for many stablecoins. He asked Mr. Portilla to discuss how the legislative proposals under consideration at the hearing could help to provide transparency for stablecoins. He also asked Mr. Portilla to address how increased transparency would provide consumers with increased confidence in stablecoins.
  • Mr. Portilla remarked that both of the legislative proposals under consideration include provisions that would provide enhanced transparency for stablecoin issuers. He noted how these legislative proposals would require stablecoin issuers to disclose their redemption policies, establish procedures for timely redemption, publish the monthly compositions of their reserve assets, and provide attestations to relevant regulators regarding the accuracy of their disclosures. He also mentioned how the legislative proposals have criminal penalties associated with false attestations. He commented that these penalties should provide significant incentives for stablecoin issuers to ensure the accuracy of their attestations.
• Rep. Timmons then noted how there have been assertions that the state regulatory framework for stablecoin issuers permitted under Full Committee Chairman McHenry’s draft stablecoin legislation will be insufficient to address anti-money laundering (AML) and financial crime concerns related to stablecoins. He emphasized that this draft stablecoin legislation would require all stablecoin issuers to be treated as financial institutions for purposes of the Bank Secrecy Act (BSA). He commented that this treatment would require these issuers to register with the U.S. Financial Crimes Enforcement Network (FinCEN) and to submit suspicious activity reports (SARs). He also noted how this draft stablecoin legislation would permit states to add enhanced requirements under their frameworks. He asked Mr. Homer to describe how the NYDFS considers AML compliance when determining whether to approve a stablecoin’s application.
  • Mr. Homer remarked that AML compliance is one of the most significant factors for the NYDFS when it considers AML compliance. He stated that it remains challenging for stablecoin issuers to obtain approval from the NYDFS and expressed support for the NYDFS’s review process. He called the NYDFS’s requirements for stablecoin issuers “incredibly robust” and highlighted how the NYDFS ensures that stablecoin issuers maintain robust KYC procedures.

Rep. Wiley Nickel (D-NC):

• Rep. Nickel expressed hope that the Subcommittee can reach bipartisan agreement on stablecoin legislation. He asserted that the status quo puts consumers at risk and stifles innovation. He also stated that stablecoins can reinforce the dominance of the U.S. dollar as the world’s reserve currency, as well as make the U.S. dollar stronger, more competitive, and more accessible. He discussed how the U.S. dollar’s influence is experiencing headwinds and noted how the share of U.S. dollars in global currency reserves has fallen from 66 percent in 2015 to 58 percent today. He warned that the U.S. dollar’s failure to remain the world’s reserve currency would have economic and national security ramifications. He noted how the U.S. dollar is the asset underlying 98 percent of stablecoin transactions and stated that greater stablecoin use will increase the U.S. dollar’s strength. He asserted that the passage of bipartisan stablecoin legislation will ensure that the U.S. dollar remains the world’s reserve currency. He asked Mr. Homer to discuss the role that stablecoins play in supporting the U.S. dollar’s global dominance.
  • Mr. Homer remarked that stablecoins constitute the most significant way in which the U.S. government can ensure the continued dominance of the U.S. dollar in a digital era. He stated that the global financial and payments system is moving toward a digital native era and that stablecoins will play a key role in the future of finance and payments. He highlighted how people in other countries are seeking out U.S. dollar-denominated stablecoins. He remarked that U.S.-issued stablecoins will be key to enabling the U.S. to conduct economic statecraft and impose effective sanctions.
• Rep. Nickel asked Mr. Homer to elaborate on how the U.S. dollar’s loss of its global reserve currency status would have national security implications (particularly regarding the U.S.’s ability to impose effective sanctions).
  • Mr. Homer remarked that sanctions tools are only effective to the extent to which payment instruments and systems are denominated in U.S. dollars or involve U.S. leadership. He warned that if significant stablecoin issuance were to occur outside of the U.S., then the U.S. would have a compromised ability to use sanctions tools in the future.
• Rep. Nickel then expressed concerns regarding the proposals to provide the U.S. Federal Reserve with a broad veto authority to decline stablecoin registrations from state-regulated stablecoin issuers. He asked Mr. Homer to indicate whether there exist situations where the U.S. Federal Reserve should have veto authority over stablecoin registrations from state-registered stablecoin issuers. He expressed interest in balancing the need for strong federal minimum standards with preserving the ability of states to regulate stablecoins.
  • Mr. Homer suggested that the U.S. consider the stablecoin regulatory frameworks adopted by other jurisdictions (such as the EU and Singapore) and indicated that these jurisdictions maintain a tiered approach for stablecoin regulation. He explained that smaller stablecoins issuers in these jurisdictions may face subnational or a different regulatory regime. He noted however that stablecoin issuers in these jurisdictions that reach a certain size threshold are subject to enhanced oversight.

Rep. Mike Flood (R-NE):

• Rep. Flood remarked that his top concern for stablecoins is ensuring that there exists a robust state pathway for stablecoin issuers. He stated that stablecoin issuers should be able to be regulated at both the state and federal levels. He asserted that this dual regulatory structure would enable states to learn best practices for regulating stablecoins from one another over time, which will ultimately result in a better overall regulatory system for stablecoins. He warned that focusing solely on federal regulation for stablecoins will hamper the development of best regulatory practices for stablecoins. He commented that the U.S.’s two-tier system for banking regulation has been very beneficial. He stated that policymakers will likely need to periodically revisit stablecoin regulations as blockchain technology use cases continue to develop. He argued that states can more nimbly respond to these developments than federal regulators (who may rely upon Congressional action to make changes). He also remarked that a state-based approach to stablecoin regulation will enable states to develop regulatory specialization, which can attract businesses to that state. He mentioned how he had successfully worked to pass the Nebraska Financial Innovation Act during his time serving in Nebraska’s state legislature. He asked Ms. Wang to discuss the importance of enabling states to develop their own rules for stablecoins.
  • Ms. Wang called state regulatory pathways for stablecoins “absolutely critical” for grassroots innovation. She commented that this innovation will in turn will make the U.S. financial system more diverse and inclusive. She asserted that states should be allowed to experiment and fail safely in their development of stablecoin rules. She noted how Full Committee Chairman Patrick McHenry’s (R-NC) draft stablecoin legislation would require stablecoin issuers to meet minimum federal guidelines for issuance. She asserted that there does not exist a constitutional reason to preempt state regulation in the case where not all stablecoins may necessarily implicate interstate commerce.
• Rep. Flood noted how there have been assertions that a state pathway for stablecoin regulation could result in a “race to the bottom” in terms of regulatory standards. He asked Mr. Homer to respond to this assertion.
  • Mr. Homer asserted that it would be difficult to imagine a “race to the bottom” regarding regulatory standards under Full Committee Chairman McHenry’s draft stablecoin legislation. He stated that this draft stablecoin legislation would establish a federal standard for stablecoin regulations based on New York’s regulatory framework for stablecoins. He commented that New York’s regulatory framework for stablecoins has been tried, tested, and proven.
• Rep. Flood then commended Committee Democrats for developing their own draft stablecoin legislation. He expressed hope that the two legislative proposals under consideration at the hearing can serve as the basis for bipartisan stablecoin legislation. He asserted that U.S. global leadership in the stablecoin space is critical. He noted however that Full Committee Ranking Member Maxine Waters’s (D-CA) draft stablecoin legislation would require state-licensed stablecoins to register with the U.S. Federal Reserve, have the U.S. Federal Reserve create registration requirements, empower the U.S. Federal Reserve to regulate and examine state-issued stablecoins, and permit the U.S. Federal Reserve to enter memorandums of understanding (MoUs) with states to delegate regulatory enforcement obligations. He stated that this legislative proposal would give the U.S. Federal Reserve control over processing stablecoin applications, stablecoin regulation, stablecoin examination, and stablecoin enforcement. He warned that this proposal provides too much authority to the U.S. Federal Reserve and would provide no viable pathway for state stablecoin regulation.

Rep. Ritchie Torres (D-NY):

• Rep. Torres noted how there have been claims that state regulators cannot be trusted to oversee state-licensed stablecoins without supervision from the U.S. Federal Reserve. He noted how state regulators are already responsible for overseeing state-chartered banks and asserted that states should have analogous authorities with respect to stablecoins. He commented that banks with fractional reserves pose greater risks to the financial system than stablecoins that are fully backed. He asked Mr. Homer to explain why states should not be permitted to regulate stablecoins.
  • Mr. Homer expressed agreement with Rep. Torres’s contention that states should be permitted to regulate stablecoins given how states are already permitted to regulate state-chartered banks that engage in fractional reserve lending. He also mentioned how states like New York have served as the primary regulators for non-bank companies throughout the U.S.’s history.
• Rep. Torres asserted that it should be possible to establish federal minimum standards that prevent regulatory arbitrage without subordinating state regulators to the U.S. Federal Reserve.
  • Mr. Homer expressed agreement with Rep. Torres’s assertion.
• Rep. Torres remarked that state regulators (like NYDFS) have been more effective at cryptocurrency regulation than the federal government. He highlighted how the U.S. Federal Reserve had been responsible for overseeing Silicon Valley Bank when the bank collapsed. He also noted how the federal government had been responsible for overseeing FTX when it had collapsed. He asserted that the SEC’s regulatory oversight has poorly served the U.S. cryptocurrency market. He remarked that the lessons learned from FTX’s collapse should inform the development of a federal regulatory framework for stablecoins. He stated that key lessons from FTX’s collapse include the need for stablecoins to have full reserve asset backing, the need for stablecoin backing assets to be either cash or cash equivalents, the need for stablecoin reserves to be verified by both self-attestation and a third-party audit, the need for customers to be able to immediately redeem stablecoins on a 1:1 basis, and the need to prohibit stablecoin issuers from lending, leveraging, and co-mingling customer funds. He asked the witnesses to indicate whether they agreed with these lessons, to which all of the witnesses answered affirmatively. He remarked that a federally licensed stablecoin issuer should have a single federal regulator and warned that too many regulators would result in regulatory confusion and duplication. He asserted that if a stablecoin is considered to be a currency regulated by the U.S. Federal Reserve or a trust regulated by the OCC, then the stablecoin should not simultaneously be considered to be a security regulated by the SEC. He asked Mr. Homer to indicate whether he agrees with this assertion.
  • Mr. Homer expressed agreement with Rep. Torres’s assertion.
• Rep. Torres then remarked that there exists a misconception that cryptocurrencies threaten the U.S. dollar’s status as the world’s reserve currency. He asserted that stablecoins demonstrate that cryptocurrencies will instead reinforce the U.S. dollar’s status as the world’s reserve currency. He highlighted how most stablecoins are pegged to the U.S. dollar. He then discussed how China has largely outcompeted the U.S. within the FinTech space. He stated however that the U.S. dollar-denominated stablecoins have been “far more” successful than China’s failed attempt at a CBDC.
  • Mr. Homer expressed agreement with Rep. Torres’s assessment of the competitiveness of U.S. dollar-denominated stablecoins. He stated that there exists strong international demand for U.S. dollar-denominated stablecoins.
• Rep. Torres noted how cryptocurrency critics often claim that there do not exist use cases for cryptocurrency technology. He stated however that blockchain technology enables real-time transactions, stablecoins provide tokenized U.S. dollars, and that tokenized U.S. dollars enable a better, cheaper, and faster payments system. He commented that this improved payments system would enable faster remittances for the lowest income Americans. He asked Mr. Homer to comment on this assessment.
  • Mr. Homer expressed agreement with Rep. Torres’s assessment of the benefits of stablecoins and stated that these faster remittances are already materializing.
• Rep. Torres acknowledged that his question period time had expired.