For the past century, the U.S. has reigned as the economic superpower of the world. The key to this sustained economic might is a regulatory environment that encourages and enables technological innovation. From semiconductors to personal computers to the internet, U.S. companies have led in developing cutting-edge technologies because our country empowers its builders and creators. Unfortunately, when it comes to Web3—the next generation of the internet built on blockchain, digital assets, and cryptocurrencies—we are trailing and are at risk of falling further behind.
In 2023, the European Union passed comprehensive cryptocurrency regulation, and numerous meaningful provisions went into effect this past summer. China’s central bank has been promoting its digital yuan, which threatens the U.S. dollar’s role as the global reserve currency. The U.S. is just watching, while our opponents move pieces on the chessboard.
It is absolutely essential to our country’s future that the U.S. enact clear and sensible cryptocurrency regulations that foster innovation, keep Web3 jobs within our borders, protect consumers, and maintain the dominance of the U.S. dollar.
We should start with stablecoins.
For newcomers, stablecoins are cryptocurrencies whose values are pegged to national currencies or high-quality financial assets. This provides them stability and enables them to play a crucial role in the digital economy, where they combine the transaction speed and low cost of digital assets with the price stability of traditional reserve currencies. The U.S. is already playing a major role in this space. According to one report, more than 95% of stablecoins are “linked to the U.S. dollar.”
The many use cases of stablecoins have earned them support from policymakers across the ideological spectrum. Conservatives value their low-cost, frictionless and instantaneous payment abilities, which can lower costs for merchants and consumers and spur startups and economic activity. Progressives appreciate their use in lowering the cost of remittances and reaching the underbanked and underserved, as well as their ability to increase access to basic financial services.
However, it must be acknowledged that, as with any new technology, stablecoins present challenges. Some stablecoins, backed by complex algorithms instead of stable reserve currency, have collapsed due to design flaws. Additionally, unlike bank deposits, stablecoins are not FDIC insured, creating risks should the issuer go bankrupt. While concerns have been raised about money laundering, stablecoins aren’t misused for this purpose any more than traditional cash. But for the public to have confidence in stablecoins, and for businesses to adopt them, clear regulations must be established to provide consumer protection, govern issuers, and guard against money laundering.
The bipartisan Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, which I introduced on February 4 alongside Senators Bill Hagerty, Cynthia Lummis, and Tim Scott, will address these challenges and create a clear regulatory environment that enables the cryptocurrency ecosystem to thrive.
This legislation protects consumers by holding stablecoin issuers to strict reserve requirements, requiring them to maintain one-to-one reserves in cash and cash equivalents. The bill prohibits the issuing of unbacked, algorithmic stablecoins, the collapse of which has led to substantial losses. Furthermore, to address their use for illicit purposes, it mandates that approved stablecoin issuers comply with U.S. anti-money laundering and sanctions rules. Finally, it clarifies procedures around conservatorship in the event that a stablecoin issuer experiences insolvency.
While this bill will undoubtedly be subject to revisions as it moves through Congress, it has already received input from a diverse range of stakeholders, including industry participants, academic experts, and federal regulators. It represents a true bipartisan effort aimed at empowering innovators while simultaneously rooting out bad actors.
Preparing the groundwork for the next century of American exceptionalism is a mission that should unite us all, and positioning the United States at the leading edge of the next iteration of the internet is key to that goal. Stablecoins are already playing an important role, and it is critical we act now to maintain our position as the leader in global economic competitiveness.
