After years in which crypto insiders desperately sought to gain the attention of the U.S. Congress, the recent congressional hearing on stablecoins has drawn notable pro-digital-assets witnesses. Among them were a senior executive from the Bank of New York Mellon Corp. and a seasoned lawyer from Davis Polk & Wardwell, both of whom represent a significant intersection of traditional finance and innovative digital assets.
As the legislative momentum builds toward support for crypto regulations, traditional financial representatives are increasingly influencing the conversation around stablecoin regulations. At the House Financial Services Committee hearing, lawyer Randy Guynn asserted that the safeguards proposed by the Stablecoin Transparency and Accountability for a Better Ledger Economy Act, referred to as the STABLE Act, should align the protections for stablecoin issuers with that of banking institutions.
Guynn explained, “If a permitted stablecoin issuer has a properly calibrated reserve of liquid assets, capital buffer, and no material amount of liabilities other than its stablecoin liabilities, as contemplated by the STABLE Act, its payment stablecoins should be as safe as insured bank deposits and central bank money.” His testimony underscores the potential for stablecoins to be viewed as a secure financial asset, akin to traditional bank deposits.
Contrastingly, sitting just across from Guynn was Caroline Butler, the global head of digital assets for BNY Mellon. Representative Ritchie Torres of New York described BNY Mellon as the “ultimate expression of the traditional financial system.” Butler emphasized that her bank is already providing substantial services for digital asset issuers, such as Circle, while emphasizing the necessity for clarity and regulatory guidance from the U.S. government.
She stated, “What’s very important for the ecosystem is to make sure that with banks providing custody, there is implicit trust and confidence in the ecosystem that client assets are indeed protected according to federal legislation and regulation.” Butler further mentioned the need for the traditional financial system to engage with new technologies, such as stablecoins and blockchain, to meet evolving market demands.
The growing chorus of support for stablecoin regulations reflects a shift in the origins of this sentiment, with traditional finance now taking a more vocal role. This change is occurring as the political influence of the crypto industry strengthens in Washington, evidenced by significant financial contributions from crypto sources to congressional campaigns. A recent bipartisan Senate vote overturned an Internal Revenue Service crypto rule, indicating a collaborative effort across party lines.
However, calls for a unified approach to stablecoin regulation are not without contention. The committee’s ranking Democrat, Maxine Waters, alongside others in her party, urged the debate to return to previously discussed bipartisan legislation that she and former Republican panel Chairman Patrick McHenry had developed. Waters cautioned against the current trajectory, insisting that there is a necessity to reassess the approach to stablecoins.
In contrast, California Democrat Representative Sam Liccardo remarked on the evolution of Congressional attitudes towards regulation, noting, “We’ve moved from discussing whether to regulate to how to regulate.” This shift illustrates a significant change in legislative dynamics concerning digital assets.
Meanwhile, in the Senate, Senator Bill Hagerty’s stablecoin bill, titled the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act), is undergoing further revisions and is set for markup hearing in the Senate Banking Committee. The discussion is concurrently taking place around potential legislation to ban the creation of a U.S. central bank digital currency (CBDC), with strong opposition from Republican lawmakers.
The evolving dialogue in Congress reflects both the growing acceptance of digital assets within traditional finance and the ongoing hurdles that accompany regulatory frameworks. As the landscape continues to shift, the involvement of established financial institutions hints at a transformative period for stablecoin legislation and its broad implications for the future of digital finance.
