Payment stablecoins, blockchain and other digital innovations, including tokenization, will enable more efficient money movement across the globe, while ensuring primacy of the U.S. dollar in transactions and trade, executives and other industry experts told lawmakers Tuesday (March 11).
During testimony and under questioning by representatives of the House Financial Services Committee, witnesses at the nearly four-hour hearing also contended that it is the private sector — and not a central bank-created CBDC — that will expand financial services and the benefits of digital dollar options to the world at large.
Chairman Rep. French Hill, R-Ark., said during his opening remarks: “The evolution of payment stablecoins and their increasing adoption beyond the digital asset ecosystem reflect broader modernization efforts in the U.S. and global payments landscape,” noting that the offerings streamline cross-border payments.
He stated, too, that a “properly regulated stablecoin market can strengthen the U.S. dollar’s dominance, modernize our payments infrastructure and promote financial access,” but said later that a CBDC represented a “competing vision about the future of digital payments” that would put the central bank in direct competition with the private sector.
Offering a contrasting view of CBDCs, ranking member Rep. Maxine Waters, D-Calif., said: “I’m deeply concerned that we are considering a bill today to strip the Consumer Financial Protection Bureau of supervision of big tech payment apps … the Republican resistance to even allow the Fed to study Central Bank Digital Currencies is not only anti-innovation, but is anti-American as it helps China win the digital currency ‘space race’ and undermines the U.S. dollar as the world’s reserve currency.”
Caroline Butler, global head of digital assets at BNY, told the committee that “blockchain technology has the potential to make money move smarter and faster,” and said that the overall payments ecosystem, and particularly stablecoins, would benefit from federal legislation that “advances clarity and consistency” no matter the issuer or regulatory regime.
Her written testimony added that tokenization will “result in greater speed, resiliency and operational efficiencies” against a backdrop where the digital assets ecosystem would also include tokenized deposits.
Charles Cascarilla, CEO of Paxos, which issues stablecoins including PayPal’s PTUSD, said in remarks before the committee that “stablecoins are a national imperative for the United States to modernize our financial system and preserve the dollar’s global dominance,” while it will be incumbent on the U.S. to set global standards for financial adoption and interoperability. The U.S. dollar, he said, “must adapt to an always-on, internet-based, software-driven and AI-enabled global economy.”
Stablecoins, continued Cascarilla, represent the next evolution of money movement: secure, programmable money that moves immediately, 24/7, at near-zero cost.
“This is not science fiction, it exists today thanks to blockchain technology,” he said.
The financial system already accommodates various forms of dollars: physical cash in your wallet, bank liabilities in an electronic account or balances held in PayPal or Venmo.
“The private sector is the source of financial innovation, and I see no use for a CBDC at this time,” Cascarilla said.
Patrick Collison, CEO of Stripe (which acquired stablecoin platform Bridge last year), said that stablecoins are providing “real utility today,” as business clients are finding better ways to manage treasury functions and handle international transfers and “to access U.S. dollars overseas … stablecoins are creating economic opportunities for American businesses at this moment.”
Looking at the regulatory environment, Randall D. Guynn, chairman of the financial institutions group at Davis Polk & Wardwell, testified: “It makes sense to base the regulatory framework for stablecoins on the framework of the dual banking system.” He said that the STABLE Act’s 100% reserve requirement should make payment stablecoins as secure and safe as bank deposits.
Noting that most of the use cases with payment stablecoins have been in settlement and trading activities, Carole House, senior fellow, GeoEconomics Center, Atlantic Council, cautioned that regulatory frameworks promoting new use cases must guard against risks and cybersecurity threats.
“We need to have strong AML protections in place,” she told lawmakers.
During questioning after the testimony, Rep. Frank Lucas, R-Okla., asked if a CBDC might be used by a politicized central bank. Guynn maintained that a CBDC would give “the Federal Reserve staff a direct window … into every transaction every person in America makes” and that at least some staff might use that info to serve what they’d deem “worth political goals.”
Speaking generally, Rep. John Rose, R-Tenn., asked what Congress “should focus on when aiming to modernize the payments world.”
Citing stablecoins as an example, Collison said: “Putting in place a shared framework with prudent rules will do a tremendous amount of good. More broadly, on payments, Stripe strongly supports the concept of some sort of federal payments charter. There’s no single shared framework for payments companies like Stripe today … We think that with access to things like the Fed’s payment system, we can provide better services to businesses and consumers.”
He noted that payments are primarily (but not solely) regulated at the state level, “and we don’t think that should go away — but in addition to that there should also be a federal framework.”
Asked about what that framework would look like, Collison said that there are analogues to the a payments charter in other jurisdictions including Europe that would be helpful in the U.S.
