Bitcoin Magazine
Stablecoins, Not Bitcoin, In Focus At First U.S. Digital Assets Subcommittee Hearing
The Senate Banking Subcommittee on Digital Assets convened for its inaugural hearing today, titled “Exploring Bipartisan Legislative Frameworks for Digital Assets.” During this session, members of the subcommittee and representatives from the cryptocurrency sector primarily focused on the regulation of stablecoins.
Senator Cynthia Lummis (R-WY), a longstanding advocate for Bitcoin and the broader digital asset ecosystem, led the proceedings alongside the subcommittee’s ranking member, Senator Ruben Gallego (D-AZ).
The panel of witnesses included esteemed individuals such as Tim Massad, former Chair of the CFTC and Research Fellow at Harvard University’s Kennedy School of Government; Jai Massari, Chief Legal Officer at Lightspark; Jonathan Jachym, Global Head of Policy and Government Relations at Kraken; and Lewis Cohen, Partner at Cahill Gordon & Reindel LLP.
Opening the discussion, Senator Lummis expressed her commitment to advancing bipartisan legislation concerning Bitcoin and stablecoins. Notably, the mention of “Bitcoin” was infrequent during this session; it was referenced mainly when Massad expressed his concerns over the formation of a Strategic Bitcoin Reserve.
Throughout the hearing, Massad emphasized the necessity of overseeing stablecoin transactions. He proposed that the “regulatory perimeter” be expanded to tackle AML (Anti-Money Laundering) challenges related to stablecoins and suggested innovations in smart contract design to help prevent misuse.
Massad elaborated, stating, “[We might] program smart contracts so that transactions can’t go through unless someone has been properly vetted.”
Furthermore, he urged stablecoin issuers to “actively monitor stablecoin activities” to detect potential AML violations.
Massari mentioned that regulatory bodies could also closely track stablecoin transactions due to their operation on public blockchains. She advocated for reasonable regulations that do not stifle innovation.
“There is a tendency to force new innovations into existing regulatory frameworks when it comes to financial services,” she commented.
Additionally, she called for a unified set of standards for stablecoin issuers, enhancing user confidence in the backing of these digital assets.
Jachym attempted to redirect the focus of the hearing from stablecoins to the Digital Asset Market Structure bill, arguing that it is essential for regulatory agencies to clarify which digital assets are classified as securities.
However, his perspective did not gain much traction; Massad contended that stablecoin discussions were of greater relevance, asserting that the market structure bill was not as urgent since regulators could apply existing securities laws to oversee crypto markets.
Jachym emphasized that the jurisdictional boundaries concerning digital assets should be straightforward. He remarked that the uncertainty surrounding regulations in the U.S. has hindered the expansion of the crypto sector.
Cohen echoed these sentiments, indicating that U.S. crypto entrepreneurs are plagued by an ongoing fear of litigation due to the “regulation-by-enforcement” strategy introduced by former SEC Chair Gary Gensler.
He also pointed out that the “unstable regulatory landscape has put both consumers and digital asset users in a precarious situation.”
The sole dissenting voice regarding excessive regulation from the U.S. government was Senator Bernie Moreno (R-OH).
“The government’s complete desire to control everything is evident,” declared Senator Moreno, who noted that numerous technologies, not just cryptocurrencies, have been exploited for illegal activities.
“Why is it that when we address digital currencies here in Washington, D.C., we suddenly believe we should dictate the speed of innovation?” he concluded.
During the hearing, subcommittee members inquired about which global jurisdictions the U.S. could draw inspiration from for its digital asset regulatory framework.
Massad advocated for looking at Europe and the recently implemented Markets in Crypto-Assets Regulation (MiCA) framework. Jachym, on the other hand, pointed to states like Wyoming, highlighting the crypto-friendly laws established there.
Although the Senators and witnesses shared diverse viewpoints throughout the session, a collective sentiment emerged—that it is crucial for lawmakers from both parties to collaborate on establishing clear regulations for the cryptocurrency sector.
“Bipartisan support for crypto legislation is no longer an unattainable objective,” Jachym remarked with a sense of optimism.
This content was originally published in Stablecoins, Not Bitcoin, In Focus At First U.S. Digital Assets Subcommittee Hearing on Bitcoin Magazine, authored by Frank Corva.
