The Senate Banking Committee discussed the sector of stablecoins in a recent hearing. Subjects of regulations and whether the assets are good for the economy or can lead to a financial crisis were raised.
Four witnesses testified: director of financial policy at Open Markets, Alexis Goldstein, partner at Davis Polk Wardwell Jai Massari, chief strategy officer and head of global policy at Circle, Dante Disparte, and associate professor at the American University Washington College of Law, Hilary Allen.
Opening the hearing, the chairman Sherrod Brown criticized stablecoins, saying they don't serve the purpose of money democratization and questioned their decentralized nature. Brown said the assets are usually backed by single companies. He called stablecoin and crypto trading gambling. According to Brown, there is a need for stricter regulations.
Next, Senator Toomey spoke, mentioning the benefits of stablecoins. He pointed out that stablecoins can speed up payments, particularly international ones at reduced costs, and increase access to financial services. Also, Senator Pat Toomey said stablecoins can be used to fight against money laundering and terrorist financing as they provide transparent transactions record. Pat Toomey also talked about the role of smart contracts. He said the government should not prevent the development of the industry, thus undermining the state's competitiveness. Tomey suggests three ways for regulations.
Witnesses' opinions differed, but all agreed that regulations are necessary.
Hilary Allen criticized stablecoin and DeFi severely, saying the sphere presents threats to financial stability, it's complex and doesn't have benefits. According to Alexis Goldstein, stablecoins don’t meet all the advantages of banking unbanked, and speed as issuers argue. Meanwhile, Jai Massari and Dante Disparte said that the space is growing and it has a potential to provide broader use cases. Massari pointed out that assets can complement today’s financial assets such as cash, cheks, credit and debit cards which all have their benefits and drawbacks. Disparte mentioned that stablecoins present programmable money, and provide greater financial control. The Circle representative compared the innovation with the creation of MP3, which replaced compact disks.
In November, the President's Working Group (PWG) issued a report calling for Congress to set a regulatory framework for stablecoins.