Stablecoins, Not Bitcoin, In Focus At First U.S. Digital Assets

Today, the Senate Banking Subcommittee on Digital Assets hosted its first hearing, entitled “Exploring Bipartisan Legislative Frameworks for Digital Assets,” at which certain members of the subcommittee and crypto industry witnesses predominantly discussed stablecoin regulation.

Senator Cynthia Lummis (R-WY), a long-time proponent of the Bitcoin and digital asset industry, presided over the hearing with assistance from ranking member of the subcommittee, Senator Ruben Gallego (D-AZ).

The witnesses included Tim Massad, former CFTC Chair and Research Fellow at the Kennedy School of Government at Harvard University; 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. 

Setting the tone for the meeting, Senator Lummis stated that she intends to do her part in passing bipartisan legislation for Bitcoin and stablecoins. (This was one of the few times during the meeting that the word “Bitcoin” was mentioned. One of the only other times in the hearing it was mentioned was when Massad voiced that he’s objected to the creation of a Strategic Bitcoin Reserve.)

Throughout the hearing, Massad stressed the importance of monitoring stablecoin transactions. He suggested extending the “regulatory perimeter” to address AML (Anti-Money Laundering) challenges associated with stablecoins and even proposed that smart contracts be designed in a way that mitigates the risk of bad actors using them.

“[We might] program smart contracts so that transactions can’t go through unless someone has been properly vetted,” said Massad.

Massad also suggested that stablecoin issuers “aggressively monitor stablecoin activity” as a means to keep an eye out for AML violations.

Massari pointed out that authorities can also surveil stablecoin transactions, as these assets run on public blockchains. She also called for sensible regulation around the technology — so long as it isn’t too heavy-handed.

“We have a tendency [when regulating] financial services to take the new thing and cram it into the old,” she said.

What is more, she also advocated for a “common set of standards” to govern stablecoin issuers so that users can feel more confident in all stablecoins being properly backed.

Jachym made efforts to shift the focus of the hearing from stablecoins to the Digital Asset Market Structure bill, claiming that it was “critical” that regulatory agencies construct clear guidelines for which digital assets are securities and which aren’t.

He didn’t receive…