Fintech executives push stablecoins at congress as Trump backs regulation

Financial technology executives are gearing up to advocate using dollar-backed stablecoins to cut transaction costs for American consumers and businesses. They are also scheduled to testify at a pivotal congressional hearing on Tuesday as political momentum builds for regulatory legislation that could offer a clearer outline of the future of these digital assets.

Charles Cascarilla, the chief executive officer of Paxos Inc., one of the largest stablecoin issuers, said in a prepared testimony, “A dollar on the blockchain could be transferred instantaneously, at virtually no cost, and could be held by anyone who had an internet connection and a smartphone.” 

Critics of the current financial system also point to high-fee services like ATMs, overdrafts, and wire transfer fees, which make it incredibly expensive for low-income individuals. Cascarilla characterized this system as a “regressive tax,” which creates financial disparities.

Proponents of stablecoins argue that these digital tokens can eliminate those losses, make transactions cheaper, and open access to millions who do not meet the requirements to be part of the traditional payment system.

However, despite their advantages, stablecoins do not offer the same regulatory protections found in traditional banking institutions. Unlike bank deposits, they do not have Federal Deposit Insurance Corporation (FDIC) coverage protection, so consumers could suffer sizable losses if an issuer fails.

That concern has sparked speculation that the federal government could ultimately have to step in to clean up after a major stablecoin disaster—possibly at a steep cost to taxpayers.

Stablecoin regulation interest is receiving support from both sides of Congress

Interest in stablecoin regulation is growing in Congress, with a bipartisan tilt toward new legislation. Even President Donald Trump supports the move. He is positive about efforts to draw regulatory clarity for the industry, such as those at a White House crypto summit earlier this month.

The Secretary of the Treasury, Scott Bessent, backed stablecoins and said they could help to ensure the US dollar remains the “dominant” currency in the world economy.

Compared to the moves in the broader crypto market, stablecoins have seen a fairly rapid surge for some time. According to ARK Invest, an investment firm led by Cathie Wood, data shows that global transaction volumes crossed $15 trillion in 2024. Most US consumers who rely heavily on cards for a wide range of retail purchases do not inherently use stablecoins. 

However, they are widely used in digital and cross-border transactions; the evolution of the entire financial ecosystem will continue to become increasingly attractive.

Stablecoins promise to be backed one stablecoin-to-one dollar on reserves and serve as a lock-in to the dollar as the world’s No. 1 reserve currency. This has led policymakers to consider how the industry should best be regulated to protect financial stability while supporting innovation.

Senate and House of Representatives bills have the common goal of regulating the stablecoin. The issuers in the introduced model would be accountable to federal or state regulators. They would be mandated to hold reserves big enough to cover all the redeemable cryptocurrency for money and to abide by the anti-money laundering regulations and other financial reports. The goal, however, is to pen regulations that protect consumers without inhibiting the industry’s growth.

National finance executives like Stripe Chief Executive Patrick Collison and head of digital assets at The Bank of New York Mellon Corp Caroline Butler will also join Charles Cascarilla. All of them will appear in the House Financial Services Committee hearing, which has been reviewing stablecoin bills and has the power to determine the future of digital payments.

This uptick in regulatory scrutiny has become more pronounced in part due to the involvement of some of the largest players in the industry, including Tether and Circle, known for managing billions of dollars of transactions daily. Stablecoins may not have taken over brick-and-mortar merchants as the primary payment method for goods and services, with fiat currency still being the most commonly accepted, but online commerce, remittances, and digital asset trading have adopted them greatly.

One of the many points of contention in the legislative talks is whether stablecoin issuers would be required to register in the US. Such a mandate may disadvantage offshore issuers, such as El Salvador-based Tether, while helping competitors based on US soil, such as Circle. 

Policymakers also consider imposing higher capital requirements to ensure that the reserves backing stablecoins remain strong during financial stress.

Congress weighs stablecoin regulations amid banking concerns and industry pushback

Banks have traditionally held a monopoly over financial transactions, including deposits, loans, and payment settlements. With the emergence of stablecoins, banks feel threatened and have spoken out against them as competition for deposits and payment processing services.

If stablecoins capture market share, they might drain revenue from banks dependent on transaction fees and interest-bearing deposits.

Another is the lack of a central backstop for stablecoins. If the industry grows large enough to become systemically important, one big failure could ripple through the financial system.

Some policymakers have proposed that a central bank digital currency (CBDC) issued by the Federal Reserve would offer a safer alternative to privately issued stablecoins. However, the cryptocurrency industry and its advocates on Capitol Hill have fought the proposal, arguing that a digital dollar supported by the Fed would snuff out competition and destroy innovation. They have introduced a bill that would ban the Federal Reserve from issuing a CBDC.

Tethered before the House Financial Services Committee and its Chair Patrick McHenry, the mainstay has focused legislation around stablecoins, notably, the Lummis-Gillibrand legislation, contrasted by bipartisan support from Senators Cynthia Lummis (R-WY) and Bill Hagerty (R-TN). A Senate aide said that the Senate Banking Committee would meet to discuss and vote on legislation covering stablecoins, potentially as soon as Thursday.

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