Urgent: Pass Stablecoin Bill

Urgent: Pass Stablecoin Bill

The Clarity for Payments Stablecoins Act: Unlocking the Potential of Stablecoins in the United States

The recent passing of H.R. 4766, the Clarity for Payments Stablecoins Act of 2023, by a bipartisan vote in committee presents a historic opportunity for the United States to expand the reach of the dollar and enhance financial access both domestically and globally. Stablecoins, which represent a unit of fiat currency on a blockchain, have been lacking federal regulatory clarity in the United States since their creation almost a decade ago. However, stablecoins are not entirely new financial products; rather, they are existing stable value products leveraging blockchain technology for efficiency and transparency.

The Need for Regulatory Clarity

Following the financial crisis, financial markets underwent a significant period of reform, favoring stable financial products that ensured price stability. This reform included penalties and increased capital requirements for products that were deemed risky. As a result, we now possess the knowledge and expertise to define safe and stable reserves for stablecoins that do not pose a threat to financial markets. H.R. 4766 aims to provide this clarity and regulatory framework for stablecoins in the United States, ensuring consumer protection and stable value preservation.

Seizing the Global Growth Potential

Despite the absence of regulatory clarity in the United States, the stablecoin market has grown globally, surpassing $100 billion in just a short span of less than a decade. Every dollar invested in stablecoins contributes to the U.S. Treasury, which is vital during these challenging times. Moreover, stablecoins offer an alternative to exploitative local financial systems and expensive intermediaries, providing a simple, transparent, and cost-effective option for users.

While the United States has been slow to regulate stablecoins, other jurisdictions have recognized their potential and are actively embracing this innovation. Singapore’s Monetary Authority of Singapore (MAS) has granted a payments license to Circle, and stablecoin projects are launching in Bermuda, the UAE, and Hong Kong. Tether, the largest stablecoin, has operated from offshore since 2014, now managing $80 billion in assets. This global traction highlights the need for the United States to act promptly to protect both national security and financial stability.

Onshore Stability and Transparency

The passage of H.R. 4766 would establish onshore stablecoins, where the United States regulates the issuer. This regulatory framework would enable thorough client due diligence and a comprehensive understanding of money flows, monitoring every individual and corporation involved in the minting or burning of stablecoins. By tracing transactions on traditional dollar rails after their execution on a blockchain, the United States would have full visibility into the starting and ending points of these transactions. This framework also ensures transparency, segregation of reserves, proper management, and investment in stable instruments that benefit consumers, fund the U.S. government and economy, particularly during times of rising interest rates and growing deficits.

Preserving the Dollar’s Dominance

Inaction on H.R. 4766 puts the United States at risk of losing the dollar’s global dominance in the crypto and blockchain space. The European Union’s Markets in Crypto-Assets Regulation (MiCA) and China’s renewed interest in Hong Kong as a crypto hub could potentially propel alternative currencies, such as the euro or the yuan, as the defining unit of account. A future where blockchain technology thrives but dollars are marginalized, with information on individuals and corporations in the hands of foreign governments hostile to the United States, paints a bleak picture for both the U.S. economy and the strength of the dollar.

Embracing Regulatory Excellence

Passing H.R. 4766 would position the United States as a global leader in stablecoin regulation. This legislation would offer a regulatory framework that is likely unmatched in terms of clarity and robustness. Smaller stablecoin projects could be regulated at the state level, fostering experimentation, while larger projects would fall under federal oversight. The payments stablecoins allowed within the bill would be transparent, conservatively reserved, subject to prudential oversight, and follow clear rules on redemption and consumer protection. The fundamental principle is to ensure stablecoins function exactly as intended: as safe, secure representations of dollars on a blockchain.

Open, Fair Competition and Financial Inclusion

Opponents of advancing the stablecoin bill often protect the interests of incumbents like Tether, which currently charges exorbitant fees to users of the financial system for payments. However, these incumbent players should not be prioritized over open and fair competition that promotes innovation and drives the United States toward better financial technology and inclusion. The passage of H.R. 4766 would level the playing field and allow the United States to unleash its potential to benefit both domestic and global financial ecosystems.

In conclusion, the Clarity for Payments Stablecoins Act of 2023 presents the United States with a critical decision that will shape its future in the blockchain industry. By embracing stablecoin regulation, the United States can leverage the potential of this technology to expand the reach of the dollar, enhance financial access, and maintain its position as a dominant player in the global market. It is imperative for policymakers to act swiftly and seize this historic opportunity.