House Financial Services hearing puts STABLE Act, CBDC risks and AML gaps at center of stablecoin debate
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Summary
Witnesses and committee members debated the STABLE Act's federal-state framework for payment stablecoins, anti-CBDC proposals, and gaps on AML, cybersecurity and cross‑border supervision. Industry witnesses urged clarity to preserve dollar dominance; Democrats pushed for stronger consumer protections and broader AML authority.
The House Financial Services Committee heard testimony and debated the STABLE Act and related proposals on April 9 during a multi‑hour hearing titled “Navigating the Digital Payments Ecosystem, Examining a Federal Framework for Payment Stablecoins and the Consequences of a US Central Bank Digital Currency.” Chairman Hill opened the hearing saying that “a properly regulated stable coin market can strengthen the US dollar's dominance, modernize our payment infrastructure, and promote financial access without government overreach.”
The hearing assembled bipartisan questions about the STABLE Act’s structure, the role of federal and state regulators, and whether the United States needs a central bank digital currency (CBDC). Ranking Member Maxine Waters criticized the current bill draft and recent administration actions, saying the administration has “only enriched himself, his crypto cabinet, and the rest of the crypto billionaire class,” and warned the draft removes important investor protections. Republican backers, including Representative Tom Emmer, argued separately that a CBDC would threaten privacy and competition and supported legislation to bar a retail CBDC.
Industry witnesses told the committee that clear federal rules are needed to allow U.S. firms to lead globally. Charles Cascarilla, CEO of Paxos, said “a stablecoin is just a dollar that operates on a blockchain rail,” and urged the committee to finalize standards such as 1:1 reserve backing, prohibitions on rehypothecation, redemptions, audits and robust AML/KYC. Caroline Butler, global head of digital assets at BNY Mellon, said banks provide custody and “same service, same risk, same regulation,” arguing consistent rules for banks and nonbank custodians would build trust.
Witnesses and members debated specifics of the draft STABLE Act. Experts described three core features intended to make payment stablecoins “no‑questions‑asked” money: 100% reserves in high‑quality liquid assets, a calibrated capital buffer, and activity restrictions to prevent issuer liabilities beyond stablecoin obligations. Randall Gwynn of Davis Polk testified the 100% reserve plus capital buffer should “make payment stablecoins issued by permitted payment stablecoin issuers as safe as insured deposits or central bank money,” but he also recommended allowing short‑dated U.S. Treasury bills (with limits on average portfolio duration) to preserve liquidity and market functioning.
Committee Democrats and national security witnesses pressed for stronger AML/CFT, sanctions compliance, cyber and resolution tools. Carol House of the Atlantic Council urged “strong safeguards” and “freeze and recovery capabilities” for sanctioned or illicit actors; she recommended federal line‑of‑sight for systemically important issuers so federal authorities can address systemic risk and enforcement gaps. Multiple members and witnesses said current international practice matters: without U.S. leadership, foreign jurisdictions could set the rules and non‑U.S. stablecoins could erode dollar dominance.
Another key theme was the federal‑state pathway. The STABLE Act establishes a federal floor and allows a state pathway only if state regimes meet or exceed that floor; several witnesses and members said that preserves the “dual banking” laboratory model while preventing a race to the bottom. Witnesses with state licensing experience praised New York’s supervision as a workable laboratory and urged reciprocity with other high‑standard jurisdictions.
On CBDC, Republicans stressed privacy and competition risks. Representative Tom Emmer said a retail CBDC “would put the Federal Reserve in direct competition with the private sector.” Industry witnesses largely argued that private stablecoins can deliver the same payment benefits without creating a government‑issued retail digital dollar.
Members and witnesses also discussed operational risks: cybersecurity, custody standards, and the need for timely, transparent reserve reporting. Several witnesses described monthly reserve disclosures, third‑party audits and statutory certifications as deterrents to misreporting. Paxos described mechanisms to freeze or seize funds when lawful authorities or internal controls identify illicit activity; witnesses said those tools are not a substitute for robust AML enforcement and international implementation of AML standards.
The hearing produced no regulatory action or votes. Members said they will continue to revise draft legislation based on testimony, with votes and markups to follow. Chairman Hill closed by saying stakeholder feedback will be used to “further strengthen the STABLE Act.”
Looking ahead, committee members on both sides said Congress must balance financial stability, national security and consumer protection while preserving The United States’ ability to compete globally in digital payments.
