It's time to stop the anti-stablecoin hysteria and embrace the future

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In the frenzied first months of 2025, the U.S. crypto agenda has emerged as a topmost political priority. At last week's White House crypto summit, Treasury Secretary Scott Bessent made one thing clear: The U.S. will use stablecoins to keep the dollar as the most dominant currency in the world. To truly unlock a rules-based competitive landscape for dollar-denominated stablecoins, Congress must act on a bipartisan basis to pull stablecoins into the regulatory and banking perimeter.

The Office of the Comptroller of the Currency has rescinded historical guidance that precluded the nation's banks from engaging in digital asset and stablecoin related activities. Against this backdrop, it is time to stop perpetuating stablecoin fear-mongering and start an honest conversation about how these innovations are not just breakthroughs in crypto, but breakthroughs in how dollars move. Regulated banks and nonbank stablecoin issuers ought to enjoy a level and globally competitive playing field. Ongoing criticism of bipartisan efforts to establish a national framework for payment stablecoins such as the GENIUS Act and STABLE Act, reveals a lingering misunderstanding of how regulated payment stablecoins work.

These legislative proposals would force issuers to follow narrow reserve asset management standards, consisting of high-quality liquid assets. While some bank policy proponents argue for linking stablecoins to FDIC insurance, this argument labors under a number of critical flaws. The first is that payment stablecoins would be fully reserved on a one-to-one basis and would be barred from engaging in perilous asset-liability mismatches, rehypothecation or risk taking, which FDIC insurance was designed to mitigate. Moreover, payment stablecoin issuers would have to pass stringent "show me the money" tests, including audits and routine disclosures. Well-structured payment stablecoin legislation would make the financial system safer, including for banks and consumers.

Current proposals go even further in ring-fencing bank-issued payment stablecoins. Banks would have to issue stablecoins from a balance sheet that looks more like a regulated stablecoin issuer, than a bank. Circumscribing payment stablecoins in this manner obviates the need for FDIC insurance. Historically many crypto firms purported to offer "pass through" FDIC insurance, prompting the FDIC to rebuke this practice. A uniform legal definition for payment stablecoins, including proposals for their treatment in bankruptcy, use as collateral and as digital cash equivalents while barring yield or interest payments, means these products will advance money movement and not compete with the deposit base.

Banks also benefit from the wholesale technological upgrade taking place with open-source technologies and cutting-edge financial integrity tools that are enhancing our collective defense against illicit actors. A crucial element of good legislation is that it would create a widely competitive landscape of payment stablecoin issuers, in which banks, nonbanks and credit unions can all compete for open, fungible and economically sound circulation of money. Draft legislation delineates regulatory lanes between state and federal banking regulators, and protects the role of states as the laboratories of responsible fintech innovation — from where today's generation of U.S. payments giants, including payment stablecoin issuers have emerged.

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Bipartisan stablecoin legislation should not compete with bank policy objectives. Rather, borrowing from market developments and what prudential regulators are implementing around the world offers good guidance. The draft bills provide a clear floor of basic activities, guardrails, disclosures and other critical standards such as the USA PATRIOT Act applying to all payment stablecoin issuers. There is also a ceiling of $10 billion that borrows from the dual-banking system, at which point a state-based payment stablecoin issuer would graduate to one of three federal regulators, including the National Credit Union Administration for credit unions. This is similar to how the Europeans have addressed regulated stablecoins, which are called e-money tokens, or EMTs, under the Markets in Crypto-Assets regulation, or MiCA. In Europe, national competent authorities such as France can license stablecoin issuers as e-money providers and supervise them at a national level until a certain size or other potential systemic trigger is reached, at which point the pan-European banking authorities take over principal oversight.

With the onset of MiCA, not only did international investors flock to Europe, including some of Europe's largest banks, startups and payments companies alike, all proliferated regulated e-money tokens with more than 10 regulated issuers and counting. Critically for consumers and market participants, regulating stablecoins in this manner has increased payment system optionality and competition, all while enjoying a common economic, legal and regulatory structure. As Bank of America's CEO Brian Moynihan noted in comments at the Economic Club of Washington, D.C., the use of stablecoins would be forthcoming even from large banks provided there are federal rules.

Not only do payment stablecoins not need deposit insurance, because of their prudential qualities and bankruptcy remoteness that would be codified in law, they also do not compete with bank deposits. Rather, today's generation of successful stablecoins have increased dollar deposits in the U.S. and global banking system, while also growing the attractiveness of U.S. Treasuries as the basis for an always-on digital dollar. In short, regulating payment stablecoins is deeply in the national interest and would promote a competitive environment in which the entire value chain, including the nation's banks, would stand to gain.

Proposed legislative language would preclude payment stablecoin issuers from offering yield to coinholders, which is not only a measure that would protect the deposit base, it will continue to incentivize secondary market innovations with stablecoins, where their programmability, composability and fully reserved nature make them the perfect form of sound money for the internet age. Here too, MiCA offers guidance where e-money tokens are not allowed to pay yield directly from the issuer so as not to compete with bank deposits.

An America-first regulatory regime for stablecoins would incentivize issuers to build their businesses here and make dollar-denominated payment stablecoins an export product, digitizing the full faith and credit of the U.S. dollar, preserving trust and access to the greenback for centuries to come.