Fifteen years ago, Lehman Brothers collapsed, destroying the retirement savings of millions of Americans. Congress and the White House responded to the ensuing financial crisis by passing the Dodd-Frank Act, which was intended to strengthen the financial system and protect consumers.
Heath Tarbert, former chairman of the Commodity Futures Trading Commission, is chief legal officer at Circle. This commentary is part of CoinDesk’s State of Crypto Week, sponsored by Chainalysis.
Today, digital currencies are poised to improve America’s decades-old financial system, strengthen the U.S. dollar and make it easier, faster and cheaper for families and businesses to send, spend, lend and exchange their money. However, this can only happen if Washington unites behind payment stablecoin legislation that puts financial stability and consumer safety first.
Payments stablecoins are neither niche nor novelty – they form an important new foundation layer for today’s payments and commerce, remittances and humanitarian aid. Their rapid growth reflects their everyday, real-world utility as digital dollars move globally at the speed and scale of the Internet.
The positive impact of digital dollars can have a disproportionate impact in communities across the United States. Working American families disproportionately bear the burden of the high fees associated with sending and spending their hard-earned money. Compare transferring funds to sending a text message across the country. Have you ever paid $6 and waited three days to text a loved one?
The frictionless nature of stablecoins helps extend financial security and inclusion to vulnerable populations at home and abroad who do not have easy access to brick-and-mortar banking. The United Nations, for example, has started sending humanitarian aid to Ukrainian refugees in the form of stablecoins.
Congress is beginning to understand what is at stake. This summer, several committees introduced bills to better regulate the digital asset economy, including the Clarity for Payment Stablecoins Act, which the House Financial Services Committee approved on a bipartisan basis. The stablecoin measure serves as an important basis for the other draft laws.
Congress should pass this bill or another bipartisan measure that would:
Both Republicans and Democrats want the United States to set the rules — not follow the lead of other countries. That’s why the Senate and White House, along with the House of Representatives, must advance this legislation on a broad, bipartisan basis.
Our aging financial system is fraught with friction and inefficiency. Whether it’s 3% credit card fees borne by small businesses, overdraft fees, two-day delays in clearing checks, or waiting for paychecks – many of these costs are offset by a well-regulated system where payments are processed digitally and instantly. eliminated.
Prioritizing stablecoin legislation this year will establish strict standards and transparency measures that distinguish between trustworthy, fully backed stablecoins based in the US and those issued abroad with questionable practices and no security measures to mitigate risk. Banning virtually “unstable” stablecoins, or perhaps even counterfeit dollars, would protect consumers both here in America and abroad.
The collapse of a global stablecoin without sufficient support could have serious implications for financial markets and the entire American economy. Treasury Secretary Janet Yellen has warned of this risk, which is why the President’s Working Group on Capital Markets called on Congress to quickly enact stablecoin legislation nearly two years ago.
China and Russia are working feverishly to develop digital assets in their own currencies. Stablecoin legislation will protect the dollar’s primacy as a global reserve currency. The dollar’s privileged status keeps borrowing costs low, expresses our democratic values abroad, and provides a buffer in times of economic stress.
By prioritizing stablecoin legislation, Congress can establish clear, consistent standards to protect consumers, improve financial stability, and advance the dollar as the preeminent currency on the internet. This crucial piece of financial plumbing is needed first to ensure that America’s digital asset markets become the envy of the world.