The Senate Banking Subcommittee on Digital Assets recently convened for their inaugural hearing titled “Exploring Bipartisan Legislative Frameworks for Digital Assets.” A significant focus of the session centered on the regulation of stablecoins. The discussion featured contributions from both subcommittee members and various experts from the crypto industry.
The hearing was led by Senator Cynthia Lummis from Wyoming, known for her strong support of Bitcoin and digital assets, alongside Senator Ruben Gallego from Arizona, the subcommittee’s ranking member.
A panel of expert witnesses provided insights during the session, including Tim Massad, a former Chair of the CFTC and a Research Fellow at Harvard’s Kennedy School of Government; Jai Massari, the Chief Legal Officer at Lightspark; Jonathan Jachym, who serves as the Global Head of Policy and Government Relations at Kraken; and Lewis Cohen, a partner at Cahill Gordon & Reindel LLP.
At the outset, Senator Lummis emphasized her commitment to advancing bipartisan legislation related to Bitcoin and stablecoins, though she only briefly mentioned Bitcoin itself during the meeting. An additional reference to Bitcoin surfaced when Massad highlighted his opposition to the idea of establishing a Strategic Bitcoin Reserve.
During the hearing, Massad underscored the necessity of monitoring transactions involving stablecoins. He advocated for expanding the “regulatory perimeter” to tackle challenges related to Anti-Money Laundering (AML) concerning stablecoins. Massad also proposed that smart contracts should be programmed to minimize misuse by bad actors.
He urged the development of smart contracts that prevent transactions without proper vetting, and he also pressed for stablecoin issuers to closely monitor activities to prevent AML violations.
Jai Massari added that authorities can already track stablecoin transactions, given their operation on public blockchain networks. She advocated for balanced regulation, voicing caution against overly stringent measures.
Massari discussed the tendency to fit new financial services into outdated frameworks and advocated for a common set of standards to ensure that all stablecoins are properly backed, thus instilling confidence among users.
Jonathan Jachym attempted to shift the focus from stablecoins to the Digital Asset Market Structure bill, stressing the importance of regulatory clarity in distinguishing which digital assets qualify as securities.
However, this pivot saw limited traction. Massad argued that addressing stablecoins was more critical than the market structure bill, as existing securities laws could adequately manage crypto markets.
Jachym emphasized the need for simple jurisdictional lines around digital assets and highlighted that the lack of regulatory clarity in the U.S. hampers industry growth.
Echoing these concerns, Lewis Cohen pointed out the persistent threat of litigation that U.S. crypto entrepreneurs face, referencing the approach of former SEC Chair Gary Gensler. He highlighted how regulatory uncertainties leave consumers and digital asset users vulnerable.
Senator Bernie Moreno from Ohio was the sole participant to challenge the government’s drive toward digital asset regulation, expressing concerns over excessive control. He noted that various technologies—not just cryptocurrencies—have been used illicitly.
Senator Moreno questioned why Washington should dictate the pace of innovation in digital currencies.
Throughout the hearing, subcommittee members inquired about global regulatory models the U.S. might emulate. Massad advocated for Europe’s newly enacted Markets in Crypto-Assets Regulation (MiCA), while Jachym suggested that lawmakers learn from Wyoming’s crypto-friendly laws.
The session conveyed a shared sentiment: it’s essential for lawmakers from both parties to collaborate and establish transparent crypto regulations.
“Bipartisan support for crypto policy is no longer a distant goal on the horizon,” Jachym remarked, conveying a sense of accomplishment.
