During a hearing on March 11, 2025, convened by the US House Committee on Financial Services, lawmakers and industry experts discussed the importance of US dollar-backed stablecoins in the financial ecosystem and the need for a clear regulatory framework for these assets. The hearing, titled “”Navigating the Digital Payments Ecosystem: Examining a Federal Framework for Payment Stablecoins and Consequences of a U.S. Central Bank Digital Currency””, also explored concerns regarding the potential introduction of a central bank digital currency (CBDC) in the US.
Stablecoins vs. CBDCs
A central topic of the hearing was the comparison between stablecoins and CBDCs, with many expressing concerns about the risks associated with a CBDC. House Financial Services Committee chairman French Hill argued that stablecoins encourage competition and innovation, unlike CBDCs, which he claimed would centralize financial power within the federal government and restrict consumer choice. Hill emphasized that, when properly regulated, stablecoins could enhance the dominance of the US dollar and modernize payment systems without the excessive government control that a CBDC would entail.
Hill stated:
“Unlike stablecoins, which operate in a competitive market, a CBDC would concentrate financial power within the federal government, restrict consumer choice, and undermine the innovation that has made US financial markets the strongest in the world.”
Representative Bill Huizenga echoed these sentiments, suggesting that stablecoins could simplify the US payment system. Congressman Andy Barr added that stablecoins help maintain the US dollar’s competitive edge, especially in the face of foreign CBDCs, such as the digital yuan. Charles Cascarilla, CEO of Paxos, dismissed the idea that a CBDC could offer any advantages beyond those already provided by stablecoins, stressing that innovation in the US financial system has historically come from the private sector, not the government.
Congressman Tom Emmer voiced his support for banning CBDCs in the US, expressing gratitude to President Donald Trump for signing an executive order prohibiting CBDC development. This order, signed on January 23, 2025, laid out a framework for promoting stablecoin growth while preventing federal agencies from pursuing CBDC initiatives.
Regulatory Considerations
The hearing underscored the growing consensus that stablecoins need a clear legal framework to ensure their stability and widespread adoption while preventing government overreach. Representative William Timmons highlighted the urgency of providing regulatory clarity, warning that without clear legislation, digital assets could face enforcement actions that may drive innovation overseas.
A key part of the discussion was the STABLE Act, which aims to regulate digital payment instruments like stablecoins. The bill proposes allowing both banks and non-banks to issue stablecoins, with oversight depending on the amount issued. It also mandates that stablecoins must be fully backed by US dollars or other approved assets, ensure public redemption policies, and subject issuers to banking-style supervision.
Caroline Butler, global head of digital assets at BNY Mellon, emphasized the importance of asset segregation under the STABLE Act, stressing that client assets should never be mixed with firm assets. Cascarilla supported this position, arguing that legal protections for reserve holdings are essential for maintaining the stability of stablecoins. Randall Guynn, Chairman of the Financial Institutions Group at Davis Polk & Wardwell, added that the STABLE Act’s backing requirements could make stablecoins a “”no-questions-asked”” form of money.
Carole House, a senior fellow at the Atlantic Council’s GeoEconomics Center, also acknowledged the cybersecurity provisions within the STABLE Act, highlighting their importance for securing digital financial infrastructure.
Stablecoins and Financial Inclusion
In addition to regulatory discussions, the hearing highlighted stablecoins’ potential to promote financial inclusion. Cascarilla pointed out that stablecoins could provide unbanked individuals with access to digital dollars through smartphone wallets, helping billions of people worldwide who lack traditional banking access. Butler also noted that financial institutions could play a key role in ensuring that stablecoin payment systems evolve alongside traditional payment mechanisms, fostering trust and confidence in the ecosystem.
The hearing emphasized the importance of stablecoins in modernizing the financial system, while also advocating for clear regulatory oversight to ensure stability and prevent potential risks posed by government-controlled digital currencies.”