Stablecoin Legislation Advances in Congress
On Wednesday, a significant development occurred as the STABLE Act, a proposed stablecoin legislation, made progress through the House Financial Services Committee. This advancement raises the possibility that Congress may enact a law this year that solidifies the role of stablecoins as a pivotal component of the global financial landscape. Advocates of stablecoins maintain that they can help the United States retain the dollar’s dominance in international finance while also offering individuals around the world a means to transact with greater ease, lower costs, and enhanced security. However, despite bipartisan support for stablecoin regulation, there is notable resistance, particularly from Democratic lawmakers who express concerns over potential systemic risks and conflicts of interest—especially in light of a recent announcement by the Trump family’s crypto firm regarding its own stablecoin.
Concerns Over Big Tech Influence
Critics are sounding alarms about one possible consequence of this legislation: the potential for large technology companies, such as Meta, X, and Amazon, to establish their own proprietary currencies, thereby amplifying their already considerable market power. Hilary Allen, a law professor at American University and a prominent skeptic of cryptocurrency in Washington, D.C., articulated this concern, stating, “While this is framed as a crypto bill, it may primarily benefit large technology platforms.”
Progress of Stablecoin Bills in Congress
Both the House and Senate have cleared their respective stablecoin bills—the STABLE and GENIUS Acts—through committee stages. These proposed laws outline the regulatory framework for stablecoins, including the required reserves that issuers must maintain. The next step for Congress will be to reconcile the differences between these two bills, with hopes of delivering a unified version to President Trump by summer. Notably, several major banks, including Bank of America, have shown interest in launching their own stablecoins if the legislation is enacted. Under the current drafts of the bills, non-financial entities would also be permitted to issue stablecoins through subsidiaries, a shift from earlier proposals that barred such companies from doing so. The STABLE Act explicitly states that any nonbank entity can issue a stablecoin, provided they obtain approval from a federal regulator.
The Implications for Big Tech Players
Allen posits that this legislation could facilitate major tech leaders like Elon Musk and Mark Zuckerberg in launching their own stablecoins. Both have shown a keen interest in the payments industry—Musk’s X has acquired various state licenses for money transmission, while Facebook previously sought to introduce its own cryptocurrency, Libra, in 2019 but faced significant backlash and regulatory scrutiny. Allen notes that these tech giants are motivated to enter the payments space due to the lucrative nature of transaction data, which reveals consumer purchasing behaviors. “As transactions shift to these tech platforms, it will significantly enhance the influence of already critical players in our economy and place them at the core of our financial system,” she warns.
Potential Risks of Stablecoin Adoption
In a cautionary example, Allen describes a scenario where Amazon could issue stablecoins that gain traction among its employees, Whole Foods customers, and readers of the Washington Post. This could lead to a reliance on stablecoins over traditional bank accounts, which presents a troubling situation. “Unlike banks that use deposited funds to support economic activity through loans, stablecoin reserves would simply remain idle,” she explains. “Consequently, funds that could have been productively employed in the economy would stagnate with Amazon.”
Legislative Warnings about Banking Competition
Stephen Lynch, a Democrat from Massachusetts, echoed these sentiments during the markup of the STABLE bill, cautioning that stablecoins might compete with bank deposits and hinder banks’ ability to lend to consumers and local businesses. In a related warning, Rohit Chopra, the director of the Consumer Financial Protection Bureau under President Biden, expressed concerns that if tech firms gained control of banking functions, they would have a strong incentive to monitor all facets of consumer transactions and potentially create personalized pricing strategies.
Calls for Separation of Commerce and Banking
During the markup session, Rep. Maxine Waters advocated for an amendment to uphold the separation between commerce and banking, arguing that the current bill could allow figures like Elon Musk and Walmart to establish their own currencies. In response, Bryan Steil, a Republican co-author of the bill, contended that the amendment could stifle innovation. French Hill, another Republican co-writer and Chair of the House Financial Services Committee, expressed hope that Congress could find a balanced solution to address Waters’ concerns while also considering a broader framework for the cryptocurrency market. Ultimately, the amendment was rejected. “This stablecoin legislation could dangerously pave the way for significant tech involvement in banking,” warns Wilmarth. “Once that door is opened, it may be nearly impossible to reverse course.”
