The United States risks lagging behind in regulating stablecoins at the federal level, facing competing jurisdictions around the world, even as both the Republican and Democratic parties push for clearer rules for the sector.
This concern was highlighted by Circle Vice President Yam Ki Chan in an interview with Decrypt at Korea Blockchain Week on Wednesday, where he discussed global regulatory changes.
“Major jurisdictions around the world have set a minimum benchmark for what a well-regulated stablecoin should look like,” Chan said. “The one that hasn’t fully implemented it yet is the United States at the national level.”
This runs counter to other regulations around the world, including the EU’s MiCA rules and Hong Kong’s stablecoin framework, which have begun to establish a unified national approach for these regions.
In the United States, many states regulate stablecoin issuers under their existing money transmission laws, which also apply to payment services like Apple Pay, Google Pay, and PayPal.
These issuers must obtain currency licenses in individual states, leading to a fragmented landscape that increases compliance costs, hampers innovation, and complicates scaling across the United States.
“What’s important is that the United States modernizes and has a structure to define what a well-regulated stablecoin looks like,” he said.
In July 2023, the United States House of Representatives Committee on Financial Services passed a bipartisan stablecoin bill known as the Clarity for Payment Stablecoins Act of 2023.
The bill aims to create a regulatory framework for stablecoins in the United States, addressing issues such as consumer protection, financial stability, and the roles of federal and state regulators.
Although it passed the committee, the bill will still have to go through other legislative processes, including approval by the House and Senate, before becoming law.
The problem is that even with bipartisan agreement on the policy aspects of the bill, the political process in the United States involves negotiating, haggling and dealing with other unrelated issues to gain enough support to move the bill through Congress, Chan said.
This “issue bargaining” refers to the compromises and agreements made to advance legislation, even when there is consensus on the policy itself.
“That’s American politics: There’s politics, and then there’s politics,” said Chan, whose company, Circle, is best known for issuing the second-largest stablecoin on the market, USDC, which is pegged to the U.S. dollar.
Asked whether he thought the upcoming U.S. election in November would jeopardize the outcome of clearer rules on cryptocurrencies, including passage of the stablecoin bill, the leader said the moment represents a chance to reset priorities and reshape the national debate.
“For those of us following these conversations, we can see this convergence,” Chan added.
Chan highlighted Sen. Chuck Schumer’s (D-NY) announcement last month, where he pledged to adopt cryptography legislation by the end of the year.
While further details on what that looks like were not provided at the time, Chan said Schumer’s “bold move” to announce it nonetheless demonstrated a shift in political consciousness surrounding crypto.
“We have a lot of private companies that are working with us and also talking to regulators. This is not a conversation that we can have alone,” he said. “It’s really important to understand how this works for us legally. What kind of risk are we taking?”
It is also important for regulators to have some visibility into the market, he added, stressing that while it was essential to “push the boundaries” in terms of innovation, it was also important not to go too far beyond the rules.
“It’s a very, very difficult thing,” Chan said.
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