Crypto industry advocates are hopeful that the Trump administration will bring improved regulatory clarity, but they are urging policymakers to act quickly to reverse the regulation-by-enforcement approach of the previous administration.
These calls were made during a hearing on February 11 by the US House Subcommittee on Digital Assets, Financial Technology, and Artificial Intelligence. Five witnesses spoke at the hearing about the future of digital assets regulation.
Jonathan Jachym, deputy general counsel at Kraken, was the first to speak and focused on the importance of establishing “fundamental rules for centralized intermediaries.” Jachym emphasized that effective market structure policy should start with the Commodity Futures Trading Commission (CFTC) being granted spot market authority by Congress. This would enable the CFTC to regulate centralized intermediaries and secondary market transactions in digital commodities. Jachym also stressed the need to avoid applying centralized rulebooks to decentralized protocols that lack centralized governance systems, infrastructure, or management.
Ji Hun Kim, president and acting CEO of the Crypto Council for Innovation, expressed similar sentiments to Jachym. Despite the progress made under President Donald Trump, Kim believes that more needs to be done to undo the damage caused by the regulation-by-enforcement approach of the previous administration. He criticized former Securities and Exchange Commission Chair Gary Gensler for bringing numerous enforcement actions related to digital assets without providing clear guidance or rulemakings to determine when an asset is a security.
On February 5, House Financial Services Committee Chair French Hill and Digital Assets, Financial Technology, and Artificial Intelligence Subcommittee Chair Bryan Steil released a draft version of the STABLE Act. This bill aims to provide clearer regulatory guidance for stablecoin issuers and builds upon the efforts of former Committee Chair Patrick McHenry.
Former CFTC Chair Timothy Massad, who currently represents Harvard University’s Kennedy School of Government, voiced support for stablecoins as the most useful application of blockchain technology to date. However, he believes that the STABLE Act falls short in several areas. Massad pointed out that the legislation carries the risk of weak state standards and lacks an ongoing federal supervision of state issuers. He also highlighted the need for provisions addressing what happens if a stablecoin issuer goes bankrupt and the risks of financial crime and sanctions evasion. Additionally, Massad pointed out that the act may have limited impact on Tether and lacks enforcement mechanisms and penalties. Lastly, Massad emphasized the need for regulators to have more authority and discretion, as stablecoins have the potential to become a significant market that will evolve in unpredictable ways.
According to CoinMarketCap, stablecoins, including USDt, USDC, PYUSD, and other competitors, have a collective valuation of $230 billion.