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n Wednesday, the STABLE Act, a crucial legislative measure concerning stablecoins, successfully advanced through the House Financial Services Committee. This development enhances the likelihood that Congress could enact a law this year that cements the position of stablecoins as a vital instrument in the global financial landscape. Proponents argue that stablecoins are essential for preserving the dollar’s dominance as the world’s leading currency while also enabling more efficient, cost-effective, and secure transactions for individuals worldwide.
Despite receiving bipartisan support, the legislation faces substantial pushback, particularly from Democratic members who voice concerns about potential systemic risks and conflicts of interest. This is particularly relevant in light of the Trump family’s crypto venture announcing its own stablecoin. Critics also warn that the legislation could inadvertently facilitate major tech giants like Meta, X, and Amazon in launching their proprietary currencies, thus amplifying corporate influence.
“While this initiative is being framed as a cryptocurrency bill, it’s important to understand that large tech companies may be the primary beneficiaries,” states Hilary Allen, a professor at the American University Washington College of Law and a well-known skeptic of cryptocurrency regulations in Washington, D.C.
Read More: What are Stablecoins?
Both the House and Senate have successfully passed their respective stablecoin bills—the STABLE and GENIUS Acts—through committee stages. These proposals establish regulatory frameworks for stablecoins, specifying the types and amounts of reserves that issuers must hold. The next phase involves harmonizing these two bills with the aim of presenting a unified version to President Trump by summer. Several financial institutions, including Bank of America, have expressed interest in launching their own stablecoins contingent on the legislation’s passage.
However, the current language in both bills permits non-financial entities to issue stablecoins via subsidiaries. Earlier drafts had limited such activities to banking institutions, but neither the STABLE nor GENIUS Act imposes these restrictions. In fact, the STABLE Act allows any nonbank entity to issue a stablecoin given they receive authorization from a federal regulator.
Allen notes that this opens avenues for tech figures like Elon Musk and Mark Zuckerberg to establish their own stablecoins. Both have shown significant interest in the payments sector—Musk’s X has obtained money transmitter licenses across various states, while Facebook previously tried to launch its own cryptocurrency, Libra, in 2019, facing considerable backlash and regulatory scrutiny.
“These major tech platforms have a keen interest in payment systems because they thrive on data collection and monetization—and transaction data is particularly valuable as it reveals consumer purchasing habits,” explains Allen. “As more transactions migrate to these tech platforms, it amplifies their already substantial influence in society and places them at the center of our financial framework.”
Allen paints a hypothetical scenario where Amazon issues its own stablecoin. This could lead to widespread adoption among Amazon employees, Whole Foods shoppers, and readers of the Washington Post, resulting in increased reliance on stablecoins over traditional banking options. “This presents serious risks because banks use customer deposits to fund loans that drive economic activity, whereas stablecoin reserves would likely remain idle,” she warns. “Funds that could have been actively contributing to the economy would just sit with Amazon.”
Stephen Lynch, a Democrat from Massachusetts, echoed similar misgivings during the markup of the STABLE bill, cautioning that stablecoins could “compete with bank deposits and diminish banks’ capacity to offer loans to consumers and small businesses.”
In October 2023, Rohit Chopra, director of the Consumer Financial Protection Bureau under President Biden, warned that if Big Tech firms were to assume banking roles, they would have a strong incentive to scrutinize every detail of consumer transactions. He also highlighted the potential for personalized pricing algorithms that could arise from such oversight.
Arthur Wilmarth, a professor emeritus at George Washington University Law School, pointed out that consumers utilizing stablecoins might lack adequate fraud protection. He referenced China’s experience, where companies like Tencent and Alibaba became dominant players in the payments market, gaining undue influence over regulators, which led Beijing to tighten its grip and assert control over those companies’ operations.
During Wednesday’s markup, Rep. Maxine Waters proposed an amendment aimed at maintaining a clear distinction between commerce and banking, asserting that the current language of the bill could enable figures like Elon Musk and corporations like Walmart to create their own currencies. In response, Wisconsin Republican Bryan Steil, a co-author of the bill, contended that the amendment would hinder innovation. Republican co-author French Hill from Arkansas and the Chair of the House Financial Services Committee expressed optimism that Congress would arrive at a “thoughtful solution” to Waters’ concerns while also considering broader legislation for the cryptocurrency sector. Ultimately, the amendment did not pass.
“I view this stablecoin legislation as a potentially hazardous opportunity for large tech firms to significantly penetrate the banking sector,” Wilmarth concludes. “Once that door is opened, it will be nearly impossible to close it again.”
