The House Committee on Financial Services is holding a hearing on 11 March 2025 on Navigating the Digital Payments Ecosystem: Examining a Federal Framework for Payment Stablecoins and Consequences of a U.S. Central Bank Digital Currency and to discuss the proposed STABLE Act legislation.

Caroline Butler, global head of Digital Assets at BNY, said in her written testimony that blockchain technology has the potential to serve as an additional payment rail with payment stablecoins having the potential to unlock greater utility of assets, enhance resiliency, and drive operational efficiencies.

Butler is co-chair of the Digital Asset Markets Subcommittee (DAMS) to the CFTC’s Global Markets Advisory Committee, which  developed a digital assets classification approach and taxonomy. This defines stablecoins as privately-issued tokens that aim to maintain a stable value relative to a peg specified by a reference asset(s) and that are designed to minimize value fluctuations relative to these reference assets(s). Stablecoins must also be referenced to at least one or more assets specified under the specific regulatory framework, including for example, cash and securities (e.g., low risk, high-quality liquid assets such as US Treasury bills).

Butler said: “There is a demand for “always on” cash to facilitate transactions that occur on a blockchain, or even to serve as the on and off ramps of such transactions into fiat. Stablecoins are one way that role can be performed.”

In the absence of a unified federal framework , participants in stablecoin arrangements look to various state and federal laws, licensing, and chartering regimes. She commended the committee for working to develop a targeted federal framework that addresses who can issue stablecoins, who can hold stablecoin reserves and the types of assets that comprise those reserves, as well as asset segregation, reserve attestation, and transparency.

Bank participation in stablecoin arrangements imparts trust and resiliency in the overall financial system according to Butler.

“We appreciate legislation that codifies the permissibility of banks to engage in stablecoin-related activity, including as an issuer of a stablecoin and/or as the custodian for the reserve,” she added. “This clarity will help serve as a catalyst for banks to explore and evaluate opportunities in this space based on their business models, client needs, and use cases.”

In addition, she recommended that there should be a level playing field for both banks and non-bank stablecoin issuers and that legislation should not impose barriers to typical bank custodial arrangements.

Butler said: “It is critical for legislation to be technology neutral in that it adheres to the principle of same activity, same risk, same regulation.”

Charles Cascarilla, co-founder and chief executive of Paxos, a regulated financial institution which provides blockchain technology, also testified before the committee. Paxos provides stablecoin and tokenization infrastructure to companies including PayPal, Robinhood and Interactive Brokers.

Cascarilla said in his written testimony: “Stablecoins are a national imperative for the United States to modernize our financial system and preserve the dollar’s global dominance. To achieve this, the U.S. must set global standards that enable broad financial adoption and interoperability.”

He described stablecoins as the next evolution of money movement using the analogy of moving from physical mail to email

“The global economy today demands secure, programmable money that moves instantly, 24/7, at near-zero cost,” added Cascarilla. “This is not science fiction, it exists today thanks to blockchain technology.”

Stablecoins offer practical advantages such as instant settlement, which eliminates capital constraints, and could free up billions of dollars currently trapped in limbo according to Cascarilla. He also highlighted that other jurisdictions including Japan, Singapore, the European Union and the United Arab Emirates  have already established clear, productive regulatory frameworks for digital assets and attracted capital, talent and innovation.

“Citi estimates that up to $5 trillion in global assets could move into stablecoins and other digital money formats by 2030 – a massive increase from the roughly $200bn in dollar-backed stablecoins currently in circulation,” he added. “If we fail to act, the United States is in danger of becoming the rust belt of the financial industry.”

Patrick Collison, founder and chief executive of Stripe, which provides payment infrastructure, said in his written testimony that stablecoins can solve problems that American businesses face related to cost, speed, and accessibility of global payments. For example, stablecoin transactions settle nearly instantly, 24/7/365 and smart contracts, and other forms of native programmability, can enable new business models and applications that would be difficult or costly to implement with traditional financial rails.

In October 2024 Stripe announced its acquisition of stablecoin platform Bridge and Collison said it has helped accelerate the use of dollar-backed stablecoins as a complement to traditional payment rails.

“This acquisition was driven by our recognition that stablecoins represent the next significant innovation in the evolution of money and payments,”  Collison added.

He recommended that any framework should ensure payment system access by allowing stablecoin issuers and custodians to readily connect with existing payments infrastructure in a technology neutral manner so there is interoperability between traditional financial systems and stablecoin networks.

Randall Guynn, chairman of the financial institutions group at law firm Davis Polk & Wardwell, said in his written testimony that payment stablecoins are a modern, digital version of private money.

“If a permitted stablecoin issuer has a properly calibrated reserve of liquid assets, capital buffer and no material amount of liabilities other than its stablecoin liabilities, as contemplated by the STABLE Act, its payment stablecoins should be as safe as insured bank deposits and central bank money,” said Guynn.

In contrast, he argued that a central bank digital currency would be a new form of public money that would compete with payment stablecoins and other forms of private money. In addition, the proponents of a U.S. CBDC have not demonstrated that the alleged benefits of a CBDC are greater than its costs and risks in terms of threats to financial privacy, financial freedom, financial stability, cybersecurity losses and other risks.