The STABLE Act, a stablecoin measure, moved through the House Financial Services Committee on Wednesday, raising the possibility that Congress may enact legislation this year that will solidify stablecoins as a worldwide financial instrument. Stablecoin proponents contend that while enabling more safe, affordable, and free transactions for individuals all over the world, they also assist the United States in maintaining the dollar’s global primacy.
Legislation pertaining to stablecoins has garnered bipartisan support, but it has also seen targeted opposition, especially from Democrats who are worried about systemic dangers and conflicts of interest—especially after the Trump family’s cryptocurrency company revealed plans to launch its own stablecoin. Another potentially serious side effect that critics caution against is that such laws may allow Big Tech companies like Amazon, X, and Meta to establish their own privatized money systems, therefore strengthening corporate authority.
In certain respects, this is a crypto bill, as it is being presented. Hilary Allen, a professor at American University Washington College of Law and a well-known crypto skeptic in Washington, D.C., however, thinks that most people are unaware that the largest beneficiaries of this trend are probably huge tech companies.
Out of committee, the STABLE and GENIUS Acts, two stablecoin measures, were approved by the House and Senate, respectively. The legislation specify the types and quantities of reserves that stablecoin issuers must hold on hand, as well as the regulations that will govern stablecoins. The two versions will now be able to be reconciled by the House and Senate in an effort to deliver a single, cohesive bill to President Trump before the summer. A number of banks, notably Bank of America, have indicated that they would like to introduce their own stablecoin if legislation is approved.
However, non-financial businesses would also be permitted to establish their own stablecoins through subsidiaries under the current wording of the two bills. Although non-banking entities were forbidden from doing so by earlier stablecoin proposals, this is not a provision in either the STABLE or the GENIUS Act. As long as they obtain permission from a federal regulator, any nonbank can actually issue a stablecoin, according to the STABLE Act.
Big Tech tycoons like Elon Musk and Mark Zuckerberg may then develop their own stablecoins, according to Allen. The payments industry has long piqued their interest; Musk’s X has obtained money transmitter licenses in numerous states, and Facebook attempted to introduce its own cryptocurrency, Libra, in 2019 but was met with harsh criticism and regulatory scrutiny.
Due to their involvement in data collection and monetization, these large digital platforms have shown a great deal of interest in processing payments. According to Allen, payments data is especially useful since it demonstrates what you’re truly purchasing. They will become the focal point of our financial system and strengthen the already highly systemically significant actors in our society as more and more transactions move onto these large tech platforms.
Allen outlines a fictitious situation where stablecoins are issued by Amazon. It is conceivable that they could increase the number of people who use stablecoins instead of bank accounts by using them among Whole Foods customers, Washington Post subscribers, and Amazon staff and users. “That’s really bad news because stablecoin reserves just sit there while banks take the money deposited with them and loan them out into the economy,” Allen explains. Thus, funds that were previously put to good use in our economy are now simply resting with Amazon.
Similar remarks were made by Massachusetts Democrat Stephen Lynch during the markup of the STABLE bill on Wednesday. Lynch cautioned his colleagues that stablecoins will compete with bank deposits and make it more difficult for banks to lend to main street businesses and customers.
President Biden’s Consumer Financial Protection Bureau chief, Rohit Chopra, issued a warning in October 2023 that if Big Tech companies took over banking operations, they would have a tremendous incentive to monitor every part of a customer’s transactions. Additionally, he said, they could create customized pricing algorithms.
Stablecoin users would not be protected against fraud, according to Arthur Wilmarth, an emeritus professor at George Washington University Law School. He also uses China as an example, pointing out how Tencent and Alibaba rose to prominence as payment companies and abused their power over regulators, which prompted Beijing to tighten its control and exert more influence over the decisions made by those companies.
Rep. Maxine Waters argued at Wednesday’s markup that the bill as drafted may allow Walmart, Elon Musk, and others to issue their own currencies, so she pushed for an amendment that would preserve the separation of banking and commerce. In response, Wisconsin Republican Bryan Steil, who co-wrote the bill, said the change would result in a “stifling of innovation.” As the House Financial Services Committee considers a wider crypto market structure measure, co-writer French Hill, a Republican from Arkansas and the chair of the committee, expressed his confidence that Congress might find a “thoughtful solution” to Waters’ concerns. Then, the amendment was turned down.
According to Wilmarth, this stablecoin legislation presents a very risky opportunity for big tech to make a significant entry into the banking industry. He believes it will be nearly difficult to close the door ever again after that.
