Crypto industry advocates are hopeful for increased regulatory clarity under the Trump administration, but are urging policymakers to act quickly to reverse the regulation-by-enforcement tactics of the previous government.
These calls were made during a hearing on February 11 by the US House Subcommittee on Digital Assets, Financial Technology and Artificial Intelligence. The subcommittee heard from five witnesses on the future of digital assets regulation.
Jonathan Jachym, deputy general counsel at Kraken, was the first to speak and focused on the need for “fundamental rules for centralized intermediaries”. Jachym stated that effective market structure policy should start with Congress granting spot market authority to the Commodity Futures Trading Commission (CFTC), which would then regulate centralized intermediaries and secondary market transactions in digital commodities. He emphasized the importance of avoiding the application of 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 recent progress under President Donald Trump, Kim stated that “more still needs to be done […] to undo the significant damage and uncertainty caused by the regulation-by-enforcement approach of the previous administration”. He specifically criticized former Securities and Exchange Commission Chair Gary Gensler, stating that during Gensler’s tenure, the SEC initiated over 125 enforcement actions related to digital assets but failed to provide clear guidance or rules to determine when an asset qualifies as 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 draft bill aims to provide clearer regulatory guidance for stablecoin issuers, building on the efforts of former Committee Chair Patrick McHenry.
Former CFTC Chair Timothy Massad, who currently represents Harvard University’s Kennedy School of Government as a director of the Digital Assets Policy Project, described stablecoins as “the most useful application of blockchain technology to date”. However, he criticized the STABLE Act for various reasons. Massad mentioned that the legislation poses a high risk of weak state standards and lacks an adequate review process, as there is no ongoing federal supervision of state issuers. He also noted that the legislation does not address the consequences if a stablecoin issuer goes bankrupt and does not do enough to tackle the risks of financial crime and sanctions evasion. Additionally, Massad pointed out that the STABLE Act might not have a significant impact on Tether, the company behind the $140 billion USDt stablecoin, as there is no enforcement mechanism or penalties for issuing an unchartered stablecoin. Lastly, Massad argued that the act does not give regulators enough authority and discretion, considering the potential growth and unpredictable nature of stablecoin markets.
According to CoinMarketCap, stablecoins, including USDt, Circle’s USD Coin (USDC), PayPal USD (PYUSD), and other competitors, have a combined valuation of $230 billion.