Congress delivered a watershed victory for the crypto industry on Thursday, passing the first federal legislation to regulate stablecoins and clearing the way for broader use of the technology in everyday finance.
Backed by Republicans and championed by President Donald Trump, the bill imposes federal or state oversight on dollar-linked tokens that can move around the clock and across platforms. Supporters say it could unlock faster, cheaper forms of payments — and bring legitimacy to a $265 billion market that Citigroup Inc. analysts expect could swell to $3.7 trillion by 2030.
The measure, which passed the House 308-122 with broad bipartisan support after clearing the Senate, is now on track to become law. Trump personally lobbied Republican lawmakers to support it.
The legislation marks a political coming-of-age for the digital assets industry, which rebounded from the confidence-rattling collapse of Sam Bankman-Fried’s FTX crypto exchange less than three years ago to pour hundreds of millions of dollars into the election last year of friendly lawmakers.
The stablecoin bill is the centerpiece of a legislative push Trump has dubbed “Crypto Week.” Earlier Thursday, the House also passed a broad crypto market structure bill that still has to be considered by the Senate.
Explainer: What Are Stablecoins? How Are They Being Regulated?
Democratic critics such as Senator Elizabeth Warren and Representative Maxine Waters warned the new stablecoin regulatory regime won’t do enough to protect consumers and could lead to pressure for government bailouts if issuers of the digital tokens fail.
But the nation’s most influential bankers are already grappling with the challenge the new measure is likely to accelerate. On earnings calls this week, JPMorgan’s Jamie Dimon, Bank of America’s Brian Moynihan and Citigroup’s Jane Fraser each described the upstart “digital dollar” as a potential threat to the banking industry’s grip on payments — and signaled they’re preparing to respond.
The digital tokens could potentially eat at bank deposits, as some consumers move money into stablecoin accounts. It could also broaden the stablecoins’ use in cross-border money transfers and in payments, and open the way for everyone from banks to card networks to technology firms issuing their own stablecoins. In recent weeks, a slew of major banks including JPMorgan said they are looking at being involved in stablecoins.
Read more: Wall Street Signals Stablecoin Fightback as Crypto Bills Advance
US-based crypto companies that issue dollar-denominated stablecoins such as Circle Internet Group Inc. may be in the most immediate position to gain.
While Circle finished Thursday up less than 1%, it has jumped 25% to $235.08 this week. Coinbase Global Inc., which has a revenue sharing agreement with Circle, rose 3.2% to $410.75, a record high.
Bitcoin was down slightly in the last 24 hours, after hitting its all-time high of about $123,000 on July 14, partly on optimism about the stablecoin bill’s prospects.
Stablecoins so far have largely been used for transactions related to the cryptocurrency market rather than business payments.
The legislation “provides the stablecoin industry with the degree of legitimacy they have been craving” said Eswar Prasad, a senior fellow at the Brookings Institution. “And the bonus is that it comes with what I view as relatively light-touch regulation.”
The measure sets regulatory rules for dollar-backed stablecoins, including a requirement for firms to hold dollar-for-dollar reserves in short-term government debt or similar products overseen by state or federal regulators.
Trump and his family have ties to a series of digital-asset businesses including World Liberty Financial, a platform that has its own branded token as well as a stablecoin.
Crypto ventures have added at least $620 million to Trump’s personal fortune in the span of months, according to the Bloomberg Billionaires Index.
Read more: Trump’s $620 Million of Quick Crypto Riches Reshapes His Fortune
Some Democrats unsuccessfully tried to add a provision to the legislation that would bar elected officials such as Trump and their families from stablecoin business ventures.
–By Yash Roy, Olga Kharif and Emily Mason (Bloomberg)
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