Amidst ongoing debates about the future of digital asset regulation, U.S. lawmakers are grappling with the intricacies of stablecoin regulation as Federal Reserve Governor Michelle Bowman testifies before the House Financial Services Committee. Bowman's testimony comes at a crucial juncture, with banks and crypto firms vying for favorable regulatory frameworks.
Bowman stated that she will work to establish new rules for banks and stablecoins, aiming to ensure healthy competition between Wall Street, fintechs, and crypto firms. She emphasized the importance of encouraging innovation responsibly and continuously improving the ability to supervise the risks to safety and soundness that innovation presents. She also noted that new technologies can create a more efficient banking sector and expand access to credit, leveling the playing field with fintech and digital asset companies.
Bowman's remarks follow the recent enactment of the Guiding and Establishing National Innovation for U.S. Stablecoins Act of 2025 (GENIUS Act), which establishes a framework for regulating stablecoins. The GENIUS Act defines stablecoins as digital assets maintaining a stable value relative to fiat currencies, primarily the U.S. dollar, and designed for payments and financial settlements. The Act mandates that stablecoin issuers must be licensed and approved, making it unlawful for unauthorized entities to issue stablecoins in the U.S.
The GENIUS Act requires stablecoin issuers to formally register and hold dollar-for-dollar reserves. This one-for-one reserve mandate ensures stability under normal circumstances but may not provide an additional liquidity buffer. It also establishes a new standardized framework for determining reserves, conducting audits, and enhancing transparency for investors and consumers.
The Act distinguishes stablecoins from securities and commodities, potentially eliminating ambiguity regarding their classification under the Securities and Exchange Commission (SEC) or Commodity Futures Trading Commission (CFTC). It also opens opportunities for banks and credit unions to issue their own stablecoins, further propelling cryptocurrency into mainstream usage.
However, the GENIUS Act is not without its critics. Some experts raise concerns about potential financial instability due to insufficient reserve requirements and a controversial statement that appears to prohibit any member of Congress or senior executive branch official from issuing a payment stablecoin during their time in public service. While this section is intended to prevent conflicts of interest, it raises questions about interpretation and enforcement.
In addition to Bowman's testimony and the GENIUS Act, a congressional report has recently accused the Biden administration of stifling the U.S. cryptocurrency industry through regulatory pressure and unclear rules. The report argues that actions by federal agencies echo Operation Choke Point, a controversial initiative during the Obama era that targeted legally operating businesses. It claims that uncertainty around cryptocurrency rules has caused significant disruptions in banking services for digital asset firms, with over 30 crypto companies and individuals losing banking relationships due to unclear guidelines and informal signals from regulators.
Looking ahead, FDIC Acting Chairman Travis Hill will submit the first GENIUS Act stablecoin rules proposal to Congress by December, aiming to establish federal regulatory frameworks for issuers, including capital and liquidity standards. Congress has also accelerated work on new digital asset rules and is considering a large market structure bill to clarify the roles of market regulators and set consistent standards for trading platforms.
