Tim Massad, who served as chair of the Commodity Futures Trading Commission until 2017, said the United States is too slow in developing a plan to modernize its payment systems.
In a Wednesday hearing of the Joint Economic Committee on the role of digital assets in government, Massad said a central bank digital currency, or CBDC, could be one solution for the United States to improve its existing payments systems, which he referred to as “slow” and “expensive.” In addition, the former CFTC chair said while stablecoins could be used for this purpose, they also presented some of the most urgent challenges for U.S. regulators and pose significant risks.
Massad said that people using stablecoins like Tether (USDT) to move funds between exchanges was a good example of why the U.S. payment system needs to be modernized. However, he added the stablecoin issuer’s reserves were likely not invested in “highly safe liquid assets” like the dollar and thus not insured in the same way as funds in traditional financial institutions. The former CFTC head said his recommendation would be to adopt “bank-like” regulations but also prevent issuers from making loans to eliminate the need for deposit insurance.
“CBDCs, stablecoins and digital assets generally are often cited as a means to achieve greater financial inclusion, and we should consider their potential for doing so,” said Massad. “We should act now to improve access to financial services through other means as well — the need is too great.”
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Coin Center director of research Peter Van Valkenburgh, also in attendance at the hearing, called stablecoins an “interesting area” in the crypto space but voiced concerns about the seeming lack of regulatory clarity for issuers.
“There are certainly some stablecoin issuers who are violating the law,” said Van Valkenburgh, adding:
“There are also regulated stablecoin issuers and there is also the possibility of creating more of a federal home for regulation of stablecoins. We don’t have a legal gap there, I think — we just have an enforcement gap.”
The comments from both Van Valkenburgh and Massad come following a report from the President’s Working Group on Financial Markets suggesting that stablecoin issuers in the U.S. should be subject to “appropriate federal oversight” akin to that of banks. The group said legislation is “urgently needed to comprehensively address the prudential risks posed by payment stablecoin arrangements.”