Warren: Current Stablecoin Bill Risks Americans’ Money, our Economy, and our National Security
“We can see a bill get a wide majority of votes if it protects consumers, if it protects our national security, and if it protects our nation’s financial stability. But this bill, in its current form, doesn’t do any of that.”
Warren on necessary updates to bill: “Not one of the fixes that we’re talking about here would end stablecoins. Not one of the fixes would restrain innovation. Not one of these fixes would be hard to put in place.”
Washington, DC – Senator Elizabeth Warren (D-Mass.), Ranking Member of the Senate Banking, Housing, and Urban Affairs Committee, made clear that if the current version of the GENIUS Act is not fixed, it will put Americans’ money, the economy, and national security at risk.
Below are Ranking Member Warren’s opening remarks:
Thank you, Mr. Chairman. Many of us are prepared to support a sensible stablecoin bill. We can see a bill get a wide majority of votes if it protects consumers, if it protects our national security, and if it protects our nation’s financial stability. But this bill, in its current form, doesn’t do any of that.
First, the bill ignores basic consumer protections that apply to every other financial product available in America. If you’re sending a U.S. dollar from your PayPal wallet, and you get scammed, the CFPB has the authority, right now, to help you get your money back. But if this bill passes, and you’re sending a stablecoin from your PayPal wallet and you get scammed, you may be out of luck.
In fact, the bill even invites scammers into the market by refusing to prohibit people convicted of fraud and money laundering from owning stablecoin companies. Sam Bankman-Fried could buy a stablecoin company from prison and regulators would have no legal grounds to stop him under this bill.
We need to fix that, and I don’t understand why there would be anyone—Democrat or Republican—who wouldn’t want to do that.
Second, the bill lacks basic national security protections that again, apply to every other type of financial transaction in America.
Without changes, this bill will supercharge the financing of terrorism.
It will make sanctions evasion by Iran, North Korea and Russia easier. And it will help out international gangs that are moving fentanyl into the United States. It even provides a boost for the sale of child pornography.
Last week, an industry report called stablecoins “the new kingpin of illicit crypto activity.”
Let me give one example: The bill does not authorize the United States to enforce our existing sanctions when North Korea or Iran buy nuclear materials using dollar-backed stablecoins instead of dollars.
We need to fix that. And I don’t understand why there would be anyone—Democrat or Republican—who wouldn’t want to do that.
Third, the bill lacks basic safeguards necessary to ensure that stablecoins don’t blow up our entire financial system. Under this bill, stablecoin issuers can invest in risky assets, including the very assets that were bailed out in 2008 and again in 2020. And anyone who thinks the US taxpayer won’t be called on, directly or indirectly, to bail out these guys out is kidding themselves. Circle, one of the largest stablecoin companies in the world, would have blown up in 2023 if regulators hadn’t bailed out its $3.3 billion of deposits at Silicon Valley Bank. This bill begs for more bailouts.
We need to fix that. And I don’t understand why there would be anyone—Democrat or Republican—who wouldn’t want to do that.
Finally, this bill does something that Democrats and Republicans have usually linked arms to stop throughout history: it lets a giant commercial company create its own currency, giving it the massive economic power that is usually reserved for publicly chartered banks.
This means that this bill gives Elon Musk the chance to issue his own X Money currency, monetize our most sensitive transactions data, punish people who speak out against him by choking off their access to his payments system, use his currency to undercut the US dollar, and destabilize our financial system when it all goes bust.
This bill opens the door for the richest man in the world to build a global empire that could begin to supplant the functions of the U.S. government.
And we really need to fix that. I don’t understand why there would be anyone —Democrat or Republican— who wouldn’t want to do that.
Not one of the fixes that we’re talking about here would end stablecoins. Not one of the fixes would restrain innovation. Not one of these fixes would be hard to put in place.
Because not a single one of these gaps in the bill is necessary to create a reasonable federal regulatory regime for stablecoins. Several of them have been included in earlier bipartisan stablecoin proposals introduced in Congress, and each can be addressed by adopting straightforward amendments that apply the same basic rules in the stablecoin market as we have for every other financial product.
Let me be direct. We all know that there are stablecoin issuers making money off facilitating crime and funding Iran and North Korea. We know there are stablecoin issuers making money off cheating consumers. And we’re pretty sure that Elon Musk would love to issue his own currency to compete with the U.S. dollar.
But we were not sent here to work for North Korea, or Iran, or Elon Musk, or a bunch of scammers. Innovative blockchain companies that want regulatory certainty and a vibrant and innovative marketplace deserve better than we’re giving them in this bill and so do the American people.
If we can find compromises on these issues today, I’m prepared to support this bill. If not, I will work to defeat it. Because we are not going to get a second chance to do this right, and we will all have to live with the consequences of what we do here today.
This Committee will also be considering the FIRM Act during today’s session. I have deep concerns about that bill as well. I am glad that Republicans and Democrats agree that Congress should be taking steps to address debanking, and I had hoped, Mr. Chairman, that we could have worked together on meaningful legislation to do that.
However, the bill we see today would hamstring regulators in their efforts to preserve the safety and soundness of our banking system without addressing the underlying causes of debanking.
Republicans and Democrats need to work together to stop unfair customer account closures, but this bill isn’t it.
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