Fork in the Road: Navigating the Future of Stablecoin Regulation

The advent of Voice over Internet Protocol (VoIP) in the 1990s revolutionized long-distance calling by significantly reducing costs. Today, a similar transformation is underway with the emergence of a global, embedded financial layer on the internet, which is driving money transfer costs towards zero. Stablecoins are at the forefront of this evolution, with transaction volumes exceeding $27 trillion in 2024, surpassing combined Visa and Mastercard volumes. As US lawmakers deliberate on stablecoin legislation, their goal should be to reinforce the dollar's dominance as a global reserve currency while extending its reach into underserved areas. This can be achieved by fostering fair and free global competition, rather than adopting a closed-market approach that privileges US-based issuers. By allowing international players to compete, the US can create a dynamic ecosystem that promotes excellence through competition. The notion that only US-based issuers maintain sufficient reserves and adhere to anti-money laundering regulations is a misconception. Responsible stablecoin issuers exist globally, and overly restrictive regulation could have unintended consequences, such as decreased demand for US Treasuries and a less competitive stablecoin market. It is crucial for Congress to craft a regulatory framework that champions competition, transparency, and innovation, rather than taking a protectionist approach that stifles progress.