Congresswoman Maxine Waters (D-CA), Chairwoman of the House Committee on Financial Services, gave the following statement at a full Committee virtual hearing entitled, “Digital Assets and the Future of Finance: The President’s Working Group on Financial Markets’ Report on Stablecoins.”
Today’s hearing is part of this Committee’s ongoing review of digital assets. This Committee has been at the forefront of Congressional oversight of cutting-edge technology in the financial services. Through our Task Forces on Artificial Intelligence and Financial Technology, and our Digital Assets Working Group of Democratic Members, we have continued to explore how emerging technologies impact our financial system, including the emergence of cryptocurrencies.
Soon after learning of Facebook’s plans to launch a global stablecoin in 2019, I asked Facebook to immediately pause its work until regulators and Congress had an opportunity to review the project. I invited Mark Zuckerberg to testify at a hearing where we scrutinized their plans, and I led a bipartisan delegation to Switzerland to meet with officials to discuss their plans to oversee the Libra Association, which was later rebranded as “Diem”. After deep scrutiny from me, the Members of this Committee and our nation’s regulators, Diem relented and recently sold its assets, effectively and I hope, permanently, ending Facebook’s misadventures in cryptocurrency. I am pleased that our Committee’s leadership on this issue has made an impact, including helping to focus the attention of regulators on these issues.
Last December, the Committee convened a first-of-its-kind hearing with a panel of cryptocurrency CEOs, building off of earlier subcommittee hearings, to understand where crypto products, services, and technologies were heading, and how they should comply with applicable financial regulations.
From the start, our Committee has recognized that the explosive growth of digital assets presents a variety of risks and opportunities for our economy and communities, especially communities of color, that have been left behind by our financial system. Their voices must be heard in the decision-making and regulatory process.
Today's hearing focuses on stablecoins, which are a subset of cryptocurrencies pegged to a reserve asset such as the U.S. dollar. Stablecoins are primarily used in the United States to facilitate trading, lending, or borrowing of other cryptocurrencies. Troublingly, investigations have shown that many of these so-called stablecoins are not, in fact, backed fully by reserve assets. Moreover, due to speculative trading and the lack of investor protections could even threaten U.S. financial stability. The President’s Working Group on Financial Markets (or PWG) published its report on stablecoins, reviewing the regulatory landscape of this fast-growing type of cryptocurrency. The Report outlined various risks that stablecoins may present to market integrity, investor protection, and illicit finance. The Report also highlighted systemic risk concerns due to the threat of stablecoin runs when they are not fully backed, concentration of economic power concerns, and regulatory gaps in effectively overseeing the stablecoin market. These risks could harm both ordinary users of these products as well as our financial system overall, and the PWG recommended that Congress take action.
As more people invest in and use cryptocurrencies, including stablecoins, the Committee will continue its efforts to look at how they are affecting many aspects of our lives and our financial system. In particular, regulators and policymakers must work to ensure that any innovation in this space is responsible, that it provides robust consumer and investor protection, that it mitigates environmental impact, and that financial inclusion is front and center. We will also continue to investigate the development of a U.S. Central Bank Digital Currency that may provide a safe, stable, and secure method of instantaneous digital payment. I thank the Ranking Member for his recent letter on this Committee’s approach on digital assets, and I hope to continue working with him in a bipartisan way as we move forward.