Lawmakers have formed a committee to discuss needed legislation on stablecoins and market structure.

Updated Feb 27, 2025 1:14 AM UTC Published Feb 27, 2025 1:10 AM UTC

Key points:

• Regulation of stablecoins will be the first issue on the Senate Banking Committee's agenda in the context of cryptocurrencies.
• The former CFTC chairman noted that initiatives to pass market structure legislation should be delayed for several years.
• Senator Mark Warner has expressed concern over the lack of customer identification procedures in the stablecoin space.

Stablecoins and the role of Congress in developing future digital asset legislation were the focus of discussion at one of the Senate Banking Committee's first hearings on the possibility of creating a regulatory framework for cryptocurrencies.

Wednesday's hearing was intended as a starting point for further congressional action on digital asset regulation and was the first held by the Banking Committee's new Digital Assets Subcommittee, led by Wyoming Republican Rep. Cynthia Lummis, a noted supporter of cryptocurrencies.

“We are on the cusp of creating a bipartisan legislative framework for both stablecoins and the market structure,” Lummis said in her opening remarks, referring to the bill she co-introduced with New York Democrat Kirsten Gillibrand as a natural counterpart to the House Financial Innovation and Technology Act.

Still, she said stablecoins would be the first item on the committee's agenda, consistent with statements from David Sachs, the White House's lead on cryptocurrency and artificial intelligence, and South Carolina Republican Tim Scott, who chairs the Senate Banking Committee.

Former CFTC Chairman Timothy Massad, one of four witnesses at the hearing, urged lawmakers to focus on stablecoin legislation and put off any efforts to structure the market “for a few years.”

“For the past four years, the crypto industry has been calling on the SEC and CFTC to develop rules and guidelines rather than regulate through enforcement; that’s what’s happening now,” he said. “The SEC has put enforcement cases on hold and created a task force to address these issues. We need to let these regulatory initiatives play out before rushing to overhaul the securities laws.”

He added that current proposals to update market structure rules to include cryptocurrencies could “create more confusion than clarity,” particularly in the context of determining how a digital asset can be considered a security, a commodity, or something else.

These proposals could potentially undermine existing securities laws, particularly as they relate to decentralized finance.

“The term is used to describe a lot of things that are not decentralized,” Massad continued. “There are almost always vectors of control. Even if a process is decentralized or automated, that doesn’t free it from the need for regulation.”

Virginia Democrat Mark Warner asked panelists to consider whether stablecoin users should conduct know-your-customer procedures, noting that the issuer can conduct KYC, but the stablecoin can be transferred between wallets without intermediate KYC procedures.

“I’m committed to having an effective regulatory framework, but I’ve seen — as have others who have spoken on the secret side — a lot of the negative aspects,” Warner said. “So help me figure out, and I’ll admit [to] some people that the anonymity and disintermediation role that blockchain plays is important, but how do we establish some minimum protections from the issuer all the way through to fiat conversion?”

Lightspark co-founder and chief legal officer Jai Massari noted that while standalone wallets do not perform KYC, “there is an on-chain

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