`
A stablecoin bill recently progressed in the House Financial Services Committee, suggesting that Congress may soon pass legislation solidifying stablecoins as important financial instruments. Supporters claim this will help the U.S. maintain the dollar’s global prominence and facilitate cheaper, more secure transactions worldwide.
Despite bipartisan support, the legislation faces opposition, particularly from Democrats worried about systemic risks and conflicts of interest, especially after the Trump family’s crypto company announced plans for its own stablecoin. Critics also suggest that the legislation could allow Big Tech companies like Meta, X, and Amazon to create their own private currencies, increasing corporate power.
Hilary Allen, a professor at American University Washington College of Law, notes that the bill’s potential impact on large tech platforms is being overlooked.
Both the House and Senate committees have passed stablecoin bills, outlining regulations and reserve requirements for stablecoin issuers. The House and Senate will now try to reconcile the two bills to send a unified bill to President Trump for approval this summer. Several banks, including , are interested in launching their own stablecoins if the law passes.
However, the current versions of the bills would allow non-financial companies to create stablecoins through subsidiaries. Previous versions prohibited this, but neither the STABLE nor the GENIUS Act includes such a restriction. The STABLE Act even suggests that non-banks can issue stablecoins with federal regulator approval.
Allen suggests this could allow figures like Elon Musk and Mark Zuckerberg to create their own stablecoins. Both have shown interest in the payments sector, with Musk’s X pursuing licenses in many states and Facebook attempting to launch its own cryptocurrency, Libra, in 2019 before facing pushback and regulatory scrutiny.
Allen explains that Big Tech platforms are interested in payments because of the valuable data they can collect and monetize. As more transactions move to these platforms, these already significant players in society will become even more important in the financial system.
Allen presents a scenario where Amazon issues stablecoins and promotes their use among employees, users, Whole Foods shoppers, and Washington Post subscribers. This could lead people to rely on stablecoins instead of bank accounts, which Allen argues is detrimental because banks loan out deposits, while stablecoin reserves remain idle. This would mean money that was previously used productively in the economy would simply be held by Amazon.
Stephen Lynch, a Massachusetts Democrat, voiced similar concerns during the STABLE bill’s markup, warning that stablecoins would compete with bank deposits and hinder banks’ ability to lend to consumers and businesses.
In October 2023, Rohit Chopra, director of the Consumer Financial Protection Bureau under President Biden, warned that Big Tech firms controlling banking operations would have a strong incentive to monitor consumer transactions and develop personalized pricing algorithms.
Arthur Wilmarth, a professor emeritus at George Washington University Law School, says that stablecoin users would lack fraud protection. He also cites China, where Tencent and Alibaba’s dominance in payments led to undue influence over regulators, prompting Beijing to intervene and gain control over their decisions.
During the markup, Rep. Maxine Waters proposed an amendment to maintain the separation of commerce and banking, arguing that the bill could allow Elon Musk, Walmart, and others to create their own currencies. Rep. Bryan Steil argued that the amendment would stifle innovation. Rep. French Hill expressed hope for a thoughtful solution to Waters’ concerns while advancing a broader crypto market structure bill. The amendment was ultimately rejected.
Wilmarth concludes that the stablecoin legislation presents a dangerous opportunity for Big Tech to enter banking significantly, making it nearly impossible to reverse course.