(Bloomberg) — Financial technology executives plan to promote dollar-backed stablecoins as a way to lower transaction costs for US consumers and businesses at a key congressional hearing on Tuesday as political momentum builds for regulatory legislation to expand use of the tokens.
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“A blockchain-based dollar can be transferred instantaneously, at virtually no cost, and held by anyone with simply an internet connection and smartphone,” Charles Cascarilla, chief executive officer of stablecoin issuer Paxos Inc., said in prepared testimony released in advance.
Cascarilla assailed the current bank-based financial system as amounting to a “regressive tax” laden with “ATM charges, overdraft penalties and wire transfer costs that disproportionately burden working families.”
Backers view stablecoins as disruptors of existing payment systems and claim that the tokens allow faster and cheaper transactions. But the tokens lack the guardrails of traditional banking — like FDIC insurance — and customers could be left in the lurch if a stablecoin fails. The US government could then face demands for a costly taxpayer bailout.
Legislation regulating dollar-backed stablecoins is gaining support in Congress as President Donald Trump throws his political weight into the effort.
Trump praised efforts to provide regulatory certainty for stablecoins at last week’s White House crypto summit, and Treasury Secretary Scott Bessent said stablecoins would help ensure the “dominance” of the US dollar globally.
Earlier: Trump’s Bitcoin Reserve Disappoints Market, Weighs on Crypto
The fast-growing industry already processes billions of dollars a day in transactions, and an assortment of fintech companies and banks are either launching new tokens or are considering doing so.
While US consumers typically use credit cards and debit cards to pay for retail goods, data compiled by Cathie Wood’s ARK Invest show global stablecoin transaction volumes topped $15 trillion in 2024.
Dollar-based stablecoins bolster demand for US dollars and debt, because they are intended to be backed at least one-to-one with dollar-based assets, like short-term government debt.
Legislation under consideration in the House and Senate would put issuers of stablecoins under the eyes of federal or state regulators to ensure they have enough dollars and liquidity, while complying with rules like those targeting money laundering.