Tim Massad, who served as CFTC chairman until 2017, said the United States was too slow to develop a plan to modernize payment systems.
At a hearing in the Joint Economic Committee on Wednesday on the role of digital assets in government, Masad said the central bank’s digital currency, or CBDC, could be a solution for the United States to improve existing payment systems, which he called “slow” and “expensive.” … … In addition, the former CFTC chairman said that although stack coins can be used for this purpose, they also pose one of the most serious challenges for US regulators and carry significant risks.
Massad said that people who use stack coins like Tether (USDT) to move funds between exchanges were a good example of why the US payment system needs to be modernized. However, he added that the issuer’s stablecoin reserves were most likely not invested in “highly liquid, highly reliable assets” such as the dollar, and were therefore not insured in the same way as funds in traditional financial institutions. The former CFTC chairman said his recommendation would be to adopt “banking rules” but also prohibit issuers from lending to eliminate the need to insure deposits.
“Central banks’ digital currencies, stable currencies and digital assets are often cited as means of greater financial inclusion, and we need to consider their potential to do so,” Massad said. “We must act now to improve access to financial services in other ways – the need is very great.”
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Coin Center Research Director Peter Van Valkenburg, who also attended the hearing, called stablecoins an “interesting area” in the cryptocurrency space, but raised concerns about the apparent lack of regulatory clarity for issuers.
“There are definitely some stablecoin issuers who are breaking the law,” Van Valkenburg said, adding:
“There are also regulated stablecoin issuers, and there is an opportunity to create more federal chambers to regulate stablecoins. I don’t think there is a gap in the law – there is just a gap in law enforcement.”
Van Valkenburg and Massad’s comments followed a report by the president’s financial market working group suggesting that US stackcoin issuers should be subject to “appropriate federal supervision”, such as banks. The group said the law was “urgently needed to fully address the preventive risks associated with stable payment mechanisms.”