Former CFTC Chairman Massad criticizes the Digital Assets Act: There are still loopholes in US stablecoin regulation, and Congress needs to act urgently

The U.S. House of Representatives Digital Assets, Financial Technology and Inclusion Subcommittee held a hearing on 2/11 to discuss the future of digital asset regulation. With the Trump administration in power, the crypto industry has heightened expectations for regulatory clarity. However, industry participants stressed that Congress must accelerate its pace and correct the past "enforcement-first, legislation-later" regulatory approach.

Should the CFTC lead the regulation of digital assets? Kraken and industry experts speak up

At the hearing, Jonathan Jachym, legal counsel from the exchange Kraken, was the first to speak, emphasizing that market oversight should start with Congress granting the CFTC authority over the spot market. He stated that the CFTC should be responsible for regulating centralized trading platforms and the secondary market for digital commodities, but also warned: "The centralized regulatory framework should not be forcibly applied to DeFi protocols, as these protocols are inherently decentralized without a central management entity."

Additionally, participants criticized former SEC Chairman Gary Gensler, accusing him of launching over 125 enforcement actions against digital assets during his tenure, without providing clear regulatory guidance, leading to extreme market instability.

Stablecoin bill draft released, former CFTC chair criticizes excessive loopholes

House Financial Services Committee Chair French Hill and Digital Assets Subcommittee Chair Bryan Steil jointly released a stablecoin bill draft on 2/5, aiming to provide a clearer regulatory framework for stablecoin issuers.

However, former CFTC Chair Timothy Massad criticized this bill. Massad believes that although the bill emphasizes stablecoins should have 100% reserves and restricts issuers' investment activities, there are still five key issues:

1. State-level standards are too lax, lacking federal oversight: The bill allows state governments to regulate stablecoins independently, but does not provide a robust federal supervision mechanism, potentially leading to inconsistent regulatory standards.
2. No clear mechanism for handling issuer insolvency: If a stablecoin issuer goes bankrupt, how will investors' and users' funds be protected? The bill does not provide a clear solution.
3. Fails to address financial crimes and sanctions evasion: The anonymity of stablecoins in cross-border transactions could enable money laundering and illicit financial flows, but the bill does not effectively mitigate these risks.
4. Limited impact on Tether (USDT): Tether has a $140 billion market cap, making it one of the largest stablecoin issuers. However, the stablecoin bill does not provide a mandatory enforcement mechanism, potentially unable to constrain Tether's operating model.
5. Insufficient power granted to regulators: Massad pointed out that the stablecoin market has already reached $230 billion and will likely continue to grow, potentially impacting financial stability, but the bill does not give regulators enough flexibility to adapt.

The Trump administration leans against CBDC, future regulatory direction under scrutiny

Currently, the Republican Party controls the House, Senate and the White House, and President Donald Trump has already signed an executive order on 1/23 prohibiting the issuance of a digital US dollar (CBDC). Additionally, a bill proposed by Congressman Tom Emmer to ban CBDC was passed by the House in May 2024 and is now under review by the Senate Banking Committee.

Although the Republican government opposes CBDC, the market generally hopes they will accelerate the development of stablecoin regulations to provide a clearer legal framework and ensure the legitimate status of stablecoins in the financial market. However, the stablecoin bill currently has many loopholes, and the future regulatory direction remains uncertain.

(New U.S. stablecoin regulations! Democrats and Republicans each propose bills, with regulatory authority as the focus)