The Senate Banking Subcommittee on Digital Assets got down to business today, holding its inaugural hearing titled “Exploring Bipartisan Legislative Frameworks for Digital Assets.” The main topic of discussion between subcommittee members and crypto industry experts? Stablecoin regulation.

Senator Cynthia Lummis (R-WY), a well-known advocate for Bitcoin and the broader digital asset industry, led the hearing. She was joined by Senator Ruben Gallego (D-AZ), the ranking member of the subcommittee.

A panel of experts provided testimony, including Tim Massad, former Chairman of the CFTC and current Research Fellow at Harvard University’s Kennedy School of Government. Also present were Jai Massari, Chief Legal Officer at Lightspark; Jonathan Jachym, Global Head of Policy and Government Relations at Kraken; and Lewis Cohen, a Partner at Cahill Gordon & Reindel LLP.

Senator Lummis kicked off the hearing by stating her commitment to passing bipartisan legislation for both Bitcoin and stablecoins. Interestingly, “Bitcoin” was only explicitly mentioned a handful of times throughout the meeting. One notable instance was when Massad voiced his opposition to the idea of creating a Strategic Bitcoin Reserve.

Throughout the discussion, Massad emphasized the necessity of closely monitoring stablecoin transactions. To combat Anti-Money Laundering (AML) concerns related to stablecoins, he proposed broadening the “regulatory perimeter.” He even suggested building smart contracts with features that could reduce the potential for misuse by bad actors.

Massad elaborated, suggesting, “[We might] program smart contracts so that transactions can’t go through unless someone has been properly vetted.”

He further recommended that stablecoin issuers “aggressively monitor stablecoin activity” as a key way to detect and prevent AML violations.

Adding to the conversation, Massari highlighted that stablecoin transactions are already traceable by authorities, given their operation on public blockchains. She advocated for smart regulation of the technology, provided it avoids being overly restrictive.

“We have a tendency [when regulating] financial services to take the new thing and cram it into the old,” she observed, cautioning against applying outdated frameworks to novel technologies.

Furthermore, Massari championed the idea of a “common set of standards” for stablecoin issuers. This, she argued, would boost user confidence by ensuring all stablecoins maintain adequate backing.

Jachym attempted to redirect the hearing’s focus from stablecoins to the Digital Asset Market Structure bill. He emphasized the “critical” need for regulatory bodies to establish clear guidelines for classifying digital assets as securities or not.

However, this shift in topic didn’t gain much traction. Massad countered that stablecoin discussions held greater urgency than the market structure bill. He argued that existing securities laws could largely be adapted to regulate crypto markets, diminishing the immediate need for new market structure legislation.

Jachym stressed the importance of “simple” jurisdictional lines for digital assets, asserting that “the lack of regulatory certainty in the U.S. has impeded growth [in the crypto industry].”

Echoing this concern, Cohen stated that crypto entrepreneurs in the U.S. operate under “the constant threat of litigation,” a clear reference to former SEC Chair Gary Gensler’s “regulation-by-enforcement” approach.

He also pointed out that the “uncertain regulatory environment has left both consumers and users of digital assets at risk.”

In a contrasting viewpoint, Senator Bernie Moreno (R-OH) stood out as the only participant directly pushing back against the U.S. government’s inclination towards (over)regulation of digital assets.

“The government has this total and complete desire to control things,” Senator Moreno stated, adding that illicit activities have been present across numerous recent technological advancements, not just crypto.

“Why all of a sudden when we got to digital currencies did we think here in Washington, D.C. that we are going to decide the pace of innovation?” he questioned in his concluding remarks.

Throughout the hearing, subcommittee members sought the witnesses’ insights on global jurisdictions that could serve as models for the U.S.’s own digital asset regulatory framework.

Massad championed Europe’s Markets in Crypto-Assets Regulation (MiCA) framework, recently implemented by the European Union, as a potential example. Jachym, on the other hand, suggested looking closer to home, towards states like Wyoming—where Kraken is based—and learning from the crypto laws the state legislature has enacted.

While subcommittee Senators and the expert witnesses shared diverse perspectives, a unifying sentiment emerged from the hearing: it’s time for bipartisan cooperation among politicians to establish clear and consistent rules for the crypto industry.

“Bipartisan support for crypto policy is no longer a distant goal,” Jachym noted, expressing a sense of optimism.