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A member of the Federal Reserve Board of Governors has warned that inconsistent stablecoin regulations could result in fragmentation, both domestically and internationally, that may undermine the benefits of the technology.
Speaking at a stablecoin conference in San Francisco last week, Fed Governor Christopher Waller said that fragmentation between jurisdictions may make it difficult for US dollar stablecoin issuers to operate on a global scale.
For example, the EU’s Markets in Crypto-Assets (MiCA) regulation takes a different approach to reserve requirements than the options under consideration in Congress.
Under MiCA, issuers of “significant” stablecoins are required to hold at least 60 percent of their reserves in bank deposits, but for issuers of non “significant” stablecoins, this requirement drops to 30 percent.
To be defined as “significant” under MiCA, issuers must fulfil at least three of seven criteria. For example, if a stablecoin has more than 10m holders, more than €5bn units outstanding and more than €500m in daily transactions, it will be defined as "significant".
On top of this, MiCA imposes additional regulations on what type of financial institution the issuer can use to deposit the reserves, and in what quantity, to address concentration risks.
In the US, in contrast, current proposals for federal stablecoin regulations make no such demands on issuers.
Under these proposals, issuers would be permitted to hold reserves in bank deposits, but there would be no requirement for them to do so.
Instead, most proposals to date have focused on ensuring that stablecoins are backed by US Treasury bills, rather than bank deposits.
As the Treasury Department noted in a presentation on stablecoins last year, this would address the risk of bank runs, which is inherent when using bank deposits as reserves.
The Treasury even proposed that US Treasury bills, or funds holding US Treasury bills, should be the only permissible type of reserve asset for US stablecoin issuers.
This proposal has been echoed by President Trump’s new commerce secretary, Howard Lutnick, whose former firm, Cantor Fitzgerald, custodies Tether’s US Treasury portfolio.
The danger of this approach, however, as noted by the Treasury, is that a run on a major stablecoin issuer such as Tether could result in a “fire sale” of US Treasuries.
Elsewhere in his speech, Waller noted that issuers may face similar fragmentation problems within the US, if states enact conflicting rules that introduce friction and reduce scalability to stablecoin activities.
However, Waller said that legislators could adopt a similar approach to the US dual banking system, where banks can be either state-chartered or federally-chartered.
“A complementary framework with state and federal regulators working together can allow innovation to flourish, while achieving some of the benefits of scale that come with a harmonised set of market rules,” he said.
By creating consistency at the federal level, he added that US authorities would be more empowered to negotiate with foreign counterparts, and could ensure that “global regulations serve the interests of US consumers and businesses”.
Dual-track stablecoin system likely to prevail
Waller’s appearance at the stablecoin conference coincided with a busy week for stablecoin legislative proposals on Capitol Hill.
Last week, as covered by Vixio, another stablecoin bill was introduced as a discussion draft to the House Financial Services Committee, entering an already crowded field.
The Stablecoin Transparency and Accountability for a Better Ledger Economy Act of 2025, also known as the Stable Act, was introduced by Representative Bryan Steil (R-WI).
The bill borrows heavily from a previous proposal, the Clarity for Payment Stablecoins Act, which had already been passed by the committee.
However, as argued by several lawmakers and expert witnesses, the Stable Act offers a watered-down version of the Clarity Act, with "substantially weaker” consumer protection, dispute resolution and federal oversight provisions.
During a digital asset subcommittee hearing on the bill, one item that both lawmakers and witnesses agreed upon was the need for a dual-track system for stablecoin regulation, similar to US banking regulations.
Jose Fernandez da Ponte, senior vice president and general manager of blockchain, crypto and currencies at PayPal, said that such a system will be “critical” to ensure continued growth of the US digital asset industry.
“Federal and state charters can work simultaneously under a core set of standards,” he said.
“In both state and federal regimes, the requirements for reserve asset management, governance disclosures and prudential risk management should be fit for the purpose of payments.”
Da Ponte added that US legislation must recognise that stablecoin issuance is the business of payments, not the business of banking or securities.
Ji Hun Kim, president and CEO of the Crypto Council for Innovation (CCI), made similar comments endorsing a dual-track approach.
“Such a bill should consider rationally integrating effective state-based regulatory models,” he said.
“Accomplishing this would realise the powerful potential of dollar-backed stablecoins in providing individuals with more choice, while further solidifying the global role of the US dollar.”
Finally, ranking member Stephen Lynch (D-MA) said that although he agreed with his colleagues that stablecoin legislation is required, it should be collaborative and bipartisan, and should not reflect a “wish list” from industry advocates.
