STABLE Act Faces Criticism: Former CFTC Chair Highlights Regulatory Gaps in Stablecoin Legislation

The future of stablecoin regulation in the United States is facing intense scrutiny as industry experts and former regulators raise significant concerns about the proposed STABLE Act.
At a recent House Subcommittee hearing on Digital Assets, Financial Technology, and Artificial Intelligence, former Commodity Futures Trading Commission (CFTC) Chairman Timothy Massad delivered a compelling critique of the draft legislation. Despite acknowledging stablecoins as ‘the most useful application of blockchain technology to date’, Massad highlighted five critical deficiencies that could potentially undermine the effectiveness of the proposed regulatory framework.
Massad’s primary concerns center on the STABLE Act’s structural weaknesses. He argues that the legislation creates excessive risks through weak state standards and lacks robust federal supervision mechanisms for stablecoin issuers. The absence of clear protocols for handling issuer bankruptcies and insufficient measures to prevent financial crimes represent significant regulatory gaps.
The hearing featured testimony from key industry representatives, including Kraken’s Jonathan Jachym and Crypto Council for Innovation’s Ji Hun Kim. They emphasized the urgent need for comprehensive and clear regulatory guidelines that can foster innovation while protecting consumer interests. Jachym specifically called for Congress to grant spot market authority to the CFTC, enabling more effective regulation of digital commodity transactions.
The current stablecoin market, valued at approximately $230 billion, includes prominent players like Tether (USDt), USD Coin (USDC), and PayPal USD. The proposed legislation aims to introduce more stringent oversight, but experts like Massad argue that the current draft lacks sufficient enforcement mechanisms and regulatory discretion.
Critics also pointed out the draft’s potential limitations in addressing the dynamic nature of stablecoin markets. The legislation appears to have minimal impact on existing major stablecoin issuers like Tether, with no clear penalties or comprehensive territoriality provisions.
The hearing underscores the complex challenges facing cryptocurrency regulation in the United States. As the industry continues to evolve rapidly, policymakers must balance innovation, consumer protection, and financial stability. The STABLE Act represents an important step, but significant refinements are necessary to create a robust and effective regulatory framework.
Industry advocates remain hopeful that ongoing dialogue and collaborative efforts between regulators, legislators, and blockchain professionals will ultimately produce comprehensive and forward-looking stablecoin regulations.