Circle President Heath Tarbert's testimony at the congressional hearing: The dollar governance strategy in the internet financial system

Core Viewpoint

Core Conclusions

From the testimony itself, Heath Tarbert's purpose for attending the congressional hearing is very clear: to promote the continued establishment of a complete digital asset market structure in the U.S. after completing stablecoin regulation, and to elevate this work to a national strategic level that maintains the global status of the dollar, U.S. financial dominance, and rule-making authority.

Specifically, there are five main appeals.

First, elevate GENIUS and CLARITY to the strategic height of the "dollar statecraft." In Heath's framework, the significance of these two bills has surpassed the regulation of the Crypto industry itself, relating to whether the dollar and U.S. rules can continue to be at the core of the global financial system after future financial infrastructure is on-chain.

Second, push for the completion of CLARITY legislation. His statement is very direct: GENIUS has established the "dollar layer" in the internet financial system, and the next step is to complete the "market layer," incorporating digital asset trading, custody, intermediaries, customer asset protection, and market regulation into a long-term stable federal legal framework.

Third, promote strict implementation of GENIUS to close the regulatory arbitrage space for offshore stablecoins. He emphasized that the final rules must not leave loopholes, and regulatory requirements should cover intermediaries that actually serve U.S. customers, with foreign stablecoin issuers also needing to meet truly comparable regulatory standards.

Fourth, expand policy discussions from stablecoins to the entire financial system on-chain. Heath emphasized that the dollar is just the first layer. What is truly migrating are currencies, securities, collateral, payments, settlements, and capital market infrastructure. The core of future competition will be which track these financial assets operate on, who governs them, and whose rules they follow.

Fifth, strengthen the strategic position of the U.S. compliant financial infrastructure route represented by Circle. Heath clearly opposes artificially creating "national champion enterprises," but the future system he envisions is very clear: dollar-denominated, U.S. law, regulated stablecoins, institutional-level settlement networks, programmable finance, and AI Agent payments. Circle's USDC, CPN, and Arc are all on this path.

Therefore, the core message of Heath's testimony can be further condensed to:

Financial infrastructure is moving on-chain, and this migration has already begun. The U.S. now needs to decide whether the future digital dollar, tokenized assets, and financial markets will operate under U.S. rules and infrastructure or on tracks established by other systems. GENIUS has completed the first step, and the next steps are CLARITY and implementation details.

From the perspective of CRCL investors, the most noteworthy signal is:

Circle is aligning its long-term development path with the U.S. dollar strategy, the financial on-chain process, and the digital asset regulatory framework on the same long-term policy line.

Full Text: Dollar Statecraft in the Internet Financial System

Introduction

Chairman Hill, Senior Member Waters, and esteemed committee members: Thank you for the opportunity to testify today.

My name is Heath Tarbert. I am a business executive and a former U.S. government official and financial regulator. I currently serve as President of Circle Internet Group. We are a publicly traded technology company based in One World Trade Center in New York City, with employees spread across 44 states and the District of Columbia.

I have worked on both sides of financial regulation: as a public servant, I was responsible for maintaining trust in financial markets; as a corporate executive, I participated in building new financial infrastructure. What I learned in both positions is the same: financial innovation that runs ahead of trust will not last. Compliance is the foundation of serious financial business.

My attitude towards this work comes from a family in Baltimore—where public service and doing things by the book are taken for granted. Both of my grandfathers served in World War II; family members have also served as police officers and firefighters. My father attended night school to become an accountant and later served as the auditor for one of the busiest ports in the U.S.; my mother worked in the county enforcing child support. This tradition has shaped every position I have held. After leaving the government, I settled in northern Illinois, where my wife and I are raising our two sons. Raising a family in the heart of America makes the stakes for the future of the U.S. economy feel more real to me. This is the perspective from which I view this hearing today.

I am pleased to be back before this committee. The last time I was here was in 2018 when I served as the Policy Chair of the Committee on Foreign Investment in the United States (CFIUS). CFIUS is responsible for reviewing foreign acquisitions of U.S. companies from a national security risk perspective, and its statutory authority had not been updated in thirty years. Meanwhile, strategic competitors were targeting emerging technologies that military capabilities depend on. U.S. law needed to be adjusted before strategic risks outpaced our institutions. We decided then: the law must keep up. Later that year, Congress passed the most significant reform of U.S. foreign investment review laws in thirty years.[1]

Today's topic is different, but the strategic choice is the same. America's technological leadership remains crucial to our national defense and economic prosperity, and the law must keep pace with it. I make this assertion because you have done it before. When it truly matters, members of this committee always find ways to cooperate.

I am not here to defend every token, every protocol, or every business model. I am here to advocate that financial innovation serving the American people should operate under U.S. law. Under this premise, I am a supporter of blockchain technology.

One principle has always run through my thinking. When I served as CFTC Chairman, I wrote: "How we regulate is as important as what we regulate."[2] The same applies to the dollar. Its status in the world depends less on proclamations and more on the quality of the laws and institutions behind it.

I call this work dollar statecraft:[3] the conscious use of U.S. law, market, and institutional credibility to keep the dollar at the center of value transfer systems. It is not monetary policy—that belongs to the Federal Reserve. It is also not sanctions policy—that is the coercive edge of the same asset. It is quieter work and more enduring work. What is the goal? To make the dollar always the obvious choice, not the forced choice.

The theme of this hearing is "Strengthening the U.S. Economy: Promoting Growth, Opportunity, and Prosperity." I want to directly connect my theme to this title.

Dollar statecraft is economic policy. The dollar's role in international markets lowers borrowing costs for Americans and reduces the cost of debt repayment for the Treasury. The infrastructure that value transfer relies on determines the capital costs for every business that uses it. Get these choices right, and you strengthen the U.S. economy in the short term—through lower friction, faster settlements, and more efficient capital formation. Get it right, and you also strengthen it for future generations—anchoring the global financial architecture here.

Get it wrong, and the losses will not announce themselves. They will slowly manifest: activities, standards, and jurisdictions will gradually migrate to systems built elsewhere.

My testimony contains three key points.

The global role of the dollar is an economic asset, not an inherent right. It lowers capital costs for American families and businesses; it expands our ability to respond to crises; it helps support defense spending. It is built on trust, and trust must be maintained.
The infrastructure that currency and financial asset transfers rely on is being rebuilt in software form. What emerges from this is what we at Circle call the internet financial system.[4]
Congress has built the dollar layer of the internet; now it should complete the market layer. The GENIUS Act establishes a prudent regulatory framework for payment stablecoins. The House has passed the market structure framework contained in the CLARITY Act. Three tasks remain: faithfully implement the first, close off avenues for evasion, and complete a lasting framework for the market built on the dollar layer.

These three points add up to a strategic question: Will the U.S. financial market—the deepest and most trusted market in the world—migrate to a track governed by U.S. law, or to someone else's track?

I also said something when I was CFTC Chairman that I will reiterate today: "I want the U.S. to lead, because whoever leads in this technology will ultimately write the rules of the game."[5]

I want to clarify which game I am referring to. This is not about a competition in any one sector of the financial industry. The infrastructure that value transfer relies on is key economic infrastructure. It relates to the capital costs for American businesses; it enables the U.S. to set standards for anti-money laundering rules and makes our sanctions system more effective. Ultimately, it relates to our economic strength and national security. Therefore, I want to elaborate further on the three points mentioned above.

1. The global role of the dollar is an asset, not an inherent right

Let me start with the dollar. It is the most relevant asset in everything that follows. Its global role is often mistakenly viewed as a matter of national prestige. A more accurate understanding is: this is a matter of national income. And it is earned by our country, not inherited. It took generations to build. We can strengthen it, or we can squander it.

(1) What this role buys for American families

The status of the dollar is easily mistaken for a form of prestige. It is actually about household economics.

It helps to lower borrowing costs for American households, American businesses, and the federal government. It makes imports cheaper, thereby suppressing prices at the cash register. It gives our government a crisis response capability that only a few sovereign nations possess. It also helps support long-term defense spending, which maintains the finest military in the world to date.[6]

Think about what this means in practice. The whole world holds dollars and buys U.S. Treasury bonds. As a result, they lend money to this country under terms that only a few nations can obtain. This advantage trickles down to 30-year mortgage loans, small business credit lines, and auto loans.

Commodities are priced in dollars. Therefore, American importers save on the exchange rate risk that foreign competitors must hedge and pay for.

When a crisis strikes, the Federal Reserve can inject liquidity on a scale that would put the credibility of most other central banks under pressure.[7]

This is the account. It is the least conspicuous yet most substantial aspect of the economic advantages that Americans possess.

(2) This status is built and can also be consumed

According to the global foreign exchange reserves reported by the International Monetary Fund's COFER dataset, about 57% are held in dollars.[8] However, at market exchange rates, the U.S. accounts for about a quarter of global output.[9]

These two numbers are telling.

At the beginning of the post-war system's design, the U.S. held a very high share of global output and industrial capacity. The role of the dollar was largely commensurate with the size of the U.S. economy. Today, the role of the dollar has exceeded the scale of the economy behind it.

So, what carries this gap? Economic size alone is not enough. It is the depth of the market, the supply of safe dollar assets, strong network effects, and trust in American laws and institutions.

No payment technology can replace sound economic policy. The role of the dollar relies on fiscal credibility and an independent monetary system. It depends on deep and liquid markets, a large supply of safe assets, and the rule of law. Digital infrastructure alone cannot sustain this status. But it is becoming a necessary condition for maintaining it.

This kind of trust is an asset. It has been accumulated over decades. It can also be depleted if neglected. The dollar's primary status is not inevitable, just as the post-war order itself is not inevitable.[10] In fact, in the late 1990s, the dollar accounted for over 70% of reserve shares. Today, this proportion is about 57%. This is a real and concerning decline in just a generation. Experts dispute the causes, but there is no disagreement about the direction. We must act before the decline becomes irreversible. Arrangements built on power and credibility need maintenance. In democratic systems, maintenance often requires legislative action.

This is what I referred to at the beginning as the dollar governance strategy. This term belongs to a longer tradition. For decades, scholars have written about economic governance strategies, and more specifically, financial governance strategies and monetary governance strategies.[11] What I am naming is a specific subset of this work: maintaining the status of the dollar within the system where value actually circulates.

The dollar governance strategy discussed here has two characteristics. Its primary tools are legal and institutional design, rather than coercion. Its goal is attraction, not coercion.

Since the dollar system is a network, America's leadership should not imply exclusivity. The most enduring trajectory will be open, interoperable, and governed by high standards of reciprocity with trusted partners. The goal is not to exclude others but to make the infrastructure governed by American laws and allied standards the infrastructure that the world chooses to use proactively.[12]

The dollar governance strategy has always been implemented through institutions. The new aspect is that these institutions now operate on software, and someone must decide who writes it.

There are two more observations. Power in the 21st century increasingly flows through systems that others rely on. Academic literature studying how these systems operate also explains how they can be lost. A country that overly relies on its own position gives all others a reason to bypass it.[13]

Our strategic competitors are often also our closest trading partners. Therefore, America's leadership must be exercised in a way that maintains network attractiveness.

(3) The current layer of stablecoins is choosing the dollar

Here is a fact that this committee should pay the most attention to: the vast majority of stablecoins in today's world are valued in dollars.[14]

Think about how this happened. Private enterprises have built a new payment layer above many countries. And it uses the dollar as the default accounting unit—not because of a mandate from the U.S., but because the dollar has always been trustworthy, liquid, and readily available.

This is not predetermined, nor is there any guarantee that it will remain so permanently. No natural law requires that the currency of the internet must be the dollar.[15]

It is necessary to articulate the mechanism more precisely because this is precisely the bridge between reserve currency status and tokenized infrastructure. The dollar's reserve currency influence does not solely depend on what foreign central banks hold. It also depends on which currency is used to invoice trade, settle transactions, submit collateral, and price global financial assets. As these functions migrate to software-based networks, the embedded currency and legal structures in the new track can gain strong network effects. If dollar currency and dollar-denominated assets become native assets of regulated infrastructure governed by U.S. law, then the demand for dollars and the U.S. rule-making power will mutually reinforce each other. If not, merely pricing in dollars will not preserve U.S. jurisdiction.

Demand is real. In many markets, households and businesses, even with widespread access to mobile technology, still have limited channels to obtain dollar-denominated bank accounts.[16]

This demand will eventually be met. The U.S. should ensure that it is satisfied by U.S. issuers regulated under the GENIUS Act, rather than by offshore issuers that are not subject to comparable U.S. prudential regulation or by foreign sovereign infrastructures built around different policy objectives.

Public chains are transparent at the transaction level, but often pseudonymous at the identity level. Analytical tools can track the flow of funds in ways that cash cannot achieve and that are often difficult to realize within the correspondent banking system. But traceability cannot replace customer identification, sanctions screening, reserve regulation, or accountable management.

This distinction is crucial for understanding "what we lose when issuance migrates offshore." Public transaction data may still be visible. What U.S. regulators lose is direct access to the governance structure of the issuer, its reserves, its books and records, and its responsible executives.

For this reason, Congress acted decisively at that time. The GENIUS Act is not a concession to the industry. It is a decision: to place U.S. standards under digital dollars before others' standards are in place.[17]

II. Internet Financial System

The status of the dollar relies on infrastructure. And this infrastructure is now being rebuilt. I want to clarify what is being built and explain why it goes far beyond the realm of currency. I also want to explain why the question of "who builds it" should belong to this committee, rather than just to software engineers.

(1) What is the Internet Financial System, and how is it different

For thirty years, the internet has transmitted information, while the financial system transmits value. A trading platform can instantly send an order, but funds still have to go through card organization networks, correspondent banks, clearinghouses, and batch settlements. The internet carries orders, while the financial system carries funds—but much more slowly, and with costs and frictions compared to internet data.

This separation is beginning to dissolve. Currency, securities, collateral, and contract instructions can increasingly be represented and managed through software on shared networks. The financial system and internet infrastructure are starting to merge. This merger is what we refer to as the Internet Financial System.

The merger gives these tools new attributes. They are programmable, so instructions are transmitted along with payments rather than through a separate messaging channel. They are continuously available, so settlements do not have to stop due to nights, weekends, or holidays. They can complete settlements at the network level in seconds rather than days. They also have composability: a payment, a currency exchange, and a collateral delivery can be completed as a single conditional transaction rather than three sequential transactions.

A specific example will clarify this. Many domestic transactions have achieved final settlement or delivery versus payment (DVP) settlement, and our large payment systems provide real-time full settlement with finality.[18] Persistent frictions exist elsewhere: cash, securities, collateral, and contract instructions often reside in different systems, operate on different schedules, and comply with different rules. Intermediaries, credit lines, reconciliations, and pre-positioned funds bridge these gaps, but inefficiencies still exist.

When both legs can conditionally move on compatible infrastructure, principal risk and time risk can be significantly reduced. Other risks do not disappear but are transferred to technology, governance, liquidity, custody, and legal aspects.

There is a related distinction worth emphasizing because it can easily be confused. Technical finality does not equal legal finality. Deterministic settlement can support legal finality,[19] but commercial law, network rules, contracts, and bankruptcy law still determine when a transfer is finally completed and who bears the loss.[20]

The remaining frictions mostly reflect the fragmented systems accumulated over decades, as well as the costs of compliance, foreign exchange, liquidity, and local distribution. A worker sending wages abroad still loses a significant proportion on fees and exchange rate spreads—the average global remittance cost remains above 6%.[21] A small manufacturing business may wait several days to receive payment for an international invoice and finance during that time gap. Better infrastructure will not eliminate every cost. But it can eliminate those costs that arise solely because systems cannot communicate or settle together.

This is a hearing themed around "growth," and the reason is specific. Faster settlements are not just convenient; they can free up capital. Every day funds are in transit is a day that businesses are financing a gap not of their own making. Settlement cycles also come with collateral submitted to prevent issues before delivery is completed. Compressing these cycles can free up working capital, and those who benefit the most are often the businesses that find it hardest to obtain credit.

Even when speed is not the primary goal, settlement designs that reduce overall risk and capital friction should still be objectives. The Internet Financial System makes this possible.

(2) It is not just the dollar that is migrating—but the entire American financial system

This is the point I most want the committee members to take away from my testimony. Most serious policy discussions about digital assets stop at the dollar. But the dollar is just the first layer.

The U.S. capital markets are the envy of the world. When I testified before the Senate Agriculture Committee in 2022, I said that our derivatives markets set the "global standard" in integrity, resilience, and vitality.[22]

We have the deepest and most liquid markets on the planet. Companies from around the world list here, raise funds here, hedge here, and clear here because our markets are the best places in the world to do these things.

This is a huge and underestimated source of American power. And it is built on infrastructure: exchanges, clearinghouses, custodians, transfer agents, and the settlement pipelines beneath them.

This infrastructure is now migrating. Payment-type stablecoins are leading the way because currency is the easiest to render as software and the most useful for circulation. But the scope of the infrastructure is much broader.

Industry data shows that by August 2026, the circulation scale of tokenized U.S. Treasury bonds and money market products has exceeded $16 billion, with providers including traditional asset management institutions such as BlackRock and Franklin Templeton, as well as new entrants including Circle.[23] Tokenized credit is starting to grow from a smaller base. Institutions are also moving from pilot programs to controlled production environments; the Depository Trust & Clearing Corporation (DTCC) has begun advancing work related to tokenized custodial assets.[24]

What attracts institutions is practicality. Collateral that can be quickly moved and reconfigured is operationally more useful than collateral that cannot do so. Certain business processes can thus be supported with less pre-positioned capital for activities of equivalent scale, reducing costs for businesses trading within them.

On the pace, let me say this. Think of television. Streaming did not replace cable television the moment it appeared. Both coexisted for many years, and still do. But the direction forward is clear. Those companies that recognized this shift early built the platforms that the whole world uses today. Most of them are American companies.

The same pattern will apply here. The traditional financial system and the internet financial system will grow in parallel. The question is not whether this migration will happen, but where the infrastructure will be built and whose rules will determine the endpoint.

Thus, strategic questions are much larger than "which currency will the new system use." A system can be priced in dollars but governed entirely by others. That is where the strategic risk lies.

America's leadership here is crucial. It means that the place for trading tokenized assets must adhere to our information disclosure and market integrity rules. It means that custodians holding these assets must accept oversight from U.S. regulators, and our standards on sanctions, illicit finance, and financial integrity must apply. It means that U.S. law will determine what constitutes final settlement, what investors have the right to know, and who bears losses in bankruptcy. And because financial infrastructure is considered critical economic infrastructure, it also means that our national security is protected. When this committee wants to know what is happening in a market, it can find out.

However, the status of the dollar as the default unit of account does not, by itself, ensure proper oversight and accountability. To ensure this oversight and accountability, the infrastructure must be built and governed under U.S. law, with deep participation from American companies and trusted partners. Otherwise, we will reach our own markets through others' tracks.

(3) The Tracks Are Being Built, and Artificial Intelligence Is the Accelerator

Many widely used public chains were originally designed as general-purpose platforms, not as regulated financial infrastructure. Consumer-grade applications run quite well on them. Institutional finance is less suitable, and this mismatch is visible. The ultimate models vary, some are still probabilistic. Transaction fees may be priced in volatile tokens, making the dollar-denominated transaction costs uncertain. Moreover, many systems either default to fully public records or move towards closed, permissioned visibility. These are not suitable for bank treasurers, corporate CFOs, or regulatory examiners.

As a result, a number of dedicated settlement networks have emerged over the past two years, initiated by payment companies, tech firms, and stablecoin issuers.[25] Circle built one of them, called Arc.[26] Other companies are also building competing systems. The policy principles I describe here should apply equally regardless of which network prevails.

Those recurring design choices are, in essence, decisions that could have broader economic impacts. Pricing transaction fees in dollars allows users to settle at the same unit as the transaction itself; pricing only in floating tokens imposes an additional layer of volatility on users. Making settlements certain strengthens the foundation upon which legal finality relies—payment finality is crucial for every market regulated by this committee. Building confidentiality alongside governed legal access allows the system to accommodate regulated institutional business; whereas making all records public, or making confidentiality absolute, will render important application scenarios difficult to achieve.

This last choice is particularly noteworthy because it is often presented to this committee as an unavoidable trade-off. It is not. Modern regulated finance has resolved this tension through conditional confidentiality: records are shielded from the public but visible to auditors, regulators, and law enforcement when granted viewing rights by law and due process. A publicly traded company cannot broadcast payroll and supplier prices on a public ledger to competitors; it also cannot conceal these cash flows from auditors or regulators.

Cryptography can make legal access faster, more precise, and more auditable. But it cannot replace legal authorization and due process, nor should it attempt to. The goal should be to provide privacy for ordinary commercial activities, accountability for regulated entities, and access for public authorities under clear legal rules.

Design issues also have pitfalls in the opposite direction. Retail central bank digital currencies (CBDCs) could create unacceptable visibility of government into citizens' lives and could lead to the disintermediation of commercial banks. At the other extreme, a design of absolute privacy that does not consider compliance would attract actors attempting to evade sanctions, launder money, and support state sponsors of terrorism. Both outcomes depend on design—this is the point: design is policy.

None of this means that technology is without risk. Like any financial infrastructure, a robust regulatory framework must address operational resilience, custody, cybersecurity, liquidity, legal certainty, governance, and illicit finance issues. It must also consider the impact of rapid growth on bank financing and the operation of short-term funding markets.[27] The policy question is not whether these issues should be addressed, but whether they will be governed under enforceable U.S. standards or migrate to places beyond U.S. regulatory reach.

This is where the intersection of the dollar governance strategy and engineering occurs. I have previously stated that the dollar's status depends on trust in the U.S. system. In this new system, important institutional rules will increasingly be implemented through code and network governance—rules about finality, rules about disclosure, rules about who can see what, and rules based on whose authorization. Trust remains that asset. It will just be earned or squandered in a different medium.

Businesses subject to U.S. law must design in accordance with the Bank Secrecy Act, sanctions obligations, privacy laws, and due process. Businesses operating elsewhere will design around different requirements. And U.S. institutions will trade in whichever system has liquidity.

This brings us to artificial intelligence—the accelerator of the trends I have described today.[28] Payment systems are already being designed for it. Software agents can initiate transactions within the authorization limits, spending caps, and compliance controls set by humans. Major card networks have announced work of this kind.[29] Traditional accounts and payment systems are designed around human workflows. Agentic commerce has increased the demand for programmable authorization and settlement. It has not eliminated legal identity, human accountability, and regulation—nor should it.

We should hope that this economy is built on American-made tracks, priced in American dollars, and governed by U.S. law.

III. Congress Has Built the Dollar Layer and Should Complete the Market Layer

The role of the dollar must be maintained, not assumed. The infrastructure beneath it is being built at this moment. Thus, the question becomes: what does maintenance look like?

In a democratic system, it looks like legislation. The GENIUS Act and the CLARITY Act are the most tangible forms of the dollar governance strategy. They are also the reason I remain optimistic.

(1) Why the GENIUS Act Is the Right Answer

In the past, three main models have been proposed to carry digital dollars on the internet: central bank digital currency, tokenized deposits, and payment stablecoins.

Central bank digital currency, depending on its architecture, could establish a direct relationship between the Federal Reserve and the public. It could create unacceptable visibility of government into personal financial activities. Moreover, it could lead to the disintermediation of community banks and regional banks that this committee has long valued. For these and other reasons, Congress has prohibited the issuance of CBDCs.[30]

Tokenized deposits are the second model that some banks are developing. They should coexist with payment stablecoins. But the two are legally and economically distinct. Tokenized deposits represent a claim by individuals on a specific bank's assets (i.e., its loan book, reserves, and other assets). In contrast, payment stablecoins under the GENIUS Act are designed around identifiable one-to-one reserves and possess bankruptcy isolation. The implementation process should maintain this distinction while monitoring the impact of both types of tools on bank financing, liquidity, and the federal safety net.[31]

What remains is payment stablecoins. This is where the GENIUS Act comes into play.

The mechanism is simple. Customers deliver one dollar to the issuer. The issuer holds identifiable reserves in legally permissible assets. A token is issued that can be redeemed at face value. These reserves are restricted from reuse, and their composition must be publicly reported. This is the core model that Circle employs for USDC today.

This act is not "light-touch" regulation. It requires identifiable one-to-one reserves held in specific high-quality liquid assets, redemption at face value, public reserve disclosures, regulatory acceptance, and compliance with the Bank Secrecy Act and sanctions compliance obligations.

The timing must be precise, and this makes the argument stronger rather than weaker. The above requirements are already law, but most have not yet taken effect. The effective date of the act is the earlier of January 18, 2027, or 120 days after the major federal regulators issue final implementation rules. From the effective date, digital asset service providers offering or selling foreign-issued stablecoins within the U.S. will be illegal unless strict conditions are met; and in any case, selling stablecoins from unlicensed issuers will be illegal starting July 2028.[32]

Implementation work is progressing, but it takes time. The Treasury published a proposed rulemaking notice in September 2025, followed by thousands of pages of proposed rules covering various aspects from prudential rules and information disclosure to anti-money laundering and market conduct. Just last month, the department released guidance specifying what controls digital asset service providers must have to ensure that Americans are not offered non-compliant foreign stablecoins.[33]

Completing the implementation rules and getting them right is crucial. Market participants are already reorganizing around a standard that is not yet fully binding. For a committee to evaluate its own legislation in this way is unusual. I do not believe this is coincidental. This framework is largely the product of years of work by this committee. It reflects an ongoing bipartisan effort, with the chair and senior members at its core.

Data across the industry can give a sense of its scale. Federal Reserve staff estimate that as of April 2026, the stablecoin market size is approximately $317 billion, over 50% higher than the level at the beginning of 2025. The same analysis report states that the trading volume of stablecoins on Ethereum rose by about 50% in the period following the passage of the GENIUS Act.[34] These numbers illustrate the scale and momentum of the market that Congress has chosen to regulate.

Impact on the U.S. Treasury Market

The trends are noteworthy but not game-changing. In a report from February 2026 using data from major issuers as of September 2025, the Treasury Borrowing Advisory Committee (TBAC) estimated that the amount of Treasury securities held by stablecoin issuers is less than 1% of the total outstanding debt and views this sector as an emerging source of demand worth monitoring.[35] Indeed, the legitimacy of this framework does not rely on stablecoins solving the federal debt issue.

Regulatory infrastructure and regulated applications are emerging. In December 2025, the Office of the Comptroller of the Currency (OCC) conditionally approved five national trust bank charters in this field.[36] Since then, payment companies, broker-dealers, and banks have submitted more applications—considering that just two years ago, there was no statutory category for "licensed payment stablecoin issuers" at the federal level, this is quite a remarkable development. Additionally, by mid-2026, the Circle Payment Network (CPN) had registered 175 financial institutions.[37] Furthermore, in July 2026, under a non-action position from the CFTC, a client submitted USDC to their futures commission merchant (FCM) to meet initial margin obligations.[38] Finally, the Financial Accounting Standards Board (FASB) has recently begun to incorporate certain payment stablecoins into the cash equivalents framework—provided they have appropriate reserve backing and can be redeemed directly from the issuer on demand. This step will pull regulated stablecoins deeper into the mainstream treasury management, payment, and financial reporting systems.[39]

This design is worth emphasizing for U.S. taxpayers. The GENIUS framework does not provide deposit insurance or explicit taxpayer guarantees to holders of payment stablecoins. This is the correct design. Its purpose is to reduce the likelihood of requiring public intervention at any time by imposing reserve, liquidity, disclosure, and regulatory requirements in advance.

It must be acknowledged that compliant payment stablecoins are not without risk. Their design avoids the credit intermediation and substantial maturity transformation characteristic of fractional reserve lending. However, operational, custody, liquidity, market, network, and legal risks still exist and must be regulated.[40]

There are two actions still to be completed.

First, the finalization of the rules should be completed according to a coordinated timeline. Issuers are building compliance plans based on proposed requirements that may still change, while the final requirements have not yet been determined. Regulatory certainty is a core commitment of this legislation. Agencies are doing serious work under real-time pressure, and Congress's focus on the pace of implementation will be well-placed.

Second, the final rules should not leave loopholes. The protections of this legislation are achieved by limiting "who can issue, offer, or sell digital dollars to Americans." These restrictions should touch on intermediaries that actually serve American customers. The determination of comparability to foreign regulation should be based on genuinely equivalent regulatory outcomes.

During my tenure as chair, I led the CFTC's cross-border swap rules based on reciprocal deference. We should extend deference to regulators with genuinely comparable rules and regulatory standards, and expect the same in return.[41]

Finally, this is not a story about a single issuer. Today's digital dollar is issued by state-regulated trust companies, while federally chartered institutions and applicants are preparing to participate under the new framework.[42] Congress did not legislate to create a "national champion enterprise," nor should this committee hope for that. A core measure of whether this legislation is successful will be whether multiple regulated issuers can safely compete under common rules while maintaining reliable redemption, transparent reserves, and meaningful consumer protections.

(II) The CLARITY Act Still to be Completed

Congress has set rules for the digital dollar. But it has not set rules for those markets using the dollar. This encompasses everything outside of the dollar itself in the second part.

The significance of this work to the rest of the ecosystem is akin to the significance of GENIUS to the dollar. The CLARITY Act passed by the House, along with the various versions forming in the Senate, pursues several common goals: allocating jurisdiction along a line that aligns with how these tools actually operate, between securities regulators and commodity regulators; establishing a workable, onshore regulatory framework for covered intermediaries, accompanied by requirements for customer protection, custody, and conflicts of interest; and extending existing illicit financial regulatory authorities to covered intermediaries and activities, making these authorities as clearly applicable here as in other areas.[43]

These are not subsidies, nor endorsements of any assets. Each provision is a principle that this committee has applied in every other market under its jurisdiction.

What this legislation does not do is equally important. It does not declare any digital asset to be robust or suitable for any investor. It does not exclude the applicability of anti-fraud or anti-manipulation protections. It does not repeal the Bank Secrecy Act—it expands it. And it will not resolve all classification issues once and for all. No law can do that. The two committees will still have interpretive work to do for many years to come.

But a framework that can answer most questions and establish procedures for the remaining issues is preferable to a status quo that can predictably answer too few questions.

What the legislation provides, above all, is durability. Agency guidance and enforcement priorities will change with government transitions. A bipartisan law, however, will be much more enduring. Businesses making 10-year infrastructure investments need laws, not posturing.

The dollar layer is now built on a bipartisan law. The layer above it is primarily built on the intentions of two agencies. This asymmetry will not resolve itself.

The final legislation should respond to the legitimate concerns raised by committee members: customer asset protection, conflicts of interest, illicit finance, market integrity, and the treatment of decentralized protocols. These are all reasons for prudent legislation. You all pointed the way last year. This committee should now defend the bipartisan principles it has established while Congress completes this work: clear delineation of jurisdiction; effective protection of customer assets; enforceable rules for intermediaries; strong illicit finance regulatory authority; honest handling of conflicts of interest; and a durable path for responsible business activities to operate across borders. My hope is that all of this can be retained in CLARITY, and that Congress can sign the final version into law this year.

Conclusion

I am an American who has spent much of my career in financial infrastructure—at the Treasury, at the CFTC, and now in the private sector. I have seen how much of this country's strength is built on systems that most citizens have never thought about. I have also seen how quickly they can migrate when the technology underlying those systems changes.

That migration is underway. It will produce a financial system that settles faster, operates longer, and reaches populations that today’s systems do not serve.

Congress cannot decide which technologies will succeed. What it can decide is whether U.S. law, U.S. institutions, and the dollar remain embedded in those successful systems. The unresolved questions are: Are these rails American? Is the unit of account still the dollar? And when things go wrong, whose laws govern?

This hearing is probing how to strengthen the U.S. economy, promote growth, opportunity, and prosperity. Among the actions this committee can take, few will be more determinative for America's long-term prosperity than helping ensure that the next generation of financial infrastructure is built and governed under U.S. law, collaborates with trusted allies, and is anchored in the dollar. This is more valuable than any single quarter's growth because it compounds.

This is the strategy for governing the dollar in the internet financial system. It is not a currency defended by proclamation, but one governed by U.S. law, built by U.S. businesses and trusted partners, and credible, liquid, and useful enough that the world continues to choose it as its financial system.

The status of the dollar is built. It can continue to be built. It can also be consumed entirely. Which path prevails depends not only on this committee. But on the part that depends on this committee, it is far more than people typically understand.

Thank you all for the opportunity to testify. I look forward to answering your questions.

Notes

[1] The Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA), enacted as Title XVII of the John S. McCain National Defense Authorization Act for Fiscal Year 2019, Pub. L. No. 115-232 (August 13, 2018). Prior to this legislation, CFIUS's jurisdiction had not been substantively revised since the Exon-Florio Amendment of 1988. Regarding strategic competitors targeting emerging technologies with military applications, see: Assistant Secretary of the Treasury for International Markets Heath P. Tarbert's statement to the House Committee on Financial Services Monetary Policy and Trade Subcommittee on H.R. 4311, 115th Congress (March 15, 2018); Heath P. Tarbert, Modernizing CFIUS, 88 Geo. Wash. L. Rev. 1477 (2020).

[2] Heath P. Tarbert, Rules for Principles and Principles for Rules: Tools for Crafting Sound Financial Regulation, 10 Harv. Bus. L. Rev. 1 (2020) ("The fundamental goal of any government agency regulating financial markets and financial institutions should be sound regulation. How we regulate is just as important as what we regulate.")

[3] This phrasing is my own. But the tradition it relies on is not. See note 11 below.

[4] Circle Internet Group, Inc., Beyond Stablecoins: The Rise of the Internet Financial System (January 13, 2026).

[5] CFTC Chair Heath P. Tarbert's remarks at Yahoo Finance's "All Markets Summit: Generational Opportunities" (October 10, 2019), published in CFTC Press Release No. 8051-19 (October 10, 2019).

[6] Regarding the composition of this account, see Daleep Singh, The Right Way to Wield America's Economic Power, Foreign Affairs (July 15, 2025) (pointing out that the dollar-based financial architecture has brought significant advantages to the U.S.: lower borrowing costs for households and businesses, unparalleled fiscal capacity to absorb economic shocks, stronger resilience during global pressures, and the ability to project power through economic statecraft); Heath P. Tarbert, The Dollar's Digital Future, Wharton Financial Future Project and University of Pennsylvania Carey Law School, Part 4 (2025), available at https://finance-pillar.wharton.upenn.edu/wp-content/uploads/2025/03/TheDollarsDigital_Future.pdf (last accessed August 28, 2026). These are contributory advantages brought by the status of reserve currency, rather than mechanical inevitabilities.

[7] This refers to the traditional lender of last resort function of central banks: providing liquidity against reliable collateral, typically on an over-collateralized basis, so that the central bank is not expected to bear credit losses. It addresses liquidity shortages rather than insolvency. Federal law reflects this distinction. See 12 U.S.C. § 343(3) (requiring that emergency loans be secured in a manner satisfactory to the lending Federal Reserve Bank and prohibiting assistance to borrowers who are already insolvent). Nothing in this testimony should be interpreted as advocating for the bailout of failing institutions.

[8] International Monetary Fund, "Composition of Official Foreign Exchange Reserves" (COFER), published in the first quarter of 2026 (dollar share 57.13%). The IMF has now allocated the total report amount by currency, rather than reporting separately on allocated and unallocated portions, so this figure represents reported foreign exchange reserves.

[9] International Monetary Fund, "World Economic Outlook" database. The comparisons in the main text above use nominal GDP calculated at market exchange rates; if calculated at purchasing power parity, the U.S. share is even smaller, which only reinforces rather than weakens the argument.

[10] Graham Allison, The Myth of the Liberal Order: From Historical Accident to Conventional Wisdom, Foreign Affairs, July/August 2018, p. 125 (arguing that the order we inherited is less a designed architecture than a byproduct of specific distributions of power).

[11] David A. Baldwin, Economic Statecraft (Princeton University Press, 1985); Benn Steil & Robert E. Litan, Financial Statecraft: The Role of Financial Markets in American Foreign Policy (Council on Foreign Relations/Yale University Press, 2006); Benjamin J. Cohen, Currency Statecraft: Monetary Rivalry and Geopolitical Ambition (University of Chicago Press, 2018).

[12] Regarding the practical application of mutual recognition, see note 41 below.

[13] Henry Farrell & Abraham L. Newman, Weaponized Interdependence: How Global Economic Networks Shape State Coercion, 44 Int'l Security 42, 49, 55--56, 76, 79 (Summer 2019) (pointing out that economic networks tend to form asymmetric structures centered around a few intermediaries, thereby granting states with jurisdiction over these intermediaries advantages in both information and coercion, and warning that the more privileged states exploit this position, the stronger the motivation for other states to undermine or replace that network).

[14] Bank for International Settlements, "The Impact of Stablecoins on the International Monetary and Financial System," BIS Papers No. 170 (2026), p. 1 (pointing out that "about 98% of stablecoin value is denominated in dollars"); Board of Governors of the Federal Reserve System, "Stablecoins in 2025: Developments and Financial Stability Implications," FEDS Notes (April 8, 2026).

[15] The dollar should not be the only currency on these tracks. As other jurisdictions establish regulatory frameworks for stablecoins, stablecoins denominated in other sovereign currencies and issued by regulated entities meeting comparable standards should be able to operate in parallel with the digital dollar. A multi-currency system with high-quality domestic currency issuance is healthier than a single currency ecosystem and aligns with the mutual recognition principles described below.

[16] National Institute of Statistics and Geography of Mexico and National Banking and Securities Commission, "2024 National Financial Inclusion Survey" (indicating that a significant portion of Mexican adults do not have formal deposit accounts, while the penetration of mobile phones is much higher). Many forcibly displaced persons also face limited or complete lack of access to formal banking services. United Nations High Commissioner for Refugees, "Global Trends" (June 2026) (approximately 117.8 million forcibly displaced persons by the end of 2025).

[17] A development worth noting. Prior to the "GENIUS Act," dollar stablecoins issued by U.S. companies were fully regulated in the EU under the "Markets in Crypto-Assets Regulation" (MiCA), which applies to such tokens starting in 2024. For a period, the most comprehensive prudential rules applicable to the digital dollar were European rather than American. This gap is one of the considerations making a domestic framework urgent.

[18] Board of Governors of the Federal Reserve System, Fedwire Funds Service (real-time gross settlement with immediate finality). Securities infrastructure also adopts a delivery versus payment mechanism.

[19] On most existing blockchains, transactions often undergo a "probabilistic" state and may be subject to chain reorganization, causing recently confirmed transactions to be reversed. Other blockchains—including Circle's Arc—provide 100% final and irreversible "certainty" in settlement finality. See Arc: An Open Layer-1 Blockchain Purpose-Built for Stablecoin Finance (August 2025), available at https://www.arc.io/litepaper (last accessed August 28, 2026).

[20] Bank for International Settlements, "Project Agorá: A Shared Programmable Platform for Wholesale Cross-Border Payments," pp. 42, 62, 65 (May 2026) (noting that "ledger settlement ensures the technical irreversibility of workflow states, rather than the legal finality of the underlying funds"; the atomic settlement trigger point is defined as having agreed legal significance, determining the timing of settlement finality; the platform's rulebook must establish settlement finality points, liability allocation, and procedures for handling participant defaults or bankruptcies according to the domestic laws of each participating jurisdiction); Coinbase Institute, "On-Chain Settlement Finality: A Practical Framework for Policymakers" (February 25, 2026) (noting that "finality is always a legal determination layered on top of technical conditions," and pointing out that even Fedwire transfers may be reclaimed by bankruptcy trustees as preferential payments under domestic bankruptcy law), available at https://www.coinbase.com/public-policy/advocacy/documents/settlement-finality-onchain (last accessed August 22, 2026).

[21] World Bank, "Global Remittance Prices," published in the second quarter of 2026 (global average cost is about 6.4% of the remittance amount). Cost drivers include compliance, foreign exchange, cash handling, local distribution, competitive conditions, and corridor economics, not just outdated technology.

[22] Heath P. Tarbert's statement to the Senate Committee on Agriculture, Nutrition, and Forestry regarding the "Digital Goods Consumer Protection Act of 2022" (S. 4760) (September 15, 2022).

[23] Data on the total volume of tokenized U.S. Treasury securities and money market products is sourced from commercial industry tracking agency RWA.xyz, as of August 2026, including products initiated by BlackRock and Franklin Templeton. For any single fund, the sponsor's disclosure documents are the authoritative source.

[24] Depository Trust & Clearing Corporation, "DTCC Approved to Offer New Tokenization Services, Paving the Way for Tokenized DTC Custodied Assets" (December 11, 2025).

[25] Dedicated settlement networks launched or announced in 2025 and 2026 include Tempo initiated by Stripe and Paradigm, Google Cloud Universal Ledger, and networks initiated by other stablecoin issuers. The initiators, operational status, and design features of each network vary.

[26] See the Arc white paper referenced in note 19 (describing the design of the network, including transaction fees denominated in stablecoins, deterministic sub-second finality, configurable privacy, and an initial proof of authority consensus model with validators selected by Circle); and ARC: The Native Asset of the Economic OS (May 2026), available at https://www.arc.io/arc-token-whitepaper (last accessed August 28, 2026) (describing a potential native coordinating asset supporting staking, economic governance, and fee mechanisms, envisioning a transition from proof of authority to proof of stake).

[27] Basel Committee on Banking Supervision, "Crypto Asset Exposures," SCO60, "Basel Framework" (effective January 1, 2026); Treasury Borrowing Advisory Committee, "Trends in U.S. Treasury Demand" (February 2026) (listing bank financing impacts as one of the matters to be monitored).

[28] The most comprehensive discussion on this integration is by Jeremy Allaire, The Agentic Economy: The Convergence of Intelligence and the Economy (July 2026), which argues that the agentic economy and the on-chain economy are not two adjacent developments but two sides of the same economic entity. This work is written in his personal capacity and does not represent the position of Circle Internet Group, Inc. The argument I present here is more limited: I view artificial intelligence as an accelerator of a migration that is already underway, rather than its cause; my testimony does not rely on that stronger claim—although I tend to agree with Mr. Allaire's view.

[29] Mastercard, Agent Pay (April 2025) (provides examples of agent payment technology operating within human-set authorization and control); Visa, Intelligent Commerce (2025). Circle has also built infrastructure for agent-initiated payments.

[30] See the 21st Century Housing ROAD Act, Pub. L. No. 119-101, Title XI, § 1101, 140 Stat. 846, 983--84 (2026) (generally prohibiting the Federal Reserve from issuing retail CBDCs directly or through intermediaries before December 31, 2030).

[31] For the distinction between bank deposits and payment stablecoins at the statutory and balance sheet levels, see Heath P. Tarbert, The Dollar's Digital Future, note 6 above, Part 1.

[32] The American Stablecoin National Innovation Guidance and Establishment Act (GENIUS Act), Pub. L. No. 119-27 (July 18, 2025) (generally effective 120 days after the final implementing regulations are issued by the primary federal payment stablecoin regulatory agency, or on January 18, 2027, whichever is earlier; digital asset service provider offering and sales restrictions have a separate three-year transition period).

[33] Proposed rules for the implementation of the GENIUS Act regarding the issuance, offering, and sale of payment stablecoins, proposed rulemaking notice, 91 Fed. Reg. 53,368 (proposed August 18, 2026) (to be codified at 12 C.F.R. ch. XV) (proposed implementation of Section 3 of the Act, comment period is 60 days after publication).

[34] Federal Reserve Board, "Stablecoins in 2025," note 14 above. The Notes reflect the analysis of Board staff and do not represent the institutional position of the Board.

[35] Department of the Treasury Borrowing Advisory Committee, "Trends in U.S. Treasury Demand," note 27 above, using financial data from major issuers as of September 30, 2025.

[36] Office of the Comptroller of the Currency, Press Release No. 2025-125 (December 12, 2025) (conditionally approves five national trust bank charter applications). Conditional approval is different from final approval, and the entities currently issuing USDC are independent of the national trust bank that Circle received final approval for in July 2026.

[37] Circle Internet Group, Inc., Q2 2026 Performance (as of June 30, 2026, the number of financial institutions registered to join the Circle payment network). The registration count does not measure transaction activity.

[38] Commodity Futures Trading Commission, Staff No-Action Position on Specific Digital Assets Used for Margin, Letter No. 25-40 (December 8, 2025), later reissued as Letter No. 26-05 (February 2026); in July 2026, a client submitted a transaction of USDC to their futures commission merchant.

[39] Financial Accounting Standards Board, "Cash Equivalents—Disclosure Enhancements and Classification of Certain Digital Assets," Project Summary (last updated July 8, 2026), available at https://fasb.org/projects/current-projects/classification-of-certain-digital-assets-as-cash-equivalents-423255 (last accessed August 28, 2026); Financial Accounting Standards Board, "PMAC Meeting Minutes—May 14, 2026" (recording discussions on stablecoins), available at https://fasb.org/about-us/Advisory-Groups/pmac/pmac-meeting-materials/pmac-meeting-recap-may-14-2026 (last accessed August 28, 2026).

[40] Circle Internet Group, Inc.'s periodic report submitted to the U.S. Securities and Exchange Commission (describing risks related to reserve banks, custodians, asset managers, liquidity, operations, and markets).

[41] CFTC Chairman Heath P. Tarbert's statement supporting the final rule on cross-border swaps (July 23, 2020) ("We should extend deference to other regulators who have adopted comparable regulations, just as we expect them to do for us."); CFTC Chairman Heath P. Tarbert's remarks at the 35th FIA Annual Expo (October 30, 2019) ("Mutual recognition is a two-way street. Therefore, if the other party grants us mutual recognition, we will also grant them mutual recognition.").

[42] No entity has yet become a licensed payment stablecoin issuer under the GENIUS Act, as the licensing regime has not yet taken effect. Several sponsors have publicly announced their intention to apply for eligibility.

[43] The 2025 Digital Asset Market Clarity Act (CLARITY Act), H.R. 3633, 119th Congress; Roll Call Vote No. 199 (July 17, 2025) (passed with 294 votes in favor and 134 votes against, including 216 Republicans and 78 Democrats voting in favor). The Senate Committee on Agriculture, Nutrition, and Forestry took action in January 2026; the Senate Committee on Banking, Housing, and Urban Affairs passed its portion on May 14, 2026, with a vote of 15 to 9; the merged updated text was released in July 2026. There are differences in the terms between the aforementioned texts, and the descriptions in the main text refer to their common objectives.

Join ChainCatcher Official

Telegram Feed: @chaincatcher

X (Twitter): @ChainCatcher_