Paxos CEO Urges US Lawmakers to Regulate Cross-Border Stablecoins

Paxos CEO Charles Cascarilla has urged US lawmakers to establish regulations for cross-border stablecoin issuance, emphasizing the need for a framework that enables stablecoin issuers to operate in other countries while still benefiting from US regulatory oversight. This call comes as the use of stablecoins for cross-border transactions continues to grow, highlighting the importance of clear regulatory guidelines to prevent financial crimes and ensure stability.

Cascarilla's testimony before the House Financial Services Committee focused on the challenges faced by Paxos' Global dollar (USDG) stablecoin, which is issued via a regulated affiliate in Singapore. He expressed concerns that without clear regulations, products like USDG could face delays and hurdles in adoption and distribution. Cascarilla recommended strengthening the current "international reciprocity language" to include clearly defined and accelerated timelines for the US Treasury Department to designate overseas jurisdictions for stablecoin regulation. This, he argued, would prevent bureaucratic delays and ensure thorough scrutiny of foreign regulatory regimes.

Cascarilla's proposal aims to prevent regulatory arbitrage, where issuers exploit lax oversight abroad. By establishing a framework to recognize jurisdictions with comparable regulatory regimes, the US can raise global standards for reserve requirements, anti-money laundering (AML) measures, and cybersecurity protocols. This approach would not only benefit the US but also foster innovation in the stablecoin sector and ensure that these digital assets can be used effectively for cross-border transactions.

Cascarilla's call for regulation comes amid compliance issues faced by some Paxos-issued stablecoins in the European Union following the enforcement of the Markets in Crypto-Assets Regulation (MiCA). Multiple crypto asset service providers in the EU have announced delistings of Paxos stablecoins like Pax dollar (PAX) and Pax gold (PAXG). This situation underscores the need for a global framework for stablecoin issuers that are regulated outside of the US.

While Cascarilla advocates for cross-border regulation, some industry leaders have urged all stablecoin firms to get regulated domestically. Circle co-founder Jeremy Allaire, for instance, argued that all dollar-based stablecoin issuers should register in the US, citing consumer protection and fair competition in the crypto market. However, Cascarilla's proposal offers a different perspective, focusing on the benefits of cross-border regulation for fostering innovation and ensuring the effective use of stablecoins in global transactions.

Stablecoins