Circle President Heath Tarbert's testimony at the Congressional hearing: The dollar's 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 clear: to promote the continuation of building 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 transcended 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 put on-chain.

Second, push for the completion of legislation for CLARITY. 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 the 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 tracks 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 represented by Circle. Heath clearly opposes artificially creating "national champion enterprises," but the future system he envisions is very clear: dollar-denominated, governed by U.S. law, regulated stablecoins, institutional-grade 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 the tracks established by others. GENIUS has completed the first step; next is CLARITY and its 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 have also served as a 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 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 Baltimore family—where public service and doing things by the book are taken for granted. Both of my grandfathers served in World War II; others in my family have been 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 child support enforcement in the county. This tradition has shaped every position I have held. After leaving 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 has not been substantively updated in thirty years. Meanwhile, strategic competitors are targeting emerging technologies that underpin military capabilities. U.S. law must be adjusted before strategic risks outpace our institutions. We decided then: the law must keep pace. Later that year, Congress passed the most significant reform of U.S. foreign investment review law 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 have always found ways to work together.

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

One principle has always guided my thinking. When I served as CFTC Chairman, I wrote: "How we regulate is as important as what we regulate."[2] The same is true for 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 the value transfer system. 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 connect my theme directly to this title.

Dollar Statecraft is economic policy. The role of the dollar 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—keeping the financial architecture of the world anchored here.

Get it wrong, and the losses will not announce themselves. They will manifest slowly: 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 households and businesses; it expands our capacity 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 assets rely on is being rebuilt in software. What results 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 execute the first, close the loopholes, and complete a lasting framework for the market built on the dollar layer.

These three points boil down to one 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?

When I served as CFTC Chairman, I also said, and 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 finance. The infrastructure that value transfer relies on is critical economic infrastructure. It relates to the capital costs for American businesses; it allows the U.S. to set standards for anti-money laundering rules and makes our sanctions system more effective. Ultimately, it relates to our economic power and national security. Therefore, I want to elaborate further on the three points mentioned above.

I. 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. People often discuss its global role as a matter of national status. A more accurate understanding is that it is a matter of national income. And it is earned by our country, not inherited. It has taken generations to build. We can strengthen it, or we can squander it.

(1) What This Role Buys American Households

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

It helps lower borrowing costs for American households, U.S. 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 world's finest military to date.[6]

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

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

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

That is the ledger. It is the most unobtrusive yet weighty economic advantage that Americans possess.

(2) This Status is Built and Can 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 one-quarter of global output.[9]

These two numbers are telling.

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

So, what accounts for this difference? 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 U.S. 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. The digital infrastructure itself cannot sustain this status. But it is becoming a necessary condition for maintaining it.

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

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

This Dollar Statecraft discussed here has two characteristics. Its primary tools are legal and institutional design, rather than coercion. Its goal is attraction, not compulsion.

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

Dollar Statecraft has always been implemented through institutions. What is new is that these institutions now operate on software, and someone must decide who writes it.

There are two additional observations. Power in the twenty-first 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 status gives everyone else 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 Layer of Stablecoins is Currently Choosing the Dollar

Here is a fact that this committee should pay the most attention to: the vast majority of stablecoin value in the world today is denominated in dollars.[14]

Think about how this happens. 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 U.S. mandate, but because the dollar has always been credible, liquid, and readily available.

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

It is necessary to articulate the mechanism precisely, as this is 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 tracks can gain powerful 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 authority 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 it is met 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 infrastructure built around different policy objectives.

Public chains are transparent at the transaction level, but they are 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 achieve in the correspondent banking system. But traceability cannot replace customer identification, sanctions screening, reserve regulation, or accountable management.

This distinction is crucial for "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 issuers, their reserves, their books and records, and their responsible executives.

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

II. The Internet Financial System

The status of the dollar relies on infrastructure. And this infrastructure is currently 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, not just to software engineers.

(1) What is the Internet Financial System and Why is it Different

For thirty years, the internet has transmitted information, while the financial system has transmitted value. A trading platform can instantly transmit an order, but funds still have to go through card 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. Currencies, 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 properties. 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 concrete example will be more specific. Many domestic transactions have achieved final settlement or delivery versus payment (DVP) settlement, and our large payment systems provide real-time full settlement with immediate 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; they are transferred to technology, governance, liquidity, custody, and legal issues.

There is a related distinction worth emphasizing because it is easily confused. Technological 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 that have 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 percentage in fees and exchange rate spreads—global remittance costs still average over 6%.[21] A small manufacturing business may wait days to receive payment for an international invoice and finance during that time lag. 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 relevant to a congressional hearing themed around "growth" for a specific reason. Faster settlements are not just convenient; they can free up capital. Every day funds are in transit is a day businesses are financing a gap not of their 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 in cases where speed is not the primary goal, settlement designs that reduce overall risk and capital friction should be the objective. The Internet Financial System makes this possible.

(2) What is Migrating is Not Just the Dollar—But the Entire U.S. 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 stated 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 capital here, hedge here, and clear here because our markets are the best places in the world to do these things.

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

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

Industry data shows that as of August 2026, the circulation of tokenized U.S. Treasuries and money market products has exceeded $16 billion, with providers including traditional asset management firms like 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 on 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 the same scale of activity, reducing costs for the businesses trading within them.

On the pace of this transition, let me make a point. Think about television. Streaming did not replace cable overnight. The two coexisted for many years, and still do. But the direction of progress is clear. Those companies that recognized this shift early built the platforms that the world uses today. And most of them are American companies.

The same pattern will emerge 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, the strategic question is much larger than "what currency will the new system use." A system can be priced in dollars but be entirely governed by others. That is where the strategic risk lies.

America's leadership here is crucial. It means that the place where tokenized asset trading occurs must adhere to our disclosure and market integrity rules. It means that custodians holding these assets must be subject to U.S. regulators, and our standards for 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 the loss in bankruptcy. And because financial infrastructure is critical economic infrastructure, it also means our national security is protected. When this committee wants to know what is happening in a market, it can find out.

But the dollar's status as the default accounting unit 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 U.S. businesses and trusted partners. Otherwise, we will reach our own markets through someone else's track.

(3) The Tracks are Being Built, and AI 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 does not fit as well, and this mismatch is visible. Finality models differ, and some remain probabilistic. Fees may be denominated in volatile tokens, making the cost of dollar-denominated transactions uncertain. Moreover, many systems either default to fully public records or move toward 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 companies, 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 regardless of which network wins.

Those recurring design choices are essentially decisions that can have broader economic implications. Pricing transaction fees in dollars allows users to price settlements in the same unit as the transaction itself; pricing only in floating tokens means users bear an additional layer of volatility. Making settlements deterministic strengthens the foundation on which legal finality relies—payment finality is crucial for every market regulated by this committee. Building confidentiality alongside governed legitimate access allows the system to accommodate regulated institutional business; whereas making all records public or absolute confidentiality makes important use cases difficult to achieve.

The 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 the right to view them by law and due process. A publicly traded company cannot broadcast payroll and vendor prices on a public ledger to its competitors; it also cannot hide these funds from auditors or regulators.

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

Design issues also have traps in the opposite direction. Retail central bank digital currencies (CBDCs) could create unacceptable visibility for governments over citizens' lives and could disintermediate commercial banks. At the other extreme, a design that disregards compliance and offers absolute privacy could 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 risks. 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 potential impacts 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 Dollar Statecraft intersects with engineering. I have previously stated that the dollar's status depends on trust in U.S. institutions. 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 about whose authorization applies. Trust remains that asset. It will just be earned or squandered in a different medium.

Businesses bound by U.S. law must design according to 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—an accelerator of the trends I have described today.[28] Payment systems are already being designed for it. Software agents can initiate transactions within the human-set authorization limits, spending caps, and compliance controls. Major card networks have announced precisely this kind of work.[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 tracks made in America, 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. So 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 Dollar Statecraft. 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 a digital dollar on the internet: central bank digital currencies, tokenized deposits, and payment stablecoins.

Central bank digital currencies, depending on their architecture, could establish a direct relationship between the Federal Reserve and the public. They could create unacceptable visibility for the government over individuals' financial activities. Moreover, they could disintermediate 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 different. Tokenized deposits are claims on assets (i.e., their loan books, reserves, and other assets) of a specific bank. In contrast, payment stablecoins under the GENIUS Act are designed around identifiable one-to-one reserves and have 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 par. These reserves are restricted from being reused, and their composition must be publicly reported. This is the core model Circle uses for USDC today.

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

It is important to be precise on timing, 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 regulatory agencies issue final implementation rules. From the effective date, it will be illegal for digital asset service providers to offer or sell foreign-issued stablecoins within the U.S. unless they meet strict conditions; and in any case, starting July 2028, it will be illegal to sell stablecoins from unlicensed issuers.[32]

Implementation work is underway but will take time. The Treasury issued a proposed rulemaking advance notice in September 2025, and since then, thousands of pages of proposed rules have covered various aspects from prudential rules and disclosures to anti-money laundering and market conduct. Just last month, the department issued guidance specifying what controls digital asset service providers must have in place to ensure that Americans are not offered non-compliant foreign stablecoins.[33]

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

Data from the entire 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 early 2025 levels. The same analysis report states that stablecoin trading volume on Ethereum increased 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.

Regarding the 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 stablecoin issuers held less than 1% of the total outstanding Treasury debt and viewed this sector as a new emerging source of demand worth monitoring.[35] Indeed, the legitimacy of this framework does not depend on stablecoins solving the federal debt issue.

Regulatory infrastructure and regulated use cases are emerging. In December 2025, the Office of the Comptroller of the Currency (OCC) conditionally approved five national trust bank charters in this space.[36] Since then, payment companies, broker-dealers, and banks have submitted more applications—considering that just two years ago, there was no statutory category of "licensed payment stablecoin issuers" at the federal level, this is quite a remarkable development. Additionally, by mid-2026, 175 financial institutions had registered to join the Circle Payment Network (CPN).[37] Furthermore, in July 2026, under a non-action position from the CFTC, a customer 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 support and can be redeemed directly from the issuer on demand. This step will pull regulated stablecoins deeper into mainstream treasury management, payments, and financial reporting systems.[39]

For American taxpayers, this design is worth emphasizing. The GENIUS framework does not provide deposit insurance or explicit taxpayer guarantees to payment stablecoin holders. This is the right design. Its purpose is to reduce the likelihood of needing 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 substantive maturity transformation inherent in fractional reserve lending. But operational, custody, liquidity, market, network, and legal risks still exist and must be subject to regulation.[40]

Two actions remain to be completed.

First, the final rules should be completed on 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 the core commitment of this act. Agencies are doing serious work under real-time pressure, and Congress's attention to the pace of implementation will be well-placed.

Second, the final rules should not leave loopholes. The protections of this act are achieved by limiting "who can issue, offer, or sell digital dollars to Americans." These limitations should reach intermediaries that actually serve U.S. customers. And the determination of comparability for foreign regulation should be based on truly equivalent regulatory outcomes.

During my tenure as chairman, I led the CFTC's cross-border swap rules based on reciprocal deference. We should extend deference to regulators that have truly comparable rules and regulatory standards, expecting them to treat us the same way.[41]

Finally, this is not a story about any one 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 has not legislated to create a "national champion enterprise," and this committee should not hope for that either. A core measure of whether this act succeeds will be whether multiple regulated issuers can safely compete under common rules while maintaining reliable redemptions, transparent reserves, and meaningful consumer protections.

(2) The CLARITY Act Still Needs Completion

Congress has set the rules for the digital dollar. But it has not yet set rules for the markets that use the dollar. This is everything else in the second part besides the dollar itself.

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

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 questions is better than the status quo, which can predictably answer too few questions.

What legislation provides is primarily durability. Institutional guidance and enforcement priorities will change with government turnover. A bipartisan law will last much longer. Businesses making ten-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 how decentralized protocols are handled. These are all reasons for prudent legislation. You have already pointed the way last year. This committee should now defend the bipartisan principles it has established while completing this work in Congress: clear jurisdictional delineation; effective protection of customer assets; enforceable rules for intermediaries; strong illicit finance regulatory authorities; honest handling of conflicts of interest; and a lasting path for responsible business activities to operate offshore. My hope is that all of these will be retained in CLARITY, and that Congress can sign the final version into law this year.

Conclusion

I am an American who has spent most 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 beneath them changes.

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

Congress cannot decide which technologies will succeed. It can decide whether U.S. law, U.S. institutions, and the dollar remain embedded in those successful systems. The unanswered questions are: Are these tracks American? Is the accounting unit still the dollar? And when things go wrong, whose laws govern?

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

This is Dollar Statecraft in the Internet Financial System. It is not a currency defended by proclamations, but a system 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 its financial system.

The dollar's status is built. It can continue to be built. It can also be squandered. Which path prevails depends not just on this committee. But the part that depends on this committee is far greater than people typically understand.

Thank you 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: Heath P. Tarbert, Assistant Secretary for International Markets at the Department of the Treasury, Statement to the House Committee on Financial Services Subcommittee on Monetary Policy and Trade 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. And how we regulate is as important as what we regulate.")

[3] This term 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 Chairman 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 ledger, 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 provides the U.S. with significant advantages: 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 Penn 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 of reserve currency status, not mechanical inevitabilities.

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

[8] International Monetary Fund, "Composition of Official Foreign Exchange Reserves" (COFER), Q1 2026 release (dollar share 57.13%). The IMF now reports the total amount allocated by currency rather than separately reporting allocated and unallocated portions, so this figure represents reported foreign exchange reserves.

[9] International Monetary Fund, "World Economic Outlook" database. The comparison in the text above uses 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 undermines this 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 a specific distribution 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 reciprocal deference, 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, giving states with jurisdiction over those intermediaries advantages in both information and coercion, and warning that the more privileged states exploit this position, the stronger the motivation for others to undermine or replace that network).

[14] Bank for International Settlements, "The Impact of Stablecoins on International Currency and Financial Systems," BIS Papers No. 170 (2026), p. 1 (noting that "about 98% of stablecoin value is denominated in dollars"); Federal Reserve Board, "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 stablecoin regulatory frameworks, stablecoins denominated in other sovereign currencies, 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 local currency issuance is healthier than a single currency ecosystem and aligns with the principle of reciprocity 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 mobile phone penetration 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 as of the end of 2025).

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

[18] Federal Reserve Board, Fedwire Funds Service (providing real-time full settlement with immediate finality). Securities infrastructure also employs delivery versus payment mechanisms.

[19] On most existing blockchains, transactions often experience a "probabilistic" state and may be subject to chain reorganization, causing recently confirmed transactions to be reversed. Other blockchains—including Circle's Arc—offer 100% final and irreversible "deterministic" 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 the workflow state, not 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 final points, liability allocation, and procedures for handling participant defaults or bankruptcies according to 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 subject to recovery 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," Q2 2026 release (global average cost around 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 on the Digital Commodity Consumer Protection Act of 2022 (S. 4760) to the Senate Committee on Agriculture, Nutrition, and Forestry (September 15, 2022).

[23] Data on the total volume of tokenized U.S. Treasuries and money market products is sourced from commercial industry tracking firm 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] The Depository Trust & Clearing Corporation, "DTCC Approved to Provide New Tokenization Services, Paving the Way for Tokenized DTC Custodial 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, launch status, and design features of each network vary.

[26] See note 19 above for the Arc white paper (describing the design of the network, including transaction fees priced 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 Demand for U.S. Treasuries" (February 2026) (listing the impact of bank financing as one of the matters to monitor).

[28] The most thorough discussion of this convergence is 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 adjacent developments but two sides of the same economy. This work is written in his personal capacity and does not represent the views of Circle Internet Group, Inc. My argument here is more limited: I view AI as an accelerator of a migration that is already underway, not its cause; my testimony does not rely on that stronger claim—though I tend to agree with Mr. Allaire's perspective.

[29] Mastercard, "Agent Pay" (April 2025) (providing examples of agent payment technology operating within human-set authorizations and controls); 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] Regarding 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 U.S. Stablecoin National Innovation and Establishment Act (GENIUS Act), Pub. L. No. 119-27 (July 18, 2025) (generally effective date is the earlier of January 18, 2027, or 120 days after the major federal regulatory agencies issue final implementation rules; the offering and sale restrictions for digital asset service providers have a three-year transition period).

[33] "GENIUS Act Implementation Guidelines for Issuance, Offering, and Sale of Payment Stablecoins," proposed rulemaking notice, 91 Fed. Reg. 53,368 (proposed August 18, 2026) (to be codified in 12 C.F.R. ch. XV) (proposing to implement Section 3 of the Act, with a comment period of 60 days after publication).

[34] Federal Reserve Board, "Stablecoins in 2025," note 14 above. These Notes reflect the analysis of the Board's staff, not the institutional position of the Board.

[35] Treasury Borrowing Advisory Committee, "Trends in Demand for U.S. Treasuries," 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 approving five national trust bank charter applications). Conditional approval is different from final approval, and the entities currently issuing USDC are independent from 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 number does not measure trading activity.

[38] Commodity Futures Trading Commission, Staff Non-Action Letter on the Use of Specific Digital Assets for Margin, Letter No. 25-40 (December 8, 2025), later reissued as Letter No. 26-05 (February 2026); in July 2026, a customer submitted 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 about 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. periodic reports 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 rules on cross-border swaps (July 23, 2020) ("We should extend deference to other regulators that have adopted comparable regulations, just as we expect them to treat us."); CFTC Chairman Heath P. Tarbert's remarks at the 35th FIA Annual Expo (October 30, 2019) ("Reciprocity is a two-way street. So if the other party gives us reciprocity, we will give it to them as well.").

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

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