Coinbase CPO Warns US Lawmakers: 5 Major Stablecoin Mistakes To Avoid
As the United States inches toward a comprehensive framework for digital assets, stablecoin rules are emerging as one of the most consequential pieces of the puzzle. After the country’s first stablecoin bill, the GENIUS Act, was signed into law last year, attention shifted to a broader crypto market structure proposal, the CLARITY Act. That bill has since stalled in Congress amid growing pushback from the traditional banking lobby.
Against this backdrop, Coinbase Chief Policy Officer Faryar Shirzad has laid out five critical missteps he argues Congress must avoid when crafting the next phase of stablecoin regulation. In his view, the way lawmakers handle these issues will determine whether the US cements its leadership in digital finance or cedes ground to foreign competitors.
1. Do Not Undermine The Bipartisan Goals Of The GENIUS Act
Shirzad’s first warning is aimed at preserving the bipartisan foundation already established by the GENIUS Act, which created the country’s initial legal framework for stablecoins. That law, signed by President Donald Trump last year, was designed around three core objectives:
– Reinforce the global role of the US dollar
– Boost demand for US Treasuries
– Foster digital asset innovation inside the United States rather than abroad
According to Shirzad, any follow‑up legislation or amendments that dilute these aims would be a strategic mistake. The point of the GENIUS Act was not merely to “tolerate” stablecoins, but to harness them as a tool that strengthens the dollar’s dominance and makes US capital markets more attractive.
He stresses that new rules should be aligned with those original goals instead of quietly shifting the framework toward a more restrictive or protectionist posture. If regulation starts to push activity into other jurisdictions-he explicitly points to rivals like China-the US could find itself watching the next generation of financial infrastructure being built elsewhere.
2. Don’t Sacrifice Consumers To Protect Banks
Shirzad’s second major concern is the temptation to recast stablecoin policy as a vehicle for shielding banks from competition. He warns that lawmakers should not use speculative or unproven fears about “deposit flight” to justify extracting value from consumers or handicapping non‑bank stablecoin issuers.
Stablecoins, by design, offer a faster and cheaper way to move money across borders, between platforms, and within the broader digital asset ecosystem. Ironically, many banks are among the most enthusiastic adopters of blockchain rails for internal settlements and cross‑border payments, precisely because they are more efficient.
Shirzad argues that rewriting settled law to tilt the playing field toward traditional banks-at the expense of fintechs, crypto platforms, and other non‑bank firms-would be bad public policy. Especially troubling, he notes, is when such changes are based on worst‑case scenarios that are not supported by evidence.
In his view, consumer interests should be at the center of the debate. That means prioritizing cheaper, faster, more transparent payments and stronger protections for stablecoin users, rather than using regulation to preserve legacy revenue streams for incumbents.
3. Avoid Vague, Open‑Ended Enforcement Powers
A third red line for Coinbase’s policy chief is the creation of broad, ill‑defined regulatory authorities that can be repurposed by future administrations. Shirzad cautions Congress against writing laws that grant agencies sweeping discretion without clear boundaries.
Ambiguous statutory language, he warns, can easily be weaponized. What begins as a narrowly intended consumer protection tool can, under a different political climate, morph into a de facto ban on legitimate business models or technologies that lawmakers never meant to outlaw.
To prevent this, Shirzad urges legislators to:
– Draft precise mandates for regulators
– Clearly define what activities are permitted and what is prohibited
– Limit the scope for “interpretation creep” over time
The stability of the regulatory environment, he argues, is as important as the substance of the rules. Entrepreneurs and established institutions alike need to know that compliant activities won’t suddenly be reclassified as unlawful because of a change in leadership or political mood.
4. Don’t Disrupt Existing Lawful Businesses And Partnerships
The stablecoin market is no longer an experimental niche. It underpins billions in daily transaction volume and involves a complex network of issuers, trading venues, payment platforms, custodians, and technology providers. Many of these relationships are governed by legally binding contracts built around the current rules.
Shirzad emphasizes that new legislation must be forward‑looking rather than punitive or retroactive. In practice, that means:
– Avoiding provisions that invalidate existing lawful agreements
– Steering clear of rules that appear designed to single out specific companies or business models
– Offering reasonable transition periods so firms can adapt to new requirements
Regulation that suddenly pulls the rug out from under legitimate operators, he warns, would not only create chaos in the market but also damage the US’s reputation as a predictable and fair jurisdiction. Instead, Congress should focus on establishing guardrails for future activity while honoring commitments that were made in good faith under previous guidance.
5. Listen To Voters, Not Just Bank Executives
Finally, Shirzad calls on lawmakers to broaden the set of voices they consult. While bank executives remain influential players in Washington, he notes that “tens of millions of Americans” now own or use cryptocurrencies in some capacity. Their experiences and expectations deserve equal attention.
For many of these users, stablecoins are not speculative instruments but practical tools:
– Sending remittances more cheaply than with traditional providers
– Accessing dollar‑denominated value in countries with unstable local currencies
– Moving funds between platforms without the delays of the legacy banking system
If Congress writes rules that make these use cases harder or more expensive, it will be everyday users-not just crypto startups-who bear the cost. Shirzad’s message is that digital assets have moved beyond a niche hobby; they have become part of the financial lives of a large and growing segment of the electorate.
He concludes that stablecoins, when properly regulated, can:
– Strengthen the US dollar’s global position
– Increase structural demand for US Treasuries
– Modernize the payments infrastructure
– Unlock new business opportunities for banks of all sizes
The policy question, in his view, is whether the US will create “clear rules that allow innovation to grow in America” or drive it offshore through heavy‑handed or misaligned regulation.
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Why Stablecoins Have Become A Policy Priority
The intensity of the debate around stablecoins is not accidental. Unlike more volatile crypto assets, stablecoins are directly intertwined with the traditional financial system through their reserves, which are often held in cash and short‑term Treasuries. That makes them:
– Systemically relevant: Large stablecoin issuers hold sizeable portfolios of government debt.
– Technologically pivotal: They are the primary medium of exchange in many crypto markets.
– Geopolitically significant: A robust US‑dollar stablecoin ecosystem reinforces the dollar’s digital footprint globally.
Because of this, lawmakers see both opportunity and risk. Well‑structured rules could bring stablecoins fully into the regulatory perimeter, enhancing transparency and resilience. Poorly designed rules could either stifle the sector or allow vulnerabilities to grow unchecked.
The Banking Lobby’s Role In The Debate
A key friction point, as highlighted by the delays around the CLARITY Act, is the stance of traditional banks. Some institutions view non‑bank stablecoin issuers as potential competitors for deposits and transaction revenues. This has fueled arguments that stablecoins might cause “runs” on banks if customers shift funds into tokenized alternatives.
Shirzad’s critique is that these fears are often hypothetical and overlook the complementary nature of the technology. Banks can:
– Issue their own stablecoins or tokenized deposits
– Partner with existing issuers to provide custody, compliance, and payment rails
– Use blockchain infrastructure to streamline back‑office operations
From this perspective, stablecoins are less a threat to banks than a catalyst for modernization. Regulations that assume a zero‑sum conflict between banks and stablecoin providers risk missing this broader synergy.
Balancing Innovation With Risk Management
None of Shirzad’s points imply that stablecoins should be left unregulated. On the contrary, the sector has faced real challenges-from questions about reserve transparency to concerns over operational resilience and governance. The issue, he argues, is *how* the risks are addressed.
Effective stablecoin regulation would typically focus on:
– High‑quality, liquid reserves held in safe instruments
– Frequent, independent attestations or audits
– Robust redemption rights for users
– Clear oversight of issuers and key service providers
– Strong compliance with anti‑money laundering rules
Shirzad’s position is that these safeguards can coexist with a competitive, innovative market-provided lawmakers avoid the five pitfalls he outlines.
The International Dimension: Competing Regulatory Models
Another layer in the conversation is the global race to set standards for digital assets. While the US debates its own approach, other major jurisdictions are rolling out frameworks of their own. If the US lags or adopts a highly restrictive stance, international issuers and platforms may simply concentrate activity where rules are clearer and more predictable.
That outcome would have several consequences:
– Reduced influence for US regulators and policymakers over global standards
– Less demand for US‑based financial infrastructure
– A potential weakening of the dollar’s role in the digital economy
Shirzad’s repeated reference to places like China underscores this geopolitical angle. For him, getting stablecoin regulation right is not just about safeguarding investors-it is about maintaining the country’s strategic advantage in finance and technology.
What A Constructive Path Forward Could Look Like
Taking Shirzad’s warnings into account, a constructive legislative path might involve:
– Building directly on the GENIUS Act’s foundations, rather than rewriting them
– Creating a clear licensing regime for stablecoin issuers, open to both banks and non‑banks that meet strict standards
– Providing detailed, narrow mandates to regulators to avoid overreach
– Ensuring new rules respect existing contracts while outlining transition pathways
– Consulting widely with industry, consumer groups, and technical experts-not just incumbents
Such an approach would not satisfy every stakeholder, but it would aim for a pragmatic balance: robust oversight without smothering the innovation that made stablecoins relevant in the first place.
Why The Outcome Matters Beyond Crypto
Although the discussion is framed around stablecoins, the decisions Congress makes here will likely set precedents for the broader digital asset ecosystem. If the US demonstrates that it can craft nuanced, technology‑aware legislation, it will encourage responsible development across the entire sector.
Conversely, if policy is perceived as arbitrary, overly punitive, or captured by narrow interests, innovators may choose to build elsewhere. That, Shirzad warns, is the real risk: not that stablecoins upend the financial system, but that the US fails to shape their evolution and loses the benefits they can bring to the dollar, to its capital markets, and to everyday users.
In short, stablecoins are not just another crypto product. They are a test case for how the US will govern the next era of money and payments-and whether it will do so in a way that is consistent, competitive, and aligned with the interests of its citizens.