-9999
Floor Speech
BREAK IN TRANSCRIPT
Mr. REED. Mr. President, today I am introducing the Foreign Stablecoin Transparency Act. This important legislation would close a loophole in the Guiding and Establishing National Innovation for U.S. Stablecoins, or GENIUS, Act by extending a provision that requires large U.S. stablecoin issuers to undergo a full financial statement audit to also cover large foreign stablecoin issuers that offer and sell their products to U.S. investors.
Stablecoins are cryptocurrencies whose value is pegged to a real- world asset, which under the GENIUS Act is the U.S. dollar. The basic promise that stablecoin issuers make to their holders is that a stablecoin will always be redeemable for a dollar on demand. You give a stablecoin company a dollar, the company gives you back an IOU that is recorded on a blockchain. The stablecoin company takes your dollar and invests it in various safe assets that are purportedly able to be liquidated at any time to meet redemption requests.
All kinds of companies that handle the American peoples' money must undergo financial statement audits. U.S.-based dollar stablecoin issuers with $50 billion of stablecoins in circulation must get an audit. Banks of all sizes must get audits, even the smallest community banks. Many States require licensed money transmitters to submit audited financial statements to provide transparency and verify their financial health. Even unregistered private funds that are sponsored by U.S. investment advisers must get audits. And of course, all public companies must get audits. So it strikes me as entirely sensible to extend this very same requirement to foreign issuers of dollar-backed stablecoins, which handle Americans' money--just like so many other institutions that are subject to audit requirements.
Unless stablecoin issuers are audited, there is no independent verification that the company has enough assets to cover all stablecoins in circulation. Instead, holders must take the word of the issuer. If the issuer does not have sufficient reserves or is found to be cooking the books, then a stablecoin company may experience a ``run'' on its assets and holders will not be able to get their money back despite being sold something that they are told is safe and redeemable on demand. That is why we need audits of all companies that issue dollar-backed stablecoins to Americans.
A major flaw of the GENIUS Act is that stablecoins issued by companies with headquarters outside the United States are not required to undergo audits. Unless this flaw is addressed, the world's largest dollar-backed stablecoin--Tether, which is based in El Salvador--can be freely offered, sold, and used by Americans without being compelled to provide a full accounting of the reserves backing its coin. Tether purportedly has $187 billion in assets and is an essential piece of the crypto financial system plumbing. All manner of crypto-assets are bought and sold not with fiat currency, but with dollar-backed stablecoins like Tether.
During his confirmation hearing before the Senate Commerce Committee in 2025 Commerce Secretary Howard Lutnick testified, ``I believe U.S. dollar-backed stablecoins should be fully audited.'' Earlier this week before the Senate Appropriations Committee, I asked him whether this specific statement included Tether, and he said ``I absolutely agree with you, Tether should be audited.
Although Secretary Lutnick has no formal role in overseeing cryptocurrency, he has significant experience in this area. His former investment bank Cantor Fitzgerald has very deep ties to Tether. Cantor owns a 5 percent stake in the company, manages the reserves backing its stablecoin, and has cosponsored various crypto investment funds with Tether.
My legislation would require foreign stablecoins backed by the U.S. dollar like Tether to undergo an audit, no matter where the company is located. And a full audit is essential. In 2021, Tether was fined by the Commodity Futures Trading Commission for lying about its reserves. The CFTC found that ``Tether misrepresented to customers and the market that Tether maintained sufficient fiat reserves to back every USDt in circulation `one-to-one' . . . and that Tether would undergo routine, professional audits to demonstrate that it maintained `100% reserves at all times.' In fact . . . Tether failed to maintain fiat currency reserves . . . to back every USDt in circulation.'' Despite Tether executives promising for years that they want to get an audit, we have yet to see them do so. Instead, Tether has published quarterly ``attestations'' by the Italian arm of a mid-tier accounting firm that simply verify information that Tether provides to that firm using procedures that are mutually agreed. That is very different than true independent third- party verification based upon standardized procedures with criminal and civil penalties if financial statements contain false information.
If foreign stablecoin issuers want the privilege of creating and handling the American people's money, then I agree with Secretary Lutnick that it is entirely sensible for them to open up their books for the American people to see, just as we expect of large U.S. stablecoin companies, banks, and other payments companies. If the goal of the GENIUS bill is to create incentives for stablecoin issuers to come onshore and operate fully within the U.S. regulatory perimeter, then we must close this alarming gap that incentivizes dollar creation by foreign companies.
I urge my colleagues to support this critical legislation.
BREAK IN TRANSCRIPT
Source