Committee hears warnings that proposed crypto and stablecoin measures could create new shadow‑banking risks

A substantial portion of the hearing focused on new financial products — notably stablecoins, tokenized securities and other crypto instruments — and whether recent bills would introduce shadow‑banking risks that could create systemic exposure.

Ranking Member Brad Sherman and several others warned that some bills pending before the House would give crypto instruments de facto legitimacy while removing traditional securities protections. Members cited press reporting of wide pricing disparities for tokenized shares on some crypto platforms and asked whether those structures should be available to retail investors.

Dennis Kelleher of BetterMarkets said the proposed measures would ‘‘pour gasoline’’ on an under‑regulated crypto industry and could tie large commercial firms and technology platforms into bank‑like networks without equivalent prudential safeguards. He warned that a failure of major token issuers or platform operators could create contagion and bailouts.

Witnesses and members also discussed a practical classification question: when does a token represent a claim on an underlying security versus a derivative or synthetic exposure? Witnesses agreed that if tokenized instruments do not confer ownership or redemption rights to the underlying asset, they function like derivatives or swaps and should be regulated accordingly. Committee members referenced SEC and CFTC jurisdictional lines in that context.

No legislation or votes occurred at the hearing. Members said they would press for clearer statutory language to address platform custody, investor protections and the extent to which banks and financial platforms should be permitted to issue tokens linked to deposits or payments.