Paxos CEO Charles Cascarilla wrote Tuesday that a regulatory framework for stablecoins should be one of America’s top priorities—no matter who wins the White House next week.

Addressing the Democratic and Republican presidential nominees in a letter, Cascarilla wrote that the U.S. is falling behind other countries without clear rules. Missing a chance to reassert its leadership on digital assets would have stark drawbacks too, he suggested.

“Unless Washington changes course, digital dollars will continue to move offshore, outside the purview of U.S. regulators and our banking system,” Cascarilla wrote. “This is a threat to our economic competitiveness and national security.”

Former President Donald Trump has styled himself as a defender of digital assets on the campaign trail, making overtures more vigorously than Vice President Kamala Harris, who adopted a pro-crypto posture this month. Addressing his letter to both candidates, however, Cascarilla leaned into the need for bipartisan support for “fixing this broken status quo.”

Lawmakers crossed the aisle on stablecoins this summer when the U.S. House Financial Services Committee passed the “Clarity for Payment Stablecoins Act of 2023.” But the bill that would create a regulatory framework for stablecoins remains far from the finish line on Capitol Hill, needing approval in the House and the Senate before it can be signed into law.

As Election Day approaches, other stablecoin firms have warned against the dangers of Congressional deadlock—convinced the U.S. is falling behind.

Circle’s Vice President, Yam Ki Chan, told Decrypt last month that the U.S. needs “to define what a well-regulated stablecoin looks like,” as regions like Hong Kong and the European Union push forward with their own rules.

Even though digital assets regulation has yet to be passed at the federal level, the New York Department of Financial Services (NYDFS) has maintained a framework in the state for nearly a decade. Providing crypto companies with a so-called BitLicense, Paxos has held one since nearly the beginning of the regime that’s become a template for other states.

Operating under the name of its exchange itBit, Paxos received the NYDFS’s first charter allowing crypto companies to be regulated under New York banking law. This made Paxos “the first issuer of prudentially-regulated, U.S. dollar-backed stablecoins,” Cascarilla wrote.

The market capitalization of Paxos’ Pax Dollar stablecoin has fallen from $369 million to $109 million since the start of this year, losing further ground to Tether’s commanding $120 billion footprint. But Paxos does also issue PayPal’s PYUSD stablecoin, which has a market capitalization of $600 million.

A plethora of digital asset firms have tried to work meaningfully with regulators like the Securities and Exchange Commission (SEC), but Cascarilla wrote that “the U.S. has become an inhospitable place for financial innovation,” pushing Paxos’ business partly overseas.

The stablecoin issuer found itself in the SEC’s crosshairs early last year. Braced for a lawsuit alleging Paxos’ BUSD stablecoin violated investor protection laws, the company later said that the regulator’s investigation had been dropped without an enforcement action.

A market structure bill that would clarify the SEC’s authority over digital assets received bipartisan support this summer, as FIT21 passed in the House. Needing Senate approval, House Majority Whip Tom Emmer (R-MN) and Senate Majority Leader Chuck Schumer (D-NY) have both since said that passing crypto regulation this year is a realistic possibility.

The gears of Washington could turn in Paxos’ favor as the dust settles in November. But as Cascarilla has pointed out, the pace of that progress has been a slow grind so far.

Edited by Andrew Hayward