Brad Sherman slams stablecoin tax refunds as tax evasion tool 

Brad Sherman has criticized proposals to distribute government payments through stablecoins, warning during a congressional hearing that such a system could support tax evasion while lawmakers simultaneously advance several new crypto tax proposals.

According to remarks delivered during a House Financial Services Committee hearing on oversight of federal banking regulators, U.S. Representative Brad Sherman argued that using stablecoins for government payments would create risks that outweigh any potential benefits.

The criticism came after National Credit Union Administration Chairman Kyle Hauptman suggested that stablecoins could improve the speed of government disbursements.

Hauptman told lawmakers that dollar-pegged tokens operate around the clock, allowing tax refunds and emergency payments to reach recipients outside traditional banking hours, including weekends and holidays.

Responding to the proposal, Sherman said he could not think of a worse idea and argued that government-backed stablecoin payments would legitimize what he described as an alternative system designed to facilitate tax evasion.

Sherman also raised concerns about yield-bearing stablecoins, stating that legal professionals were already searching for ways to work around restrictions on interest payments and urging regulators to develop rules capable of preventing such outcomes.

Stablecoin tax rules remain under review

Sherman’s comments arrive as Congress examines how stablecoins should be treated under U.S. tax law.

As reported earlier by crypto.news, the House Ways and Means Committee recently released seven discussion drafts covering digital asset taxation ahead of a June 9 hearing.

According to crypto journalist Eleanor Terrett, the package includes proposals addressing stablecoins, staking rewards, mining income, DeFi lending, wash-sale rules, charitable donations and a voluntary disclosure program for unresolved crypto tax reporting.

Among the proposals is a provision that could allow compliant stablecoins to receive de minimis treatment for small gains and losses generated through everyday transactions. The measure would separate certain low-value payments from speculative crypto trading activity for tax purposes.

Lawmakers have previously explored similar concepts through the bipartisan Digital Asset Protection, Accountability, Regulation, Innovation, Taxation and Yields Act, known as the PARITY Act.

According to Representative Steven Horsford’s office, that proposal included a deemed-basis rule that would treat regulated payment stablecoins more like cash while incorporating protections against trading and arbitrage abuse.

Regulators outline banking and compliance plans

Elsewhere during the hearing, federal regulators discussed the implementation of stablecoin oversight requirements established under the GENIUS Act.

FDIC Chairman Travis Hill said regulators are preparing customer identification requirements for stablecoin issuers and indicated that proposed rules could be released soon.

At the same hearing, Comptroller of the Currency Jonathan Gould defended the Office of the Comptroller of the Currency’s handling of a national trust bank charter application submitted by Trump-linked World Liberty Financial.

The exchange became tense after Representative Gregory Meeks questioned Gould’s independence and asked whether he was acting on behalf of the public or the Trump family.

Gould rejected the criticism, describing the comments as unprecedented and saying the pressure he had experienced came from lawmakers rather than political figures connected to the administration.

The regulatory discussion unfolded as crypto firms continue to gain access to traditional banking infrastructure. Falcon Finance launched its fUSD stablecoin with Anchorage Digital, the first federally chartered crypto bank, while crypto exchange Kraken recently received a Federal Reserve master account with certain limitations.

Separately, World Liberty Financial said last month that it was in the final stages of obtaining conditional approval for its banking charter application.