Representative Brad Sherman (D-Calif.) fired a sharp warning Thursday against allowing the federal government to process payments in stablecoins, arguing the move could create a 'tax evasion economy' and 'sanctify an alternative to the U.S. dollar.'
The core of the warning
Speaking during a House Financial Services Committee hearing, Sherman said stablecoins — digital tokens pegged to a fiat currency like the dollar — present a unique threat when paired with government payment systems. He argued that without strict enforcement, stablecoin transactions could become a shadow channel for evading taxes, since many operate outside traditional banking oversight.
'If the government starts accepting stablecoins for taxes or distributing benefits in them, we're essentially blessing a parallel financial system,' Sherman told the committee. His remarks push back against recent proposals in Congress and at the Treasury Department to integrate stablecoins into federal payment infrastructure.
Why stablecoins and government payments don't mix, per Sherman
Sherman's main concern is that stablecoins, while promoted as a faster and cheaper alternative to wire transfers and ACH payments, lack the transparency of the conventional banking system. Many stablecoin issuers operate under state licenses rather than federal charters, and transaction records can be harder for regulators to track.
'This isn't about innovation — it's about creating a tax-evasion economy,' he said. 'We'd be setting up a system where people can move money without the IRS seeing it.' The congressman also warned that government acceptance of stablecoins would 'sanctify an alternative to the U.S. dollar,' undermining the dollar's role as the world's primary reserve currency.
The broader debate around stablecoins
Stablecoin legislation has been a priority for House Financial Services Committee Chairman Patrick McHenry (R-N.C.), who has pushed for a federal regulatory framework. Proponents argue that stablecoins can improve payment speed and financial inclusion, especially for the unbanked. The Biden administration has also explored using stablecoins for digital dollar pilot programs.
But Sherman's alarm aligns with a growing chorus of lawmakers and consumer advocates who worry that stablecoins could be used for money laundering, sanctions evasion, and tax dodging. The Treasury Department has previously flagged stablecoin risks in a 2021 report, though it stopped short of recommending an outright ban on government use.
What happens next
The committee has not scheduled further hearings on stablecoin payments specifically, but Sherman's comments may pressure regulators to narrow the scope of any pilot programs. The Financial Stability Oversight Council is expected to release updated guidance on digital assets later this year. Whether that guidance will address government stablecoin use — or heed Sherman's warning — remains an open question.
