A new proposal in the US Senate aims to redefine the stablecoin market by possibly allowing American banks to create and manage stablecoins that are pegged to the US dollar.
The Payment Stablecoin Bill, presented on the 17th of April, has piqued the interest of financial organizations and observers in the financial sector.
S&P Global Ratings indicated in a report on April 23 that the passing of the bill might encourage banks to increase their participation in the stablecoin market. This potential entry could potentially diminish the influence of significant non-US stablecoin creators, such as Tether, which currently boasts a market capitalization of $110 billion.
The bill sets a limit of $10 billion for non-bank companies in terms of the amount of stablecoins they can issue. It also bans the creation of unbacked algorithmic stablecoins. Moreover, the legislation requires stablecoin issuers to keep sufficient cash or equivalent assets equal in value to the stablecoins they put in circulation.
Based on S&P Global Ratings’ assessment, if the bill is approved and new banking regulations are implemented, banks could have an advantage over institutions without a banking license. These institutions would only be allowed to issue up to $10 billion in stablecoins, which may hinder the scale of operations for large entities like Tether.
Tether, the top stablecoin by trading volume, is not issued by an American company and would not meet the requirements of the proposed Payment Stablecoin Act. Consequently, US entities would be prohibited from owning or transacting with Tether, which could decrease its popularity and benefit stablecoins that are domestically issued in the US instead.
According to S&P’s analysis, most of Tether’s transactions occurred outside the United States and were primarily driven by retail purchases, remittances, and economic transactions in developing countries.
Last week, Democratic Senator Kirsten Gillibrand emphasized the importance of passing a regulatory framework for stablecoins during her bill introduction. She explained that this step is essential to preserve the US dollar’s leading position in global finance, encourage responsible innovation, safeguard consumers, and combat money laundering and illicit financing activities.
However, not everyone was delighted with the bill’s proposed changes.
Coin Center, an organization promoting cryptocurrencies, voiced concerns about the proposed law. They argued that banning algorithmic stablecoins would result in poor policy decisions, and asserted that this action infringed upon constitutional rights under the First Amendment.
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2024-04-25 11:55