A new bill about stablecoins presented in the US Senate might persuade American banks to enter the stablecoin industry, according to S&P Global Ratings’ assessment.
On April 23, S&P mentioned in a research note that the Payment Stablecoin Act proposals, presented to the Senate on April 17, might persuade banks to begin issuing U.S. dollar-backed stablecoins. This development could pose challenges for large non-U.S. companies, like Tether, that currently issue such coins.
Stablecoins, considered a crucial foundation for financial markets by rating agencies, were highlighted by them based on BlackRock’s freshly introduced BUIDL fund. This fund serves as proof of the advantages of stablecoins, including improved efficiency and heightened security in the digital tokenization of assets and creation of digital bonds.
Significantly, the Lummis-Gillibrand Payment Stablecoin Bill aims to impose a $10 billion cap on non-bank stablecoin companies’ issuance, prohibit unbacked algorithmic stablecoins, and mandate that stablecoin issuers maintain one dollar in reserves for every stablecoin token issued.
If the bill gets passed and appropriate banking regulations are put in place, the new rules could give banks an edge over institutions not holding a banking license by restricting their ability to issue securities to a maximum of $10 billion each.
A ratings agency warned that if non-bank firms were allowed to issue an additional $10 billion, it could pose a risk to Tether’s position as the leading US dollar-backed stablecoin provider with a market capitalization of $110 billion.
The leading stablecoin in terms of circulation volume, Tether, is not permitted for use as a payment stablecoin under the proposed legislation because it is issued by a non-American company. (Or) According to S&P Global, since Tether is an overseas entity that issues the largest stablecoin by circulation volume, it does not meet the criteria to be used as a payment stablecoin in the proposed bill.
“As a result, American entities are prohibited from owning or conducting transactions with Tether. This restriction could potentially decrease Tether’s popularity and increase the usage of U.S.-backed stablecoins instead.”
According to S&P’s analysis, a significant portion of Tether’s transactions took place outside the US and were mainly influenced by dealings in developing countries, consumer spending, and money transfers.
Senator Kirsten Gillibrad (Democrat) stressed the importance of establishing regulations for stablecoins to preserve the US dollar‘s leading position in the global economy, foster responsible innovation, ensure consumer protection, and combat money laundering and illicit financing during her recent bill introduction.
Not everyone was pleased with the proposals outlined in the bill, however.
Coin Center, a non-profit organization that champions cryptocurrencies, voiced objections to the proposed legislation. They argued that banning algorithmic stablecoins would be poor policy and potentially unconstitutional, infringing upon protections granted by the First Amendment.
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2024-04-25 05:46