On Wednesday, Senator Cynthia Lummis, a big supporter of crypto, said that stablecoins should be backed with cash and issued by banks.
Lummis complained about stablecoins not being fully backed “transparently” during a speech on the Senate floor focused on the potential development of a US Central Bank Digital Currency (CBDC).
She claims that stablecoins should be issued by depository institutions. Or via money-market funds and similar channels.
She adds that they should be backed by cash or cash equivalents 100%. And that they should be regularly edited.
Currently, Circle and Tether are the two largest stablecoin issuers. They have indicated that their products are backed by short-term securities and commercial paper, as well as cash and cash-like products.
Representative Warren Davidson (R-Ohio), also a crypto-supporter, said that stablecoins might be deemed to be secure earlier this year. They may be subject to regulation by the US Security and Exchange Commission (SEC).
In Washington, crypto’s visibility has grown more complicated
The cryptocurrency market is growing fast in Washington. This has alarmed lawmakers and regulators, keeping them on the lookout for ways to oversee the booming industry. It has been a hot topic as government officials debate how to regulate stablecoins tied to fiat currencies to avoid unpredictable price swings.
Investors have been using stablecoins such as Tether to purchase other cryptocurrencies like Bitcoin. Although the coins are unregulated, they are more often used for transactions similar to those associated with traditional financial products, such as bank accounts, without guaranteeing consumer protection.
We expect the Treasury Department to release a report on stablecoins in the coming weeks
Treasury officials are preparing a report on stablecoins. In addition, they are considering launching a formal Financial Stability Oversight Council review into whether stablecoins are an economic threat. In the future, they may face more regulation.
Central Bank Digital Currencies (CBDC) design
Lummis also established her guiding principles for the development of a US CBDC yesterday.
Her remarks came after Federal Reserve chairperson Jerome Powell called a congress on Tuesday for new legislation to authorize the Fed’s plans to create a digital dollar.
In her speech, Lummis gave her key principles of a digital dollar, which included legitimate need, financial inclusion, programmability, avoiding systematic risk, and privacy.
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