One of the most pro-crypto members of Congress, Senator Cynthia Lummis, argues that stablecoins should only be issued by banks and collateralized only by cash.
Cynthia Lummis wants stablecoins 100% secured with cash
To date, the largest stablecoin, USDT, for example, is issued by a private company that does not have a US banking license and is not only collateralized in dollars. However, according to Lummis, a leading supporter of cryptocurrencies in the Senate, stablecoins should be required to be 100% secured by cash and non-banking companies should be banned from issuing them.
Lummis said during a speech in the Senate:
“Stablecoins should only be issued by depository institutions or through financial market funds or similar instruments. Stablecoins must be 100% secured by cash and cash equivalents, and this should be checked regularly.”
The question of how stablecoins are collateralized is still highly debatable.
The point is, anyone who holds stablecoins should be sure that they can exchange them for cash at any time. Although to date no one has had trouble exchanging, say, USDT for USD for more than six years, the only way to ensure this certainty is for the stablecoin issuer to have sufficient reserves to exchange tokens for face value almost immediately.
According to Bloomberg, Lummis’s words suggest that “the prospects for cryptocurrencies in Washington are getting darker as lawmakers and regulators seek to curb a growing sector.”
However, it is always necessary to distinguish between different cryptocurrencies, especially stablecoins (which are not real cryptocurrencies) and major players in the cryptocurrency sector, such as BTC and ETH.
Stablecoins are usually pegged to the US dollar and are therefore often the target of US government agencies. Just remember a number of problems that were raised in connection with the stablecoin project of Facebook, Libra, which led to the constant postponement of the project and even to a change of name. Diem, as he is now called, has not yet seen the light of day, and there have been no reports of him for some time.
Stablecoins are used instead of dollars, but out of control to which dollar transactions are subject. Regulators don’t like it because it means that there is actually a crypto version of the dollar that can be used in a completely unregulated way.
According to Bloomberg, US Treasury officials are preparing a report on stablecoins and are negotiating the launch of a formal review by the Financial Stability Board to determine whether stablecoins pose a threat.
The risk is that regulations will be introduced regarding the use of stablecoins, which are very similar to those that apply to the use of dollars.