Senator Cynthia Lummis, a big supporter of crypto, said on Wednesday that stablecoins should be backed by cash and issued by banks.
Lummis complained that stablecoins were not fully supported “transparently” during a Senate speech on the potential development of a US central bank (CBDC) digital currency.
She claims that stable coins should be issued by depository institutions. Either through money market funds and similar channels.
She adds that they should be 100% cash or cash-backed. And that they must be regularly edited.
Currently, Circle and Tether are the two largest issuers of stablecoins. They 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 stablecoins could be considered secure earlier this year. They may be subject to regulation by the United States Security and Exchange Commission (SEC).
In Washington, the visibility of crypto has become more complicated
The cryptocurrency market is growing rapidly in Washington. This has alarmed lawmakers and regulators, keeping them on the lookout for ways to oversee the burgeoning industry. It has been a hot topic as government officials debate how to regulate stablecoins linked to fiat currencies to avoid unpredictable price swings.
Investors have used stablecoins like Tether to buy other cryptocurrencies like Bitcoin. Although coins are not regulated, they are more often used for transactions similar to those associated with traditional financial products, such as bank accounts, without ensuring consumer protection.
We expect the Treasury Department to issue a stablecoins report in the coming weeks.
Treasury officials prepare a report on stable coins. In addition, they plan to launch an official review of the Financial Stability Supervisory Board to determine whether stablecoins pose an economic threat. In the future, they might face more regulation.
Design of central bank digital currencies (CBDC)
Lummis also yesterday established his hidden principles for the development of an American CBDC.
His remarks came after Federal Reserve Chairman Jerome Powell called a convention on Tuesday for new legislation to allow the Fed’s plans to create a digital dollar.
In his speech, Lummis gave him the key principles of a digital dollar, which included legitimate need, financial inclusion, programmability, systematic risk avoidance, and privacy.