Senate Bill Could Drive Banks into Stablecoin Markets
A new stablecoin bill introduced in the Senate might prompt banks to enter the stablecoin market, as per S&P Global Ratings.
The Payment Stablecoin Act, presented by senators Cynthia Lummis and Kirsten Gillibrand, would offer regulatory clarity that could encourage banks into the stablecoin market. However, Tether would not be allowed under the proposed bill, potentially decreasing demand for the non-U.S. based stablecoin.
If passed, the bill would require stablecoin issuers to hold one-to-one cash or cash-equivalent reserves to back their token. It also bans algorithmic stablecoins and stipulates that issuers and users cannot use stablecoins for illicit or unauthorized purposes such as money laundering.
If the new legislation passes, it would give banks a competitive edge by limiting entities without a banking license to a maximum issuance of $10 billion.
Tether’s dominance in the stablecoin market globally could slow down since it is issued by a non-U.S. entity and would not be allowed if the bill passes, the ratings agency added.
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This means that U.S. entities couldn’t hold or transact in Tether, which may reduce demand while boosting U.S.-issued stablecoins. However, Tether transaction activity is predominantly outside the U.S., in emerging markets, and driven by retail users and remittances.
Tether did not immediately respond to a request for comment. USDT is notably the largest stablecoin by market capitalization, according to data from The Block Research team.
Sen. Sherrod Brown (D-Ohio) would be integral to the passage of a stablecoin bill. The Senate Banking Committee chair told Bloomberg last week that he is open to advancing stablecoin legislation in a package with a bill to allow banks to do business with marijuana businesses and other measures. The House is also working on its version of a stablecoin bill.
Alexander Stefanov
Reporter at CoinsPress
Alex is an experienced finance journalist and a cryptocurrency and blockchain enthusiast. With over five years of experience covering the industry, he deeply understands the complex and constantly evolving world of digital assets. His insightful and thought-provoking articles provide readers with a clear picture of the latest developments and trends in the market. His passionate approach allows him to break down complex ideas into accessible and insightful content. Follow up on his content to be up to date with the most important trends and topics - stay ahead of the curve with CoinsPress.
