September 30, 2021

U.S. Senate says full cash reserves for stablocoins are needed

U.S. Senate says full cash reserves for stablocoins are needed

Stablecoin reserves should be 100% cash and cash equivalents, with banks or money market funds as issuers. Cynthia Lummis, a U.S. senator in the U.S. Congress, said this, Bloomberg writes.

According to her, issuers of stable coins should be audited on a regular basis.

Lummis is known as a proponent of digital assets. In 2020, she pledged to take the bitcoin debate to the national level. In August 2021, the senator co-sponsored an amendment that would exclude participants in the crypto industry from the infrastructure bill. A final vote on it will take place on 30 September.

The document was criticised in the community for its broadened definition of "broker", which encompasses almost all entities in the industry. Under its norms, miners and node operators, wallet developers, liquidity providers in DeFi-protocols and other non-custodial players could be required to report to the tax authority on user transactions.

Recall that in September the media reported on the U.S. Treasury Department's plans to require issuers of stablcoins to ensure their free conversion into fiat. Earlier representatives of the agency discussed the risks and benefits of stable coins with representatives of the banking community and credit unions.

At the same time, SEC head Gary Gensler called stablcoins "casino poker chips" cryptocurrencies and allowed that they could have "the attributes of investment contracts". The official had previously warned of increased regulation of stablecoins and DeFi.

The US President's Working Group on Financial Markets met in July. Participants discussed the rapid growth of Stablecoins, their use as a means of payment, and the potential risks to end-users, the financial system and national security.

Earlier the head of the US Federal Reserve Jerome Powell questioned the need for stablcoins. He compared stablecoins to money market funds and savings banks.

In August, the USDC issuing consortium Centre announced its intention to convert the token's reserves into dollars and treasury bills.

Stablecoin issuer USDT Tether Limited indicated in a July report that the proportion of cash and bank deposits that could be withdrawn in two days or less was around 10%.

Paxos, the company behind Pax Dollar (formerly Paxos Standard), confirmed 100% collateralisation of each USDP and BUSD issue with USD and its equivalents.

Jack Evans

About the author

I became a crypto asset owner in 2014, when the industry was in its infancy. Before that, I was working in the classic US and European stock markets. Since then, I have gained extensive experience in both cryptocurrency investing and day trading. I am happy to share with readers my experience with crypto exchanges, DeFi and NFT instruments. 

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