Stablecoins should be backed by cash and may need to be issued by banks, according to U.S. Senator Cynthia Lummis, who has become one of Capitol Hill’s most ardent supporters of cryptocurrencies.
“It may be the case that stablecoins should only be issued by depository institutions or through money-market funds or similar vehicles,” said Lummis, a Republican from Wyoming, in a speech Wednesday on the Senate floor. “Stablecoins must be 100% backed by cash and cash equivalents, and this should be audited regularly.”
Lummis’s call for more guardrails around stablecoins underscores how the outlook for crypto is getting murkier in Washington as lawmakers and regulators seek to clamp down on the burgeoning industry. Stablecoins, which are typically pegged to the U.S. dollar and other fiat currencies to avoid wild price swings, have become a key focus as officials consider how the government should oversee them.
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Stablecoins like Tether are often used by investors to buy other cryptocurrencies such as Bitcoin. Watchdogs have expressed concerns because the coins are largely unregulated, even though they are increasingly used for transactions that resemble traditional financial products -- like bank savings accounts -- without offering anywhere near the same level of consumer protections.
Treasury officials are readying a report on stablecoins, and officials are also said to be discussing launching a formal review by the Financial Stability Oversight Council into whether stablecoins pose an economic threat. If stablecoins are defined in the future as a product akin to other traditional financial products, they will face more regulation.
— With assistance by Joe Light, and Jesse Hamilton
