Stablecoins have been a target for lawmakers and regulators in the United States. The two have debated the risks that stablecoins pose to the financial sector and the US dollar’s value.
Two US lawmakers have joined hands to introduce a bill that will bring transparency to the reserves held by stablecoin issuers.
Bill to monitor stablecoins
Over the years, there has been intense debate over whether stablecoins are actually fully backed by reserves, as the issuers claim. Most stablecoins are pegged to the value of 1:1 against fiat currencies such as the US dollar. Tether (USDT) is currently the largest stablecoin with a market cap of $82.4 billion.
Senator Bill Hagerty has proposed that stablecoins be “backed by government securities with maturities less than 12 months of US dollars.” The senator also requires these stablecoin issuers to release the independently audited reports of their reserves.
The bill dubbed “Stablecoin Transparency Act” will indicate that lawmakers in America are focused on bringing transparency to the buzzing crypto space. The issue of transparency by stablecoin issuers has been a heated debate in the crypto space over the years.
This bill further proposed giving regulatory bodies the authority to regulate the stablecoin sector and not “impose onerous requirements on stablecoin issuers.” Representative Trey Hollingsworth has said the bill is not looking to stifle innovation but to bring the crypto industry closer to achieving compliance.
The debate over stablecoin transparency
Tether (USDT) has been criticised for failing to be transparent about its reserves. The company that USDT is fully backed by liquid assets, but it has failed to disclose the necessary documents to prove this, citing privacy reasons.
Circle, the company behind the USDC stablecoin, has also been under criticism after it was revealed that only 61% of its reserves were held in cash and other equivalents. A month after this was revealed, Circle converted all its reserves to cash and short-term US treasuries. Circle’s $50B reserves are held by the Bank of New York Mellon, which is one of the largest banks in the US.
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