Stablecoins are fiat-pegged cryptocurrencies designed to provide stability in a volatile financial market. The proposed bill in the United States would allow banks to issue fiat-pegged tokens without any threshold, while requiring service providers without a banking license to maintain a market cap under $10 billion. An example of the potential use for stablecoins is the Blackrock’s BUIDL fund, which utilizes the Ethereum blockchain and invests in U.S. treasuries. The fund has a liquidity pool denominated in the USDC stablecoin, offering investors the ability to redeem share tokens through a smart contract, instantly and around the clock.
It is noted that the Lummis-Gillibrand bill would not impact existing U.S.-based products such as PayPal USD, but would not authorize offshore entities like Tether. This could potentially impact Tether’s presence in the market, although Tether’s activities and volume are primarily outside of the United States. Policymakers may favor centralized systems like USDC as they mirror existing financial operations. Andrew O’Neil, Managing Director and Co-Chair of S&P Global’s Digital Assets Research Labs, highlighted the potential impact of the bill.
He noted that the new rules could remove barriers and encourage greater competition by eliminating capital requirements that currently discourage financial institutions from providing digital asset custody in the U.S. It is suggested that the policymakers’ preference for centralized systems differs from the general treatment of financial assets held in custody, which are typically off-balance sheet. Additionally, crypto.news reached out to O’Neil and the S&P for further comment on the bill and its potential impacts.
