The Payment Stablecoin Act, introduced on April 17, has drawn attention from financial institutions and market watchers alike. Furthermore, it mandates that stablecoin issuers maintain one-to-one cash or cash-equivalent reserves.
According to S&P Global Ratings, should the bill pass and subsequent banking regulations be adapted, banks could gain a competitive edge. Institutions lacking a banking license would be restricted to issuing no more than $10 billion in stablecoins, potentially limiting the operations of large entities such as Tether.
Tether, recognized as the leading stablecoin by volume, is issued by a non-U.S. entity and would not comply with the stipulations of the proposed Payment Stablecoin Act. The non-compliance would prevent U.S. entities from holding or transacting in Tether, likely decreasing its demand while favoring stablecoins issued within the U.S.
S&P pointed out that Tether’s transactions mostly took place outside of the U.S. and were mostly fueled by retail, remittances, and transactions in emerging economies.