Cynthia Lummis, a Republican Senator and staunch supporter of cryptocurrency, is wary of stablecoins. She recently stated that they must be cash-backed and audited on a regular basis.
Maintaining Appropriate Stablecoin Reserves
The senator expressed her thoughts in a speech on the Senate floor on Wednesday. The speech centered on Lummis’ overall thoughts on CBDCs and stablecoins, ahead of the Federal Reserve’s report on the subject.
Lummis acknowledged that stablecoins allow for faster payments between individuals and businesses than hard currency. They promote financial inclusion and new market opportunities, according to her. However, she also stated that they pose “novel risks” to the economy, the majority of which is their need for trusted backing.
Stablecoins must be fully backed by cash and cash equivalents, and this must be audited on a regular basis. I am concerned that some stablecoins are not always fully backed by suitable assets in a transparent manner.
Lummis also stated that stablecoins must “adhere to anti-money laundering and sanctions legislation.” As a solution, she proposed that cryptocurrencies be issued solely by “depository institutions, money market funds, or similar vehicles.”
Stablecoins are a top priority for regulators.
Stablecoins have taken the forefront as a primary regulatory concern in the United States. Senator Warren Davidson, another supporter of cryptocurrency innovation, has acknowledged that stablecoins may meet the definition of security.
While stablecoins do not guarantee a profit, they do guarantee the preservation of a specific value. As Lummis suggests, this highlights the need for a thorough audit of the company’s reserves.
Tether, the leading stablecoin on the market right now, has received a lot of skepticism from regulators. The company has released audits of its reserves on multiple occasions to confirm adequate backing. However, these ‘audits’ frequently lack specific information that would reassure regulators and the crypto community, and they have also failed to produce an independent third-party report.
Gary Gensler, the chairman of the Securities and Exchange Commission, is still a proponent of stablecoin regulation. He referred to them as “poker chips at the casino gaming tables” in an interview last week.