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Stablecoins must be backed by cash, says pro-crypto Senator Cynthia Lummis
Cynthia Lummis – Republican Senator and passionate crypto supporter – expresses caution about stablecoins. She recently said they need to be secured with cash and audited regularly. Ensuring the right stablecoin reserves The senator expressed her opinion in a speech on the Senate floor this Wednesday. The speech surrounded Lummis’ overall views on CBDCs and stablecoins ahead of the Federal Reserve’s report on the topic. Lummis acknowledged that stablecoins enable faster payments between people and businesses than hard dollars. She says they promote financial inclusion and new market opportunities. However, she also said they pose “new risks” to the economy,...
Stablecoins must be backed by cash, says pro-crypto Senator Cynthia Lummis
Cynthia Lummis – Republican Senator and passionate crypto supporter – expresses caution about stablecoins. She recently said they need to be secured with cash and audited regularly.
Ensuring proper stablecoin reserves
The senator expressed her opinion in a speech in the Senate this Wednesday. The speech surrounded Lummis’ overall views on CBDCs and stablecoins ahead of the Federal Reserve’s report on the topic.
Lummis acknowledged that stablecoins enable faster payments between people and businesses than hard dollars. She says they promote financial inclusion and new market opportunities. But she also said they pose “new risks” to the economy, particularly its need for trusted support.
Stablecoins must be 100% backed by cash and cash equivalents and this should be reviewed regularly. I am concerned that some stablecoins are not always fully backed by eligible assets in a transparent manner.
Lummis also said that stablecoins must “comply with anti-money laundering and sanctions laws.” As a solution, she suggested that the cryptocurrencies may have to be issued exclusively by “depository institutions, money market funds or similar vehicles.”
Cynthia Lummis. Bloomberg
Stablecoins are a priority concern for regulators
Stablecoins have risen to the forefront as a major regulatory concern in the United States. Senator Warren Davidson – another advocate of cryptocurrency innovation – has admitted that stablecoins could meet the definition of security.
Stablecoins do not promise holders any profit, but they do provide the maintenance of a certain value. This requires a thorough examination of the company's reserves, as Lummis suggests.
Regulators have shown great skepticism towards Tether, the leading stablecoin in the market today. The company has repeated released Audits of its reserves to confirm sufficient coverage. However, these “audits” often lack information specific enough to inspire confidence in regulators and the crypto community, and have also failed to produce an independent, third-party report.
Gary Gensler – Chairman of the Securities and Exchange Commission – continues to advocate for stablecoin regulation. In an interview last week he referred for them as “poker chips at the casino gaming tables”.
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