Senator: Stablecoins need funding, audits

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A U.S. senator said she believes stablecoins should be backed by cash and may need to be issued by banks, Bloomberg reported.

Wyoming Senator Cynthia Lummis, who has become one of the biggest proponents of cryptocurrency on Capitol Hill, said stablecoins “should only be issued by depository institutions or through funds. money market or similar vehicles, ”according to the report.

“Stable coins should be backed 100% by cash and cash equivalents, and this should be checked regularly,” she said, according to Bloomberg.

His proposal comes as the crypto’s overall visibility has started to get complicated in Washington, according to the report. Both lawmakers and regulators have sought to monitor the industry’s expansion. Stable coins, which are typically tied to the U.S. dollar and other fiat currencies to reduce volatility, have been the focus of attention as government officials have debated how to regulate them.

Stablecoins, including Tether, have been used by investors to buy other cryptocurrencies like bitcoin, according to the report. The concern among watchdogs is that coins are mostly unregulated although they are more often used for transactions resembling traditional financial products, like bank savings accounts, without offering the usual level of cash. consumer protection.

Treasury officials are working on a stable coin report, with officials reviewing a formal examination to determine if there is an economic threat, according to the report. If stablecoins end up being labeled as a traditional financial product, more regulation could be in their future.

The Federal Reserve is currently examining how cash can remain relevant in the world as consumers move to more digital forms of payment. A digital US dollar, which could be accessed on people’s phones, is under consideration.

Read more: Stablecoins Under the Microscope as US Preps Digital Currency Framework

The Fed could also ask for comments on whether to create its own digital coin, which would likely compete with stablecoins.

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