A new bill introduced to the United States Senate, known as the Payment Stablecoin Act, could potentially encourage U.S. banks to enter the stablecoin market, according to S&P Global Ratings.
S&P Global Ratings suggests that the proposals outlined in the Payment Stablecoin Act, introduced on April 17, might incentivize banks to issue U.S. dollar-pegged stablecoins. This could pose challenges for large non-U.S. entities like Tether, which currently dominate the stablecoin market.
Stablecoins are seen as a potential key element in financial markets, with benefits including efficiencies and enhanced settlement security, as demonstrated by initiatives like BlackRock’s BUIDL fund.
The proposed bill includes provisions such as imposing a $10 billion issuance limit on non-bank stablecoin firms, prohibiting “unbacked” algorithmic stablecoins, and mandating that stablecoin issuers hold one-to-one cash or cash-equivalent reserves.
If approved, the bill could provide a competitive advantage to banks by restricting non-bank institutions to a maximum issuance of $10 billion.
The $10 billion issuance limit could particularly affect Tether, the largest stablecoin issuer with a market cap of $110 billion. Since Tether is issued by a non-U.S. entity, it may not be considered a permitted payment stablecoin under the proposed legislation.
While some, like Democrat Senator Kirsten Gillibrand, view regulating stablecoins as crucial for maintaining the U.S. dollar’s dominance and protecting consumers, others, such as crypto advocacy organization Coin Center, express concerns about the proposed bill. Coin Center argues that banning algorithmic stablecoins could be bad policy and potentially unconstitutional under the First Amendment.
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