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    Home » Crypto News » Stablecoins Must Be Backed By Cash, Says Pro Crypto Senator Cynthia Lummis

    Stablecoins Must Be Backed By Cash, Says Pro Crypto Senator Cynthia Lummis

    Author: Andrew Throuvalas

    Last Updated Oct 3, 2021 @ 13:54

    The pro-crypto senator Lummis voices concerns similar to Gensler. She says stablecoins must be cash-backed, and possibly issued by banks.

    Cynthia Lummis – Republican Senator and ardent crypto supporter – is showing caution around stablecoins. She recently said that they need to be cash-backed and regularly audited.

    Ensuring Proper Stablecoin Reserves

    The senator voiced her opinion in a speech on the Senate floor this Wednesday. The speech surrounded Lummis’ overall views on CBDC’s and stablecoins, in advance of the Federal Reserve’s report on the matter.

    Lummis acknowledged that stablecoins enable faster payments between people and businesses than hard dollars. She says that they promote financial inclusion and new market opportunities. However, she also said that they present “novel risks” to the economy, mostly being their need for trusted backing.

    Stablecoins must be 100% backed by cash and cash equivalents, and this should be audited regularly. I am concerned that some stablecoins are not always fully backed by appropriate assets in a transparent manner.

    Lummis also said that stablecoins need to “comply with anti-money laundering and sanctions law”. As a solution, she suggested that the cryptocurrencies may need to solely be issued by “depository institutions, money market funds, or similar vehicles”.

    White House Considering Cynthia Lummis for Interior Sec.: Sources - Bloomberg
    Cynthia Lummis. Source: Bloomberg

    Stablecoins A Priority Concern for Regulators

    Stablecoins have taken the forefront as a primary regulatory concern in the United States. Senator Warren Davidson– another advocate of cryptocurrency innovation– has admitted that stablecoins could meet the definition of security.

    ADVERTISEMENT

    While stablecoins do not promise holders a profit, they do deliver maintenance of a specific value. This presents the need for thorough auditing of the company reserves, as Lummis suggests.

    Regulators have directed much skepticism towards Tether, the leading stablecoin on the market right now. The company has repeatedly released audits of its reserves to confirm sufficient backing. However, these ‘audits’ often lack information specific enough to instill confidence in regulators and the crypto community, and they’ve 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 to them as “poker chips at the casino gaming tables”.

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      U-Turn: Centre to Convert USDC Reserves to Cash and US Treasuries
    Tags: Regulations Stablecoins
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    About The Author

    Andrew Throuvalas
    More posts by this author

    Andrew is a content writer with a passion for Bitcoin. He became familiar with Bitcoin back in 2013, but began diligently studying the blockchain technology and its economic implications in 2017. Ever since, he’s believed in the network’s power to replace the current global monetary system, and provide financial freedom to billions worldwide.
    Contact: Medium | LinkedIn | Twitter

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