Josh Gottheimer – a member of the Democratic Party – revealed an early draft of legislation regarding stablecoins. Many critics claim that such financial assets undermine the monetary network and are often used by bad actors in criminal activities.
Enhanced Rules for Stablecoins
Over the last couple of years, some stablecoins such as Tether and USD Coin have become some of the largest digital assets by market capitalization, utilized by countless traders. Those two have a combined market cap of over $130 billion. The financial products are pegged to the US dollar’s value and are not volatile as bitcoin and the alternative coins.
Despite that, it’s not all sunshine and roses, and they have their critics, with many regulators arguing they are employed in money-laundering operations or funding terrorism activities.
Not long ago, American Senator Elizabeth Warren joined the bashing manifest suggesting that stablecoins pose risks to consumers and threaten the traditional financial system.
Democratic lawmaker Josh Gottheimer is willing to put an end to that controversy. He proposed that certain digital currencies should “qualify” as stablecoins only if they can be redeemed on a one-for-one basis for US dollars.
He said institutions issuing such products should be federally-backed banks or non-banks that agree to maintain 100% reserve assets consisting of American dollars or US debt. In his view, that would boost the development of the crypto industry:
“I don’t think we should stifle innovation in the cryptocurrency market.”
Gottheimer revealed that Nellie Liang (President Biden’s Under Secretary of the Treasury for Domestic Finance) had supported that plan.
“We’ve been very engaged with Treasury and Blockchain Association and many of the businesses in the space,” the lawmaker said.
Another proponent of Gottheimer’s proposal is Dante Disparte – Circle’s Chief Strategy Officer. He described the potential legislation as a “thoughtful, risk-based approach” that could “fit inside Federal regulatory frameworks.”
“Supporting bank and non-bank innovations in the payment system is key to long-range competitiveness and broad optionality for how dollars move in the 21st century,” Disparte outlined.
Stablecoins to Be Backed by Cash
Not long ago, the bitcoin-loving Senator Cynthia Lummis also presented her opinion on the matter. According to her, stablecoins need to be cash-backed and regularly audited:
“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.”
On the other hand, the Republican acknowledged that such monetary products enable faster payments between people and businesses than hard dollars. She added that they promote financial inclusion and create new market opportunities.
Featured Image Courtesy of NJ Spotlight News