Cynthia Lummis – Republican senator and ardent supporter of crypto – is being cautious about stablecoins. She recently said that they need to be cash-backed and regularly audited.
Ensure adequate stable coin reserves
The senator expressed her opinion in a speech to the Senate on Wednesday. The speech surrounded Lummis’ overall views on CBDC’s and stablecoins, in advance of the Federal Reserve’s report on the matter.
Lummis recognized that stablecoins allow faster payments between individuals and businesses than strong dollars. She says that they promote financial inclusion and new market opportunities. However, she also said they presented “new risks” to the economy, mainly due to their need for trusted support.
Stablecoins must be 100% backed by cash and cash equivalents, and this should be audited regularly. I am concerned that some stable coins may not always be fully secured 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 cryptocurrencies might need to be issued only by “depository institutions, money market funds, or similar vehicles.”
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 for cryptocurrency innovation – admitted that stablecoins could meet the definition of security.
While stablecoins do not promise holders a profit, they do deliver maintenance of a specific value. This presents the need for a thorough audit of the company’s reserves, as Lummis suggests.
Regulators have directed much skepticism towards Tether, the leading stablecoin on the market right now. The company has repeatedly issued audits of its reserves to confirm sufficient support. 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 the regulation of stablecoins. In an interview last week, he referred to them as “poker chips at the casino gaming tables”.
