SP Proposed Stablecoin Legislation Could Boost US Engagement Pose Challenge to Tethers Dominance
The S&P report suggests that a bipartisan bill aimed at regulating stablecoins could provide banks with a competitive advantage over other financial institutions and promote competition in the digital asset custody market.
The Lummis-Gillibrand Payment Stablecoin Act, introduced on April 17, seeks to bring regulatory clarity to the stablecoin market, which is currently dominated by Tether (USDT) and is estimated to be worth $157 billion.
Stablecoins are digital currencies pegged to fiat currencies, such as the U.S. dollar, and are known for providing stability in the volatile crypto market. They serve as a bridge for liquidity between traditional fiat currencies and the digital asset space.
If passed, the bill would allow U.S. banks to issue fiat-pegged tokens without any limitations, while non-bank service providers would be required to maintain a market cap below $10 billion.
According to Andrew O’Neil, Managing Director and Co-Chair of S&P Global’s Digital Assets Research Labs, the regulatory framework is likely to give banks an edge over their competitors and promote the adoption of blockchain technology in the financial sector, particularly through asset tokenization and digital bond issuance. O’Neil pointed out that on-chain payment systems, like BlackRock’s Ethereum-based fund, enable real-time and efficient settlement processes.
While the Lummis-Gillibrand bill won’t affect existing U.S.-based stablecoin products like PayPal USD, it does not provide authorization for offshore entities like Tether. This could potentially impact Tether’s presence in the market, although O’Neil noted that Tether’s activities and trading volume are mainly focused outside of the United States.
Furthermore, the proposed regulations do not cover decentralized stablecoins like Maker’s DAI and Frax Finance’s FRAX. O’Neil explained that policymakers tend to favor centralized systems like USDC, as they resemble traditional financial operations.
Lastly, the S&P report anticipated an increase in the number of providers in the digital asset custody industry, especially following an update to SEC rules that no longer require custodians to report crypto-assets on their balance sheets. crypto.news has reached out to O’Neil and S&P for further comments on the bill and its potential impacts.
For more information, read: Coin Center says Senate-presented stablecoin bill poses risks to innovation and free speech.
