Senator Cynthia Lummis Advocates for Stablecoin Regulation: An Examination of the Legislation and Its Implications

The stablecoin regulation proposal by U.S. Senators Cynthia Lummis and Kirsten Gillibrand is anticipated to be announced soon, as reported on March 7.

According to Axios, the bill has garnered favorable responses from various stakeholders, including the Treasury and the New York Department of Financial Services, which have provided technical support for the Senate bill.

Addressing Risks and Scepticism

Lummis is widely recognized as a pro-Bitcoin legislator. The Senator has advocated for a more profound integration of digital assets into the operations of the government. She is also a HODLer who accumulated a significant amount of BTC in 2021.

However, despite her support for Bitcoin, the Senator has expressed concerns regarding stablecoins such as Tether. She has urged the Department of Justice to contemplate pursuing criminal charges against Tether and Binance due to their purported links to illicit financing.

This call came in response to the attack on Israel by the terrorist group Hamas. The Senator has also voiced her opposition to central bank digital currencies (CBDCs).

She has taken a firm stance against state-controlled digital assets, labeling them as “anti-democratic” and “a means of financial censorship.”

1) The Fed cannot introduce a CBDC without congressional approval

2) A CBDC is anti-democratic and a means of financial censorship

3) Now onward to outlawing a CBDC in America https://t.co/K7Z7wJQGC5

— Cynthia Lummis (@CynthiaMLummis) March 7, 2024

Jerome Powell, the chair of the Federal Reserve, has refrained from commenting on whether the U.S. will adopt a CBDC, but he has indicated that the nation is far from developing one. He made these remarks during a hearing before the Senate Committee on Banking, Housing, and Urban Affairs.

Stablecoins, which have a market capitalization of approximately $150 billion, are often perceived as potential risks to U.S. anti-money laundering and counter-terrorism efforts.

The legislation proposed by Senators Lummis and Gillibrand is viewed as one of the more likely bills to pass through Congress.

For several months, they have been crafting legislation aimed at providing regulatory clarity regarding stablecoins while protecting consumers from malicious actors.

Ongoing discussions with the House Financial Services Committee are focused on balancing federal and state authorities. The introduction and referral are submitted directly to a Senate Committee for consideration.

Stablecoin and CBDC Discussions Ongoing outside the US

Stablecoins have become a crucial link between traditional finance and cryptocurrency assets.

These cryptocurrencies are designed to maintain a stable value pegged to fiat currencies such as USD or EUR. They serve as a bridge to reduce volatility while ensuring that traders’ and investors’ funds are readily available for deployment into other crypto assets.

Asset backing is a fundamental mechanism that supports stablecoins, as many are backed by fiat currencies at a 1:1 ratio.

This theoretically ensures that a stablecoin’s price remains constant while allowing for the redemption of those underlying assets.

Due to this stability, stablecoins have emerged as an appealing option for various applications.

As the U.S. postpones its decision on stablecoin regulation and the launch of a CBDC, other nations have advanced their efforts.

In the UK, there is a coordinated initiative among regulators to enable CBDCs and stablecoins to coexist.

The involved regulators include HM Treasury, the Financial Conduct Authority, and the Bank of England (BoE).

Despite these collaborations, the BoE remains in an exploratory phase and has not yet determined when it intends to implement the CBDC.

Today, we respond to the digital pound consultation. We are grateful to those who contributed. With @HMTreasury work continues to explore a digital pound in the design phase, but no decision has been made to issue one.

You can read our response here: https://t.co/h4GsMkuOpd pic.twitter.com/IwN58h7rNf

— Bank of England (@bankofengland) January 25, 2024

If they proceed with the digital pound, also referred to as Britcoin, regulators anticipate launching the CBDC no sooner than 2025.

Globally, numerous countries are conducting pilot CBDC programs to examine digital currency, including China’s e-yuan.

There is also a renewed effort for wholesale CBDCs in Hong Kong, while the central bank of the Philippines expects to complete its wholesale CBDC pilot program by the end of the year.

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