Cynthia Loomis, a Republican senator and ardent crypto supporter, is showing caution about stablecoins. She recently said that they need monetary support and have their accounts audited regularly.
Ensure proper stablecoin reserves
The senator gave her opinion in a speech in the Senate on Wednesday. The speech surrounded Lummis’ overall views on CBDCs and stablecoins, ahead 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 they promote financial inclusion and new market opportunities. However, she also said that they present “new risks” to the economy, mostly their need for reliable support.
The stablecoins must be 100% backed by cash and cash equivalents, and this must be audited regularly. I am concerned that some stablecoins are not always fully backed by suitable assets in a transparent manner.
Loomis also said that stablecoins need to “comply with anti-money laundering and sanctions law.” As a solution, she suggested that cryptocurrencies might only need to be issued by “depository institutions, money market funds, or similar means.”
Stable coins are a priority concern for regulators
Stablecoins have taken the lead as a major regulatory concern in the US. Senator Warren Davidson – another advocate of cryptocurrency innovation – admitted that stablecoins can meet the definition of security.
While stablecoins do not promise their owners profits, they do offer maintenance at a specific value. This illustrates the need for a thorough audit of the company’s reserves, Loomis suggests.
Regulators have cast a lot of skepticism towards Tether, the leading stablecoin in the market at the moment. The company has repeatedly issued audits of its reserves to confirm adequate support. However, these ‘audits’ often lack enough specific information to instill confidence in regulators and the crypto community, and they also fail 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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