U.S. Senators Kirsten Gillibrand and Cynthia Lummis proposed the latest stablecoin bill, the Lummis-Gillibrand Stablecoin Payments Act, on the 17th. S&P Global analysis pointed out that it will encourage more banks to participate in the stablecoin market and may weaken Tether’s role in global stablecoins. dominant position in the market.
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superiorThis week, U.S. Senators Kirsten Gillibrand and Cynthia Lummis proposed the latest stablecoin bill, the Lummis-Gillibrand Payment Stablecoin Act, which intends to ban algorithmic stablecoins, require issuers to support their tokens 1:1, and implement an anti-money laundering framework.
Regarding the possible impact of this bill, rating agency S&P Global stated that currently most U.S. dollar stablecoin issuers, including USDT, which has the largest market share, are not subject to U.S. regulations (as shown below).
However, this situation may change with the passage of the new bill. If the bill is finally enacted, it may prompt more banks to enter the stablecoin market and affect Tether’s dominant position.
Regulatory clarity will encourage banks to enter the stablecoin market
S&P Global pointed out that the bill authorizes national non-depository trust companies (non-banks) registered with the Federal Reserve to issue stablecoins of up to $10 billion, while depository institutions have no restrictions.
Therefore, assuming the bill is approved and relevant banking regulations are adhered to, the new rules may limit the issuance of institutions without banking licenses to a maximum of $10 billion, thereby giving banks a competitive advantage.
S&P Global added that the bill is unlikely to have a significant impact on stablecoins already regulated by the New York Department of Financial Services (NYDFS), including PayPal USD, Gemini USD and Paxos USD, as they are well below the $10 billion threshold. And in other aspects it is basically under the guidance of NYDFS.
Tether’s dominance may wane
But S&P Global stressed that if the bill passes, Tether’s dominance of the global stablecoin market may slow down because it is an issuing entity that is not registered in the United States.
Tether is issued by a non-U.S. entity and is therefore not a payments stablecoin permitted under the proposed bill, meaning U.S. users cannot hold or trade Tether, which could reduce demand while boosting U.S.-issued stablecoins.
However, S&P Global also stated that Tether trading activity mainly occurs in emerging markets outside the United States and is driven by general users and remittances.
Provisions related to the Lummis-Gillibrand Payment Stablecoin Act
According to S&P Global, the Lummis-Gillibrand Payment Stablecoin Act mainly stipulates the following matters:
- Authorizes national non-depository trust companies (non-banks) registered with the Federal Reserve to issue stablecoins of up to $10 billion, while there is no threshold for depository institutions.
- Transitional arrangements enable existing stablecoin issuers to continue operating pending new approvals.
- Ban algorithmic stablecoins.
- Reserve requirements include asset segregation, full guarantees covering all circulating stablecoins, and limiting reserve assets to cash, bank deposits, Treasury bills maturing within 90 days, repurchase agreements maturing within 7 days, and deposits held with the Fed.
- Monthly asset and regulatory breach revelations.
- Stablecoins are forced to be redeemed within one working day.
- FDIC Regulation and Resolution of Insolvent Stablecoin Issuers.
- Clarifies that a custodian’s digital assets should be treated as off-balance sheet assets, just like other custody financial assets (overturning the SEC’s requirement that custodians report digital assets as on-balance sheet assets and assume corresponding liabilities).
