Stablecoin Transparency Act requires that stablecoins be fully backed up by dollars or short-term government securities. Issuers of stablecoin would also need to publish audited records.
The whole hysteria about Tether is only a bit of a joke, as it is not backed by the U.S. Dollar.
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Stablecoin Transparency Act requires stablecoins be fully backed with a combination U.S. Dollars and “government securities having maturities less than twelve months” (i.e. bonds). It would also legalize the requirement for stablecoin issuers, such as Circle (USDC), and Tether (USDT), to regularly publish audited reports showing their reserves.
“From whether coins can be considered securities or commodities to who regulates them, the people in the cryptocurrency market are dealing with significant uncertainty,” said Sen. Hagerty. He sympathizes with those consumers looking to ensure their money is safe.
Stablecoins can be described as crypto assets that are pegged 1:1 to a fiat currency. Often, it is the U.S. Dollar. It is believed that every stablecoin that’s in circulation has a $1 bill in its bank. Anyone can redeem that coin.
The New York Attorney General’s Office took Tether to task for spreading this perception. stated that Tether’s claim that its virtual currency was 100% backed by U.S. Dollars at all times was a fabrication. Tether’s 2021 reports showed that Tether had substantial reserves in cash and “cash equivalents,” such money market funds. They also included significant holdings of secured loans, bonds or crypto investments.
Tether made some investments that helped it turn a profit. However, these investments could reduce the liquidity of the company in the event of a “bank run” digitally. A decline in Bitcoin’s price or other crypto holdings could also reduce the company’s reserve value below USDT, potentially leading to a price drop.
Circle, which partners with Coinbase to create USDC, is second in market capitalization behind USDT. It was criticised last year for the fact that 61% of its holdings had cash equivalents or cash equivalents as of July.
But by August, it had announced that it would only use cash and short-term government bonds, similar to the requirements in the Hagerty-Hollingsworth bill. An attest from Grant Thornton in October proved this, and Circle today declared that it would keep its approximately $50 billion in reserves at mega-bank BNY Mellon.
Senator Hagerty argues that, while the Stablecoin Transparency Act aims to protect consumers, it won’t place stablecoins into the hands of “unaccountable Bureaucrats who threaten innovation.”
If it gets a vote. Both chambers are controlled by Democrats. While there is a bipartisan interest to regulate cryptocurrency, the duo will need support from both sides of the aisle in order to win a vote on a committee.