A new bill introduced in the Senate would benefit stablecoin issuers, according to a memo from investment bank TD Cowen.
that much Lummis-Gillibrand Payment Stablecoin Lawintroduction last week Sens. Kirsten Gillibrand, D-N.Y., and Cynthia Lummis, R-Wyo., will create “clear rules of the road,” the bank said in a note Monday.
“In our view, Lummis-Gillibrand will be positive for stablecoin issuers because it will establish clear rules. This will also be symbolically important for cryptocurrencies in general as it will be the first constructive cryptocurrency bill in Congress,” said TD Cowen Washington Research Group, led by Jaret Seiberg.
If the bill passes, stablecoin issuers would be required to hold a one-to-one reserve of cash or cash equivalents to back their tokens. It also banned algorithm-based stablecoins and stated that issuers and users cannot use stablecoins for illegal or unauthorized purposes, such as money laundering.
The bill also gives federal and state agencies a role in authorization and enforcement.
Lummis and Gillibrand said they received technical assistance from the Federal Reserve, the Treasury, and state financial regulators in Wyoming and New York. TD Cowen said the Biden administration could support the bill, but noted that such legislation still faces “significant hurdles,” including maintaining support from the White House and being included in a broader legislative package.
TD Cowen added that stablecoin legislation could also spark M&A.
“If this approach is adopted, we believe it could lead to mergers between banks and stablecoin issuers, as issuers will want the benefits of being banks, and banks looking to play a role in stablecoins will want the user base of existing issuers,” the group said. said in the note.
House side negotiations
House Financial Services Chairman Patrick McHenry, R-N.C., and Rep. Maxine Waters, D-Calif., have been working to establish a regulatory framework for stablecoins. industry sources He said discussions on who will be the primary regulator of stablecoin issuers have fallen into a holding pattern.
TD Cowen said a compromise between the two could be similar to the Senate bill.
“We still believe the deal being negotiated between House Financial Services Chairman Patrick McHenry and Representative Maxine Waters will be the primary text of the final bill. But Lummis-Gillibrand is still important because it provides insight into what we can expect. It’s from McHenry and Waters.” TD Cowen said in the note.
In the Senate, Ohio Senator Sherrod Brown will be essential to passing stablecoin legislation. The Chairman of the Senate Banking Committee said: bloomberg Last week, he said he was open to pushing for stablecoin legislation, along with legislation that would allow banks to do business with marijuana businesses and other measures.
Disclaimer: The Block is an independent media outlet delivering news, research and data. As of November 2023, Foresight Ventures is a majority investor in The Block. Foresight Ventures invests in other companies in the cryptocurrency space. Cryptocurrency exchange Bitget is an anchor LP of Foresight Ventures. The Block continues to operate independently to provide objective, impactful and timely information about the cryptocurrency industry. Below are our current financial disclosures.
© 2023 The Block. All rights reserved. This article is provided for informational purposes only. It is not provided or intended to be used as legal, tax, investment, financial or other advice.