Stablecoin bill could improve U.S. participation, challenge Tether dominance

A bipartisan stablecoin bill could give banks an advantage over other institutions and encourage competition in the digital asset custody business, according to an S&P report.

If approved, the Lumis Gillibrand Payment Stablecoin Act proposed on April 17 would introduce regulatory clarity to the $157 billion stablecoin market, currently dominated by Tether (USDT). Looks like it’s going to happen.

Stablecoins are cryptocurrencies pegged to fiat currencies, providing stability to volatile financial markets. Such assets are typically tied to a sovereign currency such as the US dollar, such as Circle’s USD Coin (USDC), and serve as an on-off liquidity gateway.

The bill would allow U.S. banks to issue fiat-pegged tokens without standards, but would require service providers without banking licenses to maintain a market capitalization below $10 billion.

According to Andrew O’Neill, managing director and co-director of S&P Global’s Digital Asset Institute, this regulatory framework gives banks an advantage over other market participants. Encourage The adoption of blockchain in the financial sector will be facilitated through the tokenization of assets and the issuance of digital bonds.

Using the BlackRock Ethereum-based fund as an example, O’Neill said on-chain payment rails provide efficient payments in real-time.

“Investment group Blackrock’s BUIDL fund provides a recent use case. This tokenized fund, which uses the Ethereum blockchain and invests in US government bonds, has a liquidity pool denominated in USDC stablecoins, allowing investors to Houses can instantly redeem equity tokens 24/7 through smart contracts.”

Andrew O’Neill, Managing Director and Co-Director, S&P Global Digital Asset Institute

The Lummis-Gillibrand bill would not affect existing US-based products such as PayPal USD, but the framework would not allow offshore entities like Tether. While this condition could destabilize USDT’s presence in the market, O’Neill pointed out that Tether’s activity and trading volume primarily takes place outside the United States.

Furthermore, decentralized stablecoins are not included in the regulation, so services such as Maker’s DAI and Frax Finance’s FRAX are not covered by the proposal. O’Neill explained that policymakers are likely to favor a centralized system like USDC that mirrors existing financial operations.

Finally, S&P’s report predicted an influx of new providers into the digital asset custody industry, especially with updates to SEC rules that no longer require custodians to report crypto assets on their balance sheets. has reached out to O’Neill and S&P for further comment on the bill and its impact.

“That policy not only differs from the general treatment of financial assets, which are generally held off-balance sheet, but also creates capital requirements that are likely to prevent financial institutions from offering digital asset custody in the United States. The new rules will remove that barrier and could lead to increased competition. ”

Andrew O’Neill, Managing Director and Co-Director, S&P Global Digital Asset Institute

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