Stablecoins are digital assets pegged to fiat currencies such as the U.S. dollar. Usually, stablecoins are backed by a $1 or its equivalent that is redeemable in the reserves. There are various concerns regarding the security of stablecoins that have caught the attention of lawmakers.
U.S. Lawmakers Demand Transparency
The latest release of Senator Hagerty’s office highlights the newly introduced bill, according to which the stablecoins would be “backed by government securities with maturities less than 12 months or U.S. dollars”, and stablecoin issuers will need to release audited reports of their reserves publicly that are performed by third-party auditors.
The “Stablecoin Transparency Act” points to the fact that American lawmakers are moving in the direction to make the $180B industry accountable and transparent.
Since Tether, a centralized entity that issues stablecoin, USDT, was called out over the concealment of its reserve status, transparency regarding the stablecoin issuers has become a growing issue in the industry.
The release also outlines that the bill will not render regulatory bodies the power to control the stablecoin industry to put burdensome requirements on stablecoin issuers or out of existence.
Further, Representative Hollingsworth said that the bill doesn’t aim to put a crackdown on technological innovation, but rather the bill gives an overview of how the regulatory compliances will be like in the future.
Two Popular Stablecoins USDT & USDC Under The Radar
The largest stablecoin by market cap, Tether, has received a good amount of criticism because of its lack of transparency on the status of its reserve. Even though USDT is backed by a number of liquid assets, the company still wasn’t able to reveal the source of the commercial papers in many instances because of “private reasons.”
As per a report by Grant Thornton, Circle, the company that backs USDC, was reported to hold only 61% of reserves in cash and cash equivalents as of last July. Cut to a month later, Circle made a reserve move that converted all its reserves completely to cash and short duration U.S. Treasuries, a step taken in order to give assurance to the USDC community.
According to the reports by CryptoPotato, Circle will keep around $50B worth of reserves with one of the oldest banks in America, The Bank of New York Mellon.
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Source: https://www.thecoinrepublic.com/2022/04/04/in-newly-introduced-bill-us-lawmakers-target-stablecoins-its-issuers/