Pro-Crypto Senator Lummis Says Stablecoins Need To Be Backed By Cash

On Wednesday, U.S. Senator Cynthia Lummis said that stablecoins should be backed by cash and may need to be issued by banks. 

In a Senate floor speech focused on the potential development of a U.S. central bank digital currency (CBDC), Lummis said her concern is that stablecoins are not fully backed “in a transparent manner.”

“Stablecoins must be 100% backed by cash and cash equivalents, and this should be audited regularly,” she said, adding that “It may be the case that Stablecoins should only be issued by depository institutions or through money-market funds or similar vehicles.”

At present, the two largest stablecoin issuers are Circle and Tether. They have shared that their productsare abacked by a combination of cash and cash-like products along with short-term securities and commercial paper.

Often, investors use Tether to buy Bitcoin BTC/USD, which is largely unregulated. 

In May, U.S. Rep. Warren Davidson suggested that stablecoins might meet the definition of a security, which would subject them to regulatory oversight from the U.S. SEC.