‘Huge Disaster’—Congress Just Introduced A Game-Changing Bill That Could Blow Up The Bitcoin Price And Crypto Market
04/24 update below. This post was originally published on April 23
Bitcoin
Bitcoin
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The bitcoin price, up over 300% since crashing to its late 2022 lows of around $15,000 per bitcoin, has stormed into 2024 even as fears swirl of a “rapid, cataclysmic” U.S. dollar collapse.
Now, as traders bet on whether China could be about to cause another bitcoin price earthquake, a pair of U.S. senators have introduced a new crypto bill to Congress, designed to regulate dollar-pegged stablecoins, and described as a “huge disaster” by one expert.
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U.S. president Joe Biden issued an executive order in 2022 that called for a “comprehensive … [+]
The 179-page U.S. stablecoin bill introduced last week by senators Cynthia Lummis, R-Wyo., and Kirsten Gillibrand, D-N.Y., would create “clear rules of the road” for stablecoin issuers like Circle and Tether
Tether
The stablecoin market, led by Tether’s USDT and Circle’s USDC
USDC
04/24 update: The Lummis and Gillibrand stablecoin act could “accelerate” a move on-chain payments and the tokenization of assets, according to Andrew O’Neill, managing director of S&P Global’s digital assets research lab, wrote in an emailed note.
“Stablecoins could be a key pillar of financial markets’ blockchain adoption by serving as a digital currency for fully on-chain payments, which promise efficiencies and enhanced settlement security, specifically through tokenization of financial assets and digital bond issuance,” O’Neill wrote in an emailed note.
Last month, the world’s largest asset manager BlackRock quietly revealed it’s already begun the second stage in its plan for a crypto-based “revolution in financial markets” with its BlackRock USD institutional digital liquidity fund (Buidl)—something Citi analysts predict could become a “$5 trillion market by 2030.”
“Investment group BlackRock’s
BlackRock
The bill “would be symbolically significant for crypto in general as it would be the first constructive crypto legislation from Congress,” the TD Cowen Washington Research Group, led by Jaret Seiberg, wrote in a note seen by The Block.
“If this approach is adopted, we believe it could lead to mergers between banks and stablecoin issuers as issuers will want the advantages of being a bank and a bank looking to play a role in stablecoins will want the user base of an existing issuer,” the group said in its note.
The bill, the latest in a series of attempts to get stablecoin legislation through Congress, would see issuing companies required to hold one-to-one cash or cash-equivalent reserves to back their coin.
It would also ban algorithmic stablecoins, prevent the use of stablecoins for money laundering or other illicit purposes and hand chartering and enforcement responsibility to federal and state agencies.
Lummis called the new bill, which would create a mechanism for Federal Deposit Insurance Corporation (FDIC) conservatorship and resolution if a stablecoin issuer becomes insolvent, “the most comprehensive stablecoin bill to date.”
“Passing this bipartisan solution is critical to maintaining the U.S. dollar’s dominance and making certain the U.S. remains the world leader in financial innovation,” Lummis, a longtime crypto advocate, said in a statement.
“It protects consumers by mandating one-to-one reserves, prohibiting algorithmic stablecoins, and requiring stablecoin issuers to comply with U.S. anti-money laundering and sanctions rules,” Gillibrand added.
However, some from both the traditional world of finance and the crypto space have criticized the bill.
“It will be a huge disaster when any of them are passed,” Hilary Allen, an associate professor at American University’s Washington College of Law, told Bloomberg, arguing stablecoins aren’t robust enough to be a viable form of payment.
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The bitcoin price has rocketed higher over the last year, erasing its 2022 price crash and topping … [+]
Jerry Brito, executive director of Coin Center, a non-profit crypto lobby group, wrote in a blog post the proposed bill “stifles innovation and breaches First Amendment rights by banning all algorithmic models.”
While U.S. lawmakers from both sides of the aisle are increasingly finding common ground on stablecoin legislation, the founder of crypto company Snickerdoodle Labs, Jonathan Padilla, who worked on PayPal’s
PayPal
PayPal
But the need for comprehensive stablecoin legislation could soon be pushed up the agenda. Venezuela’s state-run oil company PDVSA is turning to cryptocurrency to skirt U.S. oil sanctions on the country, Reuters reported, citing anonymous sources. PDVSA has been moving oil sales to Tether’s USDT dollar-pegged stablecoin since last year.
The Wall Street Journal reports the U.S. is drafting sanctions that could cut some of China’s banks off from the global financial system, citing anonymous sources. The move would be designed to dent the China-Russia trade enabling Moscow to rebuild its military after losses in Ukraine, the report said.
