According to a study by S&P Global Ratings, the upcoming Lummis-Gillibrand Payment Stablecoin Act, set to be implemented on April 17, 2024, could significantly transform the U.S. stablecoin industry.

Researchers Mohamed Damak and Andrew O’Neill suggest that this legislation will bring much-needed regulatory clarity and could drive broader institutional adoption of stablecoins.

Their assessment indicates that clear regulations may help stabilize the market and boost confidence among potential institutional entrants.

New Stablecoin Legislation Set to Boost US Market Confidence

The bipartisan bill, as stated in the S&P report, enacts essential restrictions to strengthen stablecoins’ legal status. According to the source, the measure authorizes non-bank financial organizations registered with the Federal Reserve to produce stablecoins while imposing stringent asset reserve and operational transparency standards.

This action could encourage the widespread adoption of stablecoins as both personal and institutional digital currencies, stabilizing the market and increasing user confidence.

S&P Global Ratings has analyzed the impact of the upcoming bipartisan stablecoin legislation on U.S. markets. The report highlights that the bill introduces key regulations aimed at solidifying the legal standing of stablecoins. It allows non-bank financial entities registered with the Federal Reserve to issue stablecoins, provided they adhere to strict standards for asset reserves and operational transparency. This legislative move is poised to foster widespread adoption of stablecoins, enhancing market stability and boosting confidence among both personal and institutional users.

• Key Provisions:
  • Registration with the Federal Reserve for issuers
  • Strict asset reserve requirements
  • Enhanced operational transparency

New US Stablecoin Legislation Poised to Reshape Financial Landscape

According to an S&P Global Ratings report, impending legislation could significantly impact the U.S. stablecoin market. The report examines the potential effects of the new act on market dynamics, particularly for U.S.-issued stablecoins. The legislation aims to create a more level playing field by capping the issuance power of non-banking organizations at $10 billion.

This move could decrease the dominance of foreign-issued stablecoins like Tether (USDT), which is not recognized as a permitted payment stablecoin under the new regulations due to its non-U.S. origins.

The authors suggest that this regulatory shift could lead to reduced U.S. demand for Tether while boosting the appeal of domestically issued stablecoins. Despite this, they note that the majority of stablecoin transaction activity is driven by retail users and remittances in emerging economies, rather than the U.S. market.

The legislation also proposes significant changes to current SEC regulations that could lower capital requirements for financial institutions offering digital asset custody services, potentially leading to increased competition and innovation in the sector.

• Key Points:
  • Limit on non-banking organizations’ issuance power to foster U.S. stablecoin growth
  • Potential reduction in U.S. demand for Tether, enhancing demand for U.S.-issued stablecoins
  • Expected boost in digital asset custody services due to relaxed SEC regulations

However, the bill has its critics. Coin Center, a nonprofit research and advocacy center, has voiced concerns that the bill could stifle innovation and infringe on First Amendment rights.

They are urging Senators Lummis and Gillibrand to reconsider the legislation to allow for more nuanced regulation that supports technological development within the stablecoin sector.