Update 4/24 below. This post was originally published on April 23

Bitcoin
Bitcoin
has just suffered its latest supply cut in half, unleashing “unprecedented” cryptographic “chaos”.

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The price of bitcoin, which has risen more than 300% since hitting its low in late 2022 of around $15,000 per bitcoin, has reached 2024 even as fears of a “rapid and cataclysmic” collapse of the US dollar.

Now, as traders bet on whether China could be about to cause another earthquake in the price of bitcoinTwo US senators have introduced a new crypto bill to Congress designed to regulate dollar-pegged stablecoins, and described as a “major disaster” by one expert.

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The 179-page U.S. stablecoin bill introduced last week by Sens. Cynthia Lummis, R-Wyo., and Kirsten Gillibrand, D-N.Y., would create “clear rules of the road” for stablecoin issuers like Circle and Tether
To tie
and potentially trigger a round of mergers and acquisitions between issuers and banks, according to analysts at investment bank TD Cowen.

The stablecoin market, led by Tether’s USDT and Circle’s USDC
USDC
, has grown to a US$160 billion market in recent years. Dollar-pegged stablecoins have emerged as a fast-growing way for people to move money around the world and gain access to offshore crypto exchanges that cannot work directly with U.S. banks.

Update 4/24: The Lummis and Gillibrand stablecoin law could “accelerate” a movement toward on-chain payments and the tokenization of assets, according to Andrew O’Neill, managing director of S&P Global’s Digital Asset Research Lab, wrote in an emailed note.

“Stablecoins can be a key pillar of blockchain adoption in financial markets, serving as a digital currency for fully on-chain payments that promise efficiency and greater settlement security, specifically through the tokenization of financial assets and the issuance of digital securities ,” O’Neill wrote. in a note sent by email.

Last month, the world’s largest asset manager BlackRock quietly revealed that it has already begun the second phase of its plan for a crypto-based “financial markets revolution” with its BlackRock USD Institutional Digital Liquidity Fund (Buidl) –something that Citi analysts predict could become a “$5 trillion market by 2030.”

“BlackRock’s investment group

Black stone
The Buidl fund provides a recent use case. The tokenized fund, which uses the Ethereum blockchain and invests in US Treasury bonds, has a liquidity pool denominated in the stablecoin USDC, for which investors can redeem equity tokens via a smart contract, instantly and 24 hours a day. day, 7 days a week,” O’Neill wrote.

The bill “would be symbolically significant for cryptography in general, as it would be the first constructive legislation on cryptography from Congress,” the TD Cowen Washington Research Group, led by Jaret Seiberg, wrote in a note. visa 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 pass stablecoin legislation in Congress, would require issuing companies to hold one-to-one cash or cash-equivalent reserves to back their currencies.

It would also ban algorithmic stablecoins, prevent the use of stablecoins for money laundering or other illicit purposes, and hand over charter and oversight responsibility to federal and state agencies.

Lummis called the new bill, which would create a mechanism for Federal Deposit Insurance Corporation (FDIC) trusteeship and resolution if a stablecoin issuer becomes insolvent, “the most comprehensive stablecoin bill to date.”

“Passing this bipartisan solution is critical to maintaining the dominance of the US dollar and ensuring the US remains the world leader in financial innovation,” Lummis, a longtime crypto advocate, said in a statement.

“It protects consumers by enforcing one-to-one reserves, banning algorithmic stablecoins, and requiring stablecoin issuers to comply with U.S. sanctions and anti-money laundering rules,” Gillibrand added.

However, some people, both from the traditional world of finance and the crypto space, have criticized the project.

“It will be a huge disaster when any of them pass,” said Hilary Allen, an associate professor at American University Washington School of Law. counted Bloomberg, arguing that stablecoins are not robust enough to be a viable form of payment.

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Jerry Brito, executive director of Coin Center, a nonprofit crypto lobby group, wrote in a blog post publish the proposed bill “stifles innovation and violates First Amendment rights by prohibiting all algorithmic models.”

While US lawmakers on both sides of the aisle are increasingly finding common ground on stablecoin legislation, founder of crypto firm Snickerdoodle Labs, Jonathan Padilla, who worked at PayPal
PayPal

PayPal
stablecoin as head of blockchain strategy until June 2021, counted DLNews, any such bill likely won’t pass Congress until next year.

But the need for comprehensive stablecoin legislation could soon be put on the agenda. Venezuelan state oil company PDVSA is turning to cryptocurrency to bypass US oil sanctions on the country, Reuters reported, citing anonymous sources. PDVSA has been shifting oil sales to Tether’s dollar-pegged stablecoin USDT since last year.

Wall Street Journal reports The US is drafting sanctions that could isolate some Chinese banks from the global financial system, citing anonymous sources. The move would aim to harm China-Russia trade, allowing Moscow to rebuild its armed forces after losses in Ukraine, the report said.

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