Wyoming Republican Sen. Cynthia Lummis, a prominent crypto advocate, advised on Wednesday about stablecoins must be backed by cash.
She stated on the Senate floor that any legal framework for stablecoins will need to include complete cash-backing, akin to a money market mutual fund, citing “novel risks” to the US economy.
“Stablecoins must be 100% backed by cash and cash equivalents, and this should be audited regularly,” she said. “It may be the case that stablecoins should only be issued by depository institutions or through money market funds or similar vehicles.”
Some stablecoins, such as Tether and USD coin, have sparked debate about whether their cash reserves are secure enough for a cryptocurrency ostensibly comparable to a dollar.
Lummis, a Bitcoin holder and one of the Senate's most ardent crypto supporters, stressed that stablecoins should adhere to all applicable anti-money laundering and sanctions legislation.
But, as long as these regulatory problems are resolved, Lummis remains optimistic about the potential of stablecoins in the US economy.
“Properly supervised, stablecoins are not tantamount to the so-called wildcat banks of the 19th century,” she said. “Stablecoins have an important role to play moving forward.”
Lummis thrilled crypto enthusiasts last month when she helped offer a key change to an infrastructure bill that corrected what opponents termed an excessively wide description of cryptocurrency “brokers.”
Although the amendment was eventually defeated, she received praise from cryptocurrency specialists.
“Without [Lummis’s] amendment, the US will spend hundreds of millions collecting information on transactions that could never generate actual tax revenue,” Marco Santori, Kraken’s chief legal officer, told Insider previously.