There is controversy that the new stablecoin regulation bill, co-sponsored by Senators Cynthia Lummis and Kirsten Gillibrand, may significantly contribute to stifling innovation in the United States.
The now famous Stablecoin Regulation Bill
Loomis and Gillibrand I introduced the 179-page bill last week with a focus on legalizing and clarifying various parts of these cryptocurrencies linked to fiat currencies.
In addition, the proposed bill does not tolerate so-called algorithmic stablecoins that are not backed by full fiat reserves. This has a huge impact on software developers and the broader technology community.
Among all the bill’s other focuses, it supports the use of a mechanism to maintain and dissolve the FDIC if an issuer becomes insolvent. Stablecoin legislation in Congress has sparked excitement within the cryptocurrency sector, but the same cannot be said for the traditional financial system.
Hilary Allen, an assistant professor at American University’s Washington College of Law, appears concerned about the content of the bill. It is worth noting that Allen is someone who has written and spoken extensively about how various cryptocurrency products can undermine the stability of the financial system.
With the new development of Stablecoin bill Pending its passage, he believes this is a case of a “huge disaster” waiting to happen.
Backlash and support trails for the stablecoin bill
Allen does not believe that stablecoins qualify as a form of payment. For context, he clearly said that the blockchain underlying these stablecoins is not reliable and does not have sufficient throughput.
The professor was quick to point out that the FDIC receivership aspect of the Loomis-backed stablecoin bill could cause a significant increase in banking fees for all American consumers.
Alongside this subtle hostility to the bill, there are also supportive conversations that the bill violates First Amendment rights, especially with its ban on algorithmic stablecoins. Cryptographic Defense Group Coin Center challenged the Lummis-Gillibrand Act, Citing First Amendment concerns about stablecoin regulation.
Cryptocurrency advocacy group CEO Jerry Brito praised the government’s commitment to regulating stablecoins in the region. In general, many efforts in the cryptocurrency industry became more intense after the collapse Terraform Labs In 2022.