S&P Global: Once the latest stablecoin bill is passed, banks will enter the game while Tether may be phased out

PANews reported on April 25 that, according to The Block, SP Global Ratings revealed that the latest stablecoin bill proposed by the Senate could encourage banks to enter the stablecoin market if passed. The bill was jointly introduced by Republican Senator Cynthia Lummis of West Virginia and Democratic Senator Kirsten Gillibrand of New York, aiming to clarify regulatory provisions and thereby encourage banks to get involved in stablecoin business. However, it's worth noting that this bill intends to ban non-U.S. native stablecoins like Tether which may reduce its market demand.

SP Global stated that the passage of the Stablecoin Act will promote institutional blockchain innovation, especially in areas involving on-chain payments such as tokenization or digital bond issuance. As use cases for stablecoins continue to grow, opportunities for banks as issuers of these coins will also increase while potentially weakening Tether's dominant position in the global stablecoin market. If passed, this act would require issuers of stablecoins to hold cash or cash equivalents equaling their tokens as reserves and prohibit algorithmic-stable coin issuance. Additionally, both issuers and users must strictly comply with regulations prohibiting using these coins for illegal or unauthorized activities such as money laundering.

SP Global said if new legislation is approved it would limit entities without a banking license from issuing more than $10 billion thus giving an advantage to banks; Tether’s dominance in global markets might slow down because it is issued by a non-US entity which wouldn’t be allowed under this law. SP Global added: "This means U.S entities won't be able hold or trade Tether which could decrease demand while boosting US-issued Stablecoins but most trading activity happens outside US borders driven mainly by retail customers and remittances."