Senator Elizabeth Warren is worried a bipartisan stablecoin bill working its way through Congress doesn’t do enough to address the systemic risks she thinks the dollar-pegged assets pose.
Senator Bill Hagerty (R-TN) introduced the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act in February.
The legislation, which aims to establish regulatory clarity for stablecoins, passed out of the Senate Banking Committee on March 13th by a bipartisan 18-6 vote.
In a speech to the committee earlier this month, Warren (D-Massachusetts) said the bill doesn’t protect consumers, national security or financial stability.
“The bill lacks basic safeguards necessary to ensure that stablecoins don’t blow up our entire financial system. Under this bill, stablecoin issuers can invest in risky assets, including the very assets that were bailed out in 2008 and again in 2020. And anyone who thinks the US taxpayer won’t be called on, directly or indirectly, to bail out these guys out is kidding themselves. Circle, one of the largest stablecoin companies in the world, would have blown up in 2023 if regulators hadn’t bailed out its $3.3 billion of deposits at Silicon Valley Bank. This bill begs for more bailouts.”
The potential legislation would require stablecoin issuers to maintain backing for their assets on a 1:1 ratio.
The bill states that stablecoin issuer reserves can be made up of US currency; funds held as demand deposits or insured shares at an insured depository institution; and Treasury bills, notes or bonds.
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