Potential Impact of the Lummis-Gillibrand Payment Stablecoin Act on U.S. Stablecoin Adoption

The Lummis-Gillibrand Payment Stablecoin Act is set to revolutionize the U.S. stablecoin market, according to a recent report by S&P Global. The act, which promises a legislative and regulatory framework to bolster confidence in stablecoins, could see a surge in adoption as banks and institutions gain more clarity on the rules.

Andrew O’Neill, managing director and co-chair of S&P Global’s Digital Assets Research Lab, highlighted in a research note that the regulatory clarity provided by the act could encourage more banks to enter the stablecoin market. The bill, if approved, would limit institutions without a banking license to a maximum issuance of $10 billion, giving banks a competitive advantage.

One of the key implications of the act is the potential decline in Tether’s dominance in the stablecoin market. Tether, issued by a non-U.S. entity, would not be considered a permitted payment stablecoin under the proposed bill, limiting its use by U.S. entities. This could lead to increased demand for U.S.-issued stablecoins and a shift in market dynamics.

Additionally, the act could pave the way for more custody services to emerge in the market. By removing the Securities and Exchange Commission’s requirement for custodians to report digital assets on their balance sheet, the new rules could encourage more financial institutions to provide digital asset custody services in the U.S.

Overall, the Lummis-Gillibrand Payment Stablecoin Act is poised to bring significant changes to the stablecoin market, boosting confidence, encouraging institutional usage, and simplifying the provision of digital custody services. With these regulatory changes on the horizon, the U.S. stablecoin market is set for a period of growth and innovation.