Coin Center, a prominent non-profit organization advocating for cryptocurrency, has voiced concerns over the recently proposed stablecoin bill put forth by Senators Cynthia Lummis and Kirsten Gillibrand. According to Coin Center, the bill’s prohibition on algorithmic payment stablecoins may raise constitutional issues and stifle innovation.
In a blog statement, Coin Center argued that the proposed legislation, while aimed at regulating stablecoins, could potentially impede technological advancement and infringe upon First Amendment rights by banning all algorithmic models. The organization emphasized that such a blanket ban on algorithmic stablecoins could not only hinder progress in the crypto industry but also violate constitutional principles.
The Washington-based crypto think tank highlighted the constitutional implications of restricting the publication of code and algorithms, asserting that it constitutes a form of prior restraint on protected speech. According to Coin Center, such restrictions would be unconstitutional unless the government can demonstrate a compelling interest and narrow tailoring.
Coin Center’s critique of the stablecoin bill comes in response to the collaborative efforts of Senators Lummis and Gillibrand, along with the Federal Reserve and the New York State Department of Financial Services, to establish a regulatory framework for stablecoins. While the bill has been lauded for its aim to bring clarity to the stablecoin market, it has also faced criticism for its restrictive measures targeting specific stablecoin models.
The proposed legislation mandates that stablecoin issuers maintain reserves of cash or cash equivalents at a 1:1 ratio to back their tokens. Additionally, it introduces a ban on unbacked algorithmic stablecoins, restricting U.S.-approved issuers to only issue dollar-backed stablecoins, effectively preventing algorithmic stablecoins from entering the market.
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