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The United States is preparing a new law on stablecoins

During the Bitcoin Policy Summit in Washington on April 9th, Senator Kirsten Gillibrand from New York revealed plans for a new law on stablecoins. The main goal of this law is to make Bitcoin more accessible as a payment method and support the development of the crypto industry.

What is the law project afraid of?

Senators pointed out that the stablecoin law aims to control dishonest market participants. Gillibrand noted that this law will help unlock the potential of cryptocurrency and support Bitcoin as a payment method.

The law also aims to give federal and local regulators the authority to monitor stablecoin issuers, whether they are banks or non-bank institutions. This will contribute to safety and stability in the industry.

In other words, US senators say that the new law on stablecoins will help improve control over fraudsters and reveal the "opportunities of cryptocurrencies and the role of Bitcoin as a payment method."

Additionally, this law will give both federal and local regulators the power to monitor companies issuing stablecoins. This will help ensure safety and stability in this industry.

Gillibrand also mentioned that "we have worked with the Federal Reserve, the Treasury, and the Department of Financial Services of New York State to allow companies to issue stablecoins, ensuring safety and reliability." This law also considers the interests of various government and industry bodies, aiming to provide clear rules.

What is a stablecoin?

A stablecoin is a type of cryptocurrency whose value is tied to the value of another stable asset, such as the US dollar, euro, gold, or other currencies or commodities. The main goal of stablecoins is to provide stability and reliability in terms of price, distinguishing them from more volatile cryptocurrencies like Bitcoin. These coins are useful for those who want to preserve the value of their assets without significant price fluctuations often seen in cryptocurrency markets.

How do stablecoins work?

Stablecoins, as the name suggests, are less prone to fluctuations because their value is tied to more stable assets. This makes them popular among traders as they act as intermediaries, allowing them to benefit from their profits and manage market positions.

Stablecoins also have significant value for cryptocurrency investors and traders, similar to the importance of fiat currency for participants in traditional markets. For example, just as traditional investors can redirect their assets to cash or bonds during periods of high volatility, cryptocurrency investors can use stablecoins.

However, it's essential to understand that not all stablecoins are the same. They can be tied to different assets, including other currencies or goods, and use various mechanisms to support the peg to the underlying asset.

Conclusion

With the presence of many different stablecoins, choosing the right one can be challenging for new investors. It's important to balance decentralization, stability, and freedom from rules. Nevertheless, stablecoins will continue to play an essential role in cryptocurrency markets, especially in the context of changes in monetary policy and economic stability.

If you have any questions about cryptocurrency regulation, feel free to reach out to us. Blockchain and cryptocurrency are one of Avitar's main areas of focus.

If you have questions regarding the crypto-regulation, please contact us. Blockchain and Crypto are one of the main areas of Avitar’s work.

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Authors:

Violetta Loseva

,

Serhii Floreskul

,

5.23.2024 16:59
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