New York State Attorney General Letitia James has cautioned against embracing foreign issuers of stablecoins like Tether, urging the U.S. government to require these digital assets to be backed by the US dollar or treasuries on a one-to-one basis. In her letter, dated April 8, James emphasized the need for stablecoins issued by companies with an American presence and regulated under US laws.
Currently, Tether, the world’s largest stablecoin supplier, does not have a US presence and its token is backed by a mix of assets, including US Treasury Bills, Bitcoin, and precious metals. James pointed out that Tether holds $94.5 billion in US treasury bills, equaling 55% of the average daily trading volume of treasury bills.
The attorney general warned that stablecoin redemptions can spark run on the bank scenarios for underlying cash and treasuries reserves, potentially necessitating sell-offs in the treasury markets. She also expressed concern over Tether’s recent relocation to El Salvador and its previous misrepresentations of its reserves in 2021.
In contrast, Tether’s next closest rival, Circle, is based in the US and holds its reserves more in line with James’ suggested framework. The company has taken steps to demonstrate its commitment to compliance, including working on an audit by a “Big Four” accounting firm and hiring a new chief financial officer.
James also warned against the widespread adoption of Bitcoin, citing its ability to undermine national interests and threaten the prime position of the US dollar in global transactions. A strong dollar is essential for America’s national interest, as it indicates demand for and confidence in US institutions and the economy.
Source: https://www.theblock.co/post/350445/new-york-ag-warns-congress-of-non-us-stablecoin-issuers-like-tether-amid-legislation-talks