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S&P Global Says US Stablecoin Adoption Could Soar Following New Rules

Tanzeel Akhtar
Last updated: | 2 min read

American credit ratings firm S&P Global said that a change in rules under the Lummis-Gillibrand Payment Stablecoin Act could see U.S. stablecoin adoption soar as the regulatory framework could bolster confidence.

In a research note Andrew O’Neill, managing director and co-chair of S&P Global’s Digital Assets Research Lab said the act promises a legislative and regulatory framework to bolster confidence in stablecoins, accelerate institutional usage, facilitate bank issuance, and simplify the provision of digital custody services.

Regulatory Clarity Will See More Banks Dabbling in Stablecoins


The Lummis-Gillibrand Payment Stablecoin Act was introduced on April 17. O’Neill, explains in his note that regulatory clarity should encourage banks into the stablecoin market.

“Assuming the bill is approved, and that relevant banking regulation follows, the new rules may offer banks a competitive advantage by limiting institutions without a banking license to a maximum issuance of $10 billion. The bill is unlikely to significantly affect stablecoins already regulated by the New York Department of Financial Services (NYDFS), including PayPal USD, Gemini USD, and Paxos USD, as they are well-below the $10 billion threshold and because it is otherwise broadly consistent with NYDFS guidance,” said Andrew O’Neill, managing director and co-chair of S&P Global’s Digital Assets Research Lab.

Tether’s Dominance May Wane


Another important note from O’Neill is that Tether’s (USDT) dominance in the stablecoin market may wane. Tether is the largest stablecoin by outstanding volume, is issued by a non-U.S. entity and is therefore not a permitted payment stablecoin under the proposed bill, explains the S&P managing director.

“This means that U.S. entities couldn’t hold or transact in Tether, which may reduce demand while boosting U.S.-issued stablecoins. We note, however, that Tether transaction activity is predominantly outside the U.S., in emerging markets, and driven by retail users and remittances,” said O’Neill.

In December, S&P Global said it had started assessing the ability of Tether to maintain its peg to the U.S. dollar marking it at a ‘constrained’ rating of 4.

Stablecoins are a cryptocurrency whose value is usually pegged to a fiat currency or commodity. Tether has been under scrutiny for years – the stablecoin was issued in 2014 and is the longest-standing stablecoin with the largest volume in circulation. Its price has remained relatively stable in recent years and particularly over the past 12 months, noted the S&P in 2023.

The risk assessment is between 1 to 5 – with 5 being ranked weak. Tether had been scored weak due to the lack of information disclosed.

Market Could See More Custody Services Emerge


Another important point made by O’Neill is that the removal of the Securities and Exchange Commission’s requirement that custodians report digital assets on their balance sheet could see more custody services emerge.

“That policy not only differs from the general treatment of financial assets held in custody, which are generally off-balance sheet but creates a capital requirement that likely discourages financial institutions from providing digital asset custody in the U.S. The new rules would remove that barrier and could lead to greater competition,” said O’Neill.