Coin Center criticizes 'unecessary' and 'unconstitutional' stablecoin bill

Crypto industry advocates are pushing back against a bill that could restrict stablecoin offerings in the U.S. 

The Lummis-Gillibrand Payment Stablecoin Act, introduced by Sens. Cynthia Lummis and Kirsten Gillibrand in the U.S. Senate on Wednesday, would require stablecoins to be backed by one-to-one cash or cash-equivalent reserves, effectively outlawing algorithmic stablecoins, in addition to charging federal and state authorities with stablecoin chartering and enforcement.

However, cryptocurrency-focused non-profit group Coin Center said Friday in a letter to lawmakers that the proposed framework is an “unreasonable,” and even “unconstitutional,”  measure that could curb innovation in the U.S. cryptocurrency industry.  

It “may make sense to require issuers of products like Terra to register with the SEC and make appropriate disclosures… but an outright ban on a particular business model is unnecessary and anti-innovation,” Coin Center said in the statement. 

The group also argued that banning algorithmic stablecoins — digital tokens backed by computer programming — is “essentially a ban on code” that would threaten free speech rights enshrined in the U.S. Constitution. 

“Banning people from publishing code and algorithms is a clear prior restraint on protected speech and is unconstitutional unless the government can show a compelling interest and narrow tailoring,” Coin Center said. 

Coin Center asked lawmakers to consider a previous bill proposing a two-year moratorium on these types of tokens in lieu of a full, permanent ban on algorithmic stablecoins. The moratorium, which formed part of the Clarity for Payment Stablecoins Act introduced last year, would only prohibit future stablecoin activity and does not affect existing projects, CoinCenter noted. 

The group’s recommendation comes on the heels of other crypto industry advocates' efforts to have lawmakers’ latest stablecoin bill revised. On Wednesday, the Blockchain Association (BA), a US-based blockchain advocacy group, offered to guide the framework’s development.   

“Blockchain Association is ready — supported by the expertise of our members — to provide feedback and we look forward to continuing our open dialogue with the senators and their staff,” BA CEO Kristin Smith said Wednesday in a statement.