Lummis to Banks: ‘Issue Stablecoins or Lose to Tether’

The Lead

Senator Cynthia Lummis (R-WY) issued a stark ultimatum to U.S. banks on Friday: embrace stablecoins as a core product line or watch fintech disruptors cannibalize the payments market. In a Feb. 6 appearance on Fox Business, the Senate digital assets heavyweight urged traditional financial institutions to “stop fighting stablecoins and start using them,” framing dollar-pegged tokens not as a threat, but as the only way for banks to modernize settlement rails.

The Senator’s comments landed as the broader crypto market faced headwinds, with Ethereum (ETH) slipping 3.8% to $2,149 in early trading, reflecting ongoing jitters over regulatory stalemates.

The Receipt

Lummis, who now chairs a key Senate digital assets panel, is leveraging her position to fast-track the Lummis-Gillibrand Payment Stablecoin Act. The legislation explicitly authorizes banks and state trust companies to issue payment stablecoins, provided they maintain 1:1 reserves and prohibit algorithmic structures. By positioning stablecoins as a “new product category,” Lummis is effectively telling Wall Street that the era of delaying tactics is over.

“Banks should see stablecoins as a way to expand services, not defend turf… blockchain-based transfers can outperform traditional bank rails for both domestic and cross-border transactions.”, Sen. Cynthia Lummis via Fox Business

Global Divergence

While Washington pushes for bank-issued dollar tokens to cement USD dominance, emerging market central bankers are signaling growing alarm. South African Reserve Bank Governor Lesetja Kganyago issued a fresh warning this week, arguing that the proliferation of dollar stablecoins threatens “monetary sovereignty” in the Global South.

Kganyago’s concerns, reported by Bloomberg, highlight a widening fracture in global policy: U.S. lawmakers view stablecoins as a geopolitical tool to export the dollar, while nations like South Africa see them as a mechanism for capital flight and a direct challenge to local currency control. This dichotomy suggests that as U.S. banks potentially enter the fray, they may face hostile regulatory environments in the very cross-border markets Lummis aims to capture.

Institutional Context

The timing of Lummis’s push is critical. With Tether (USDT) and Circle (USDC) already dominating the $170 billion+ stablecoin market, U.S. banks are currently sidelined. If the Lummis-Gillibrand framework passes in spring 2026 as hoped, it would force major custodians to decide immediately whether to compete as issuers or relegate themselves to holding reserves for crypto-native firms.