United States Senators Kirsten Gillibrand and Cynthia Lummis have unveiled a significant legislative proposal aimed at establishing a comprehensive regulatory framework for stablecoin issuers and the fiat-backed digital assets.
The announcement came on April 17, marking the introduction of the Lummis-Gillibrand Payment Stablecoin Act, a culmination of months of drafting by the two senators. This long-awaited bill is anticipated to be formally presented in 2024.
Stablecoin Bill in the US
Central to the proposed legislation is the prohibition of “unbacked, algorithmic stablecoins,” a measure likely prompted by the depegging incident of TerraUSD (UST) from the U.S. dollar in 2022.
Gillibrand and Lummis emphasized the necessity of requiring issuers to maintain one-to-one reserves and implementing state and federal regulatory mechanisms to oversee stablecoin operations, all while combating illicit activities associated with stablecoin usage.
Significance of Regulations
Senator Gillibrand highlighted the significance of this stablecoin regulatory framework in preserving the dominance of the U.S. dollar, fostering responsible innovation, safeguarding consumers, and mitigating the risks of money laundering and illicit finance.
She expressed confidence in garnering support for the legislation from both Senate and House members, emphasizing the collaborative effort between their offices and relevant federal and state agencies in crafting the bill.
Key Provisions from the Stablecoin Bill
Key provisions of the 179-page bill include granting state non-depository trust companies the authority to issue payment stablecoins up to $10 billion, while authorized institutions under a limited-purpose state charter would have unrestricted issuance capabilities.
Additionally, the legislation aims to uphold the existing system of state and federal charters and imposes stringent rules regarding custody practices for non-depository trust companies, especially in light of recent events involving FTX.
Senator Lummis’ prior advocacy for regulatory action against stablecoin issuer Tether, following allegations of facilitating funds for Hamas, underscores her commitment to ensuring the integrity of stablecoin operations. Her collaboration with Senator Gillibrand on previous crypto-focused legislation reflects a shared dedication to clarifying regulatory roles within the digital asset space.
Growing Concerns Among Lawmakers
The unveiling of the Lummis-Gillibrand Payment Stablecoin Act comes amid growing concerns among lawmakers and industry stakeholders regarding the need for robust regulatory safeguards for stablecoin issuers in the United States.
Although similar initiatives, like the Clarity for Payment Stablecoins Act, have advanced to the brink of a full floor vote in the House of Representatives, progress has stagnated in recent months.
Senator Sherrod Brown, Chair of the Senate Banking Committee, has signaled his intent to prioritize stablecoin legislation in the current legislative session, contingent upon addressing his concerns.
While not specifically endorsing the efforts of Lummis and Gillibrand, his statement underscores the significance of ongoing discussions surrounding stablecoin regulation within the U.S. legislative landscape.
