US senators Kirsten Gillibrand and Cynthia Lummis have introduced the Lummis-Gillibrand Payment Stablecoin Act, a landmark bipartisan legislation that seeks to establish a regulatory framework for payment stablecoins. The bill aims to protect consumers, foster responsible innovation, and crack down on money laundering and illicit finance.
The legislation, which the senators have been working on for months, prohibits “unbacked, algorithmic stablecoins” and mandates one-to-one reserves for issuers. It also creates state and federal regulatory regimes for stablecoin firms and aims to prevent illicit uses of stablecoins.
Senator Gillibrand emphasized the importance of passing a regulatory framework for stablecoins in order to maintain the dominance of the US dollar, promote responsible innovation, and protect consumers. She expressed confidence that the legislation, which was developed in close collaboration with relevant federal and state agencies, can earn the necessary support in the Senate and the House.
The bill includes provisions that allow state non-depository trust companies to issue up to $10 billion in payment stablecoins. Authorized institutions would be able to issue stablecoins “up to any amount” under a limited-purpose state charter. The legislation also emphasizes the need for proper custody practices for stablecoin issuers, citing the recent FTX incident as an example.
This is not the first time Senators Lummis and Gillibrand have collaborated on crypto-focused legislation. In the past, they have worked together to introduce bills that clarify the roles of regulatory bodies like the Securities and Exchange Commission and the Commodity Futures Trading Commission in regulating digital assets.
The introduction of this stablecoin bill comes amidst ongoing concerns from lawmakers and industry leaders about establishing guardrails for stablecoin issuers in the United States. While a similar bill, the Clarity for Payment Stablecoins Act, has made progress in the House of Representatives, it has yet to see significant movement. Senator Sherrod Brown, the chair of the Senate Banking Committee, has expressed interest in addressing stablecoin regulation in the current legislative session.
The Lummis-Gillibrand Payment Stablecoin Act represents a significant step towards establishing a comprehensive regulatory framework for stablecoins in the United States. As the crypto industry continues to evolve, regulatory clarity and consumer protection are becoming increasingly important.
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