US Senators Kirsten Gillibrand and Cynthia Lummis have introduced the Lummis-Gillibrand Payments Stablecoin Act, a landmark bipartisan legislation that seeks to establish a regulatory framework for payments stablecoins. The bill aims to protect consumers, promote responsible innovation and crack down on money laundering and illicit finance.
The legislation, which senators have been working on for months, prohibits “unbacked, algorithmic stablecoins” and mandates a one-to-one reserve for issuers. It also creates state and federal regulatory regimes for stablecoin firms and aims to prevent illegal use of stablecoins.
Senator Gillibrand stressed the importance of passing a regulatory framework for stablecoins to maintain the dominance of the US dollar, promote responsible innovation, and protect consumers. He 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 House.
The bill includes provisions that allow state non-depository trust companies to issue up to $10 billion in payment stablecoins. Authorized institutions will be able to issue stablecoins “up to any amount” under a limited-purpose state charter. The law 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 amid ongoing concerns from lawmakers and industry leaders about setting 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 not yet seen significant movement. Senator Sherrod Brown, Chairman of the Senate Banking Committee, has expressed interest in addressing stablecoin regulation in the current legislative session.
The Loomis-Gillibrand Payments Stablecoin Act represents an important step toward establishing a comprehensive regulatory framework for stablecoins in the United States. As the crypto industry evolves, regulatory clarity and consumer protection are becoming increasingly important.
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