USA Senators Approve New Stablecoin Law

United States Senators Kirsten Gillibrand and Cynthia Lummis have introduced new legislation targeting the regulation of payment stablecoins, which they call the Lummis-Gillibrand Payment Stablecoin Act.

This bill, which has been in development for several months and was recently unveiled, aims to establish a detailed regulatory framework for stablecoins, particularly emphasizing the prohibition of "unbacked, algorithmic stablecoins" — a likely reference to the 2022 TerraUSD (UST) collapse.

The proposed legislation mandates that stablecoin issuers must maintain one-to-one reserves and sets out specific regulatory structures both at the state and federal levels to manage these firms.

The act also seeks to deter and prevent the illicit use of stablecoins. Senator Gillibrand emphasized the critical nature of this regulatory framework for maintaining U.S. dollar dominance, fostering responsible innovation, consumer protection, and combating money laundering and other illegal financial activities.

The bill, which spans 179 pages, allows state non-depository trust companies to issue up to $10 billion in payment stablecoins.

More extensively, it authorizes institutions to issue stablecoins "up to any amount" under a limited-purpose state charter, preserving the current state and federal charter systems and establishing specific custody rules for non-depository trust companies, especially in light of the FTX collapse.

This legislative effort by Lummis and Gillibrand builds on their previous collaborations on crypto-focused legislation, aiming to clearly delineate the roles of regulatory bodies like the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) in the oversight of digital assets.

The introduction of this bill coincides with ongoing discussions and legislative efforts within Congress to create a more secure and regulated framework for digital currencies, including another bill in the House of Representatives, the Clarity for Payment Stablecoins Act, which has stalled somewhat after being moved out of committee in July 2023.

Senator Sherrod Brown, chairman of the Senate Banking Committee, has expressed his intention to prioritize a stablecoin bill in the current legislative session, signaling a broad legislative focus on this aspect of digital finance.

However, he has not specifically referred to the efforts of Lummis or Gillibrand in his recent statements.

Sources:

https://cointelegraph.com/news/stablecoin-bill-united-states-senate-lummis-gillibrand

https://www.gillibrand.senate.gov/news/press/release/lummis-gillibrand-introduce-bipartisan-landmark-legislation-to-create-regulatory-framework-for-stablecoins/

https://twitter.com/gillibrandny/status/1780567473386909881

https://www.gillibrand.senate.gov/wp-content/uploads/2024/04/LIP24254.pdf

https://www.gillibrand.senate.gov/wp-content/uploads/2024/04/LGPSA-One-Pager1.pdf