Two United States Senators, Kirsten Gillibrand and Cynthia Lummis, have introduced a new bill called the Lummis-Gillibrand Payment Stablecoin Act. The legislation aims to establish a regulatory framework for payment stablecoins. The senators have been working on this bill for several months and plan to make it public in 2024. The proposed legislation prohibits “unbacked, algorithmic stablecoins,” which is likely a reference to TerraUSD (UST) depegging from the US dollar in 2022. The bill also requires one-to-one reserves for stablecoin issuers, creates state and federal regulatory regimes for firms, and aims to prevent illicit uses of stablecoins.
Senator Gillibrand emphasizes the importance of passing a regulatory framework for stablecoins to maintain the dominance of the US dollar, promote responsible innovation, protect consumers, and combat money laundering and illicit finance. She believes that by working closely with relevant federal and state agencies, the bill can gain necessary support in both the Senate and the House.
According to the text of the 179-page bill, state non-depository trust companies would be allowed to issue up to $10 billion in payment stablecoins. Authorized institutions would have the ability to issue stablecoins “up to any amount” under a limited-purpose state charter. The legislation also focuses on establishing rules on custody for non-depository trust companies, highlighting the importance of proper custody practices for issuers.
Senator Lummis previously called for action against stablecoin issuer Tether in October 2023, accusing them of facilitating funds used by Hamas after the terrorist group’s attack on Israel. She has worked with Senator Gillibrand on previous crypto-focused legislation, including a bill that aimed to establish a comprehensive framework clarifying the roles of the Securities and Exchange Commission and Commodity Futures Trading Commission in regulating digital assets.
The introduction of the Lummis-Gillibrand Payment Stablecoin Act comes at a time when lawmakers and industry leaders have expressed concerns about establishing regulations for stablecoin issuers in the United States. The House of Representatives has already taken steps towards such regulation with the Clarity for Payment Stablecoins Act, which was approved by the committee in July 2023. However, there has been little progress on this bill in recent months.
Senator Sherrod Brown, the chair of the Senate Banking Committee, has stated that a stablecoin bill would be one of his goals in the legislative session, provided that his concerns are addressed. Although he did not specifically mention the efforts of Senators Lummis and Gillibrand, it indicates the growing interest and focus on stablecoin regulation in the United States.