Senators Gillibrand and Lummis Propose Groundbreaking Stablecoin Regulatory Framework
Summary:
US Senators Kirsten Gillibrand and Cynthia Lummis have proposed the Lummis-Gillibrand Payment Stablecoin Act, providing a new regulatory framework for payment stablecoins. The legislation addresses stablecoin issuers' regulations, mandates one-to-one reserves, and contains measures against potential illicit usage. It also dictates conditions for non-depository trust firms and modifies the existing state and federal charters framework. The proposal follows previous joint efforts by the Senators to clarify digital asset regulatory roles.
Kirsten Gillibrand and Cynthia Lummis, two US senators, have put forward new legislation to create a regulatory structure for stablecoin transactions. The Senators revealed on April 17 that they had tabled the Lummis-Gillibrand Payment Stablecoin Act, which has been in the works for several months and was anticipated to be released to the public in 2024. The proposed bill forbids 'unanchored, algorithmic stablecoins', possibly referring to TerraUSD (UST) detaching from the US dollar in 2022. It also mandates one-to-one reserves for issuers, introduces state and federal oversight systems for companies, and forestalls illicit utilization of stablecoins.
Gillibrand stated that forming a regulatory framework was key in upholding the supremacy of the US dollar, fostering accountable innovation, and safeguarding consumers while clamping down on money laundering and illicit finance. She expressed confidence in the proposed legislation following close collaboration with related state and federal agencies to craft the strongest possible bill.
As per the 179-page bill, state non-depository trust companies will be permitted to generate up to 10 billion dollars in payment stablecoins, with authorized institutions having the leeway to issue unlimited amounts under a restricted-purpose state charter. The legislation seeks to respect the current arrangement of state and federal charters and set up rules for non-depository trust companies’ custody.
In 2023, Lummis urged the Justice Department to scrutinize stablecoin issuer Tether over allegations of facilitating funds for the Hamas group after an attack on Israel. She and Gillibrand have previously collaborated on cryptocurrency-focused legislations, including one to demarcate the roles of the Securities and Exchange Commission and the Commodity Futures Trading Commission in digital asset supervision.
The legislation was introduced amidst apprehensions among legislators and industry pioneers regarding setting boundaries for stablecoin issuers in the US. The House of Representatives commenced the review of a similar bill, the Clarity for Payment Stablecoins Act, in July 2023. Despite the readiness of the bill for a full floor vote, it has been stagnating for some time now.
Reportedly, Senator Sherrod Brown, the Senate Banking Committee chair, noted the urgency of a stablecoin bill in the legislative session, as long as his apprehensions were addressed. He made no mention of Lummis’s or Gillibrand’s efforts.
Published At
4/17/2024 7:15:00 PM
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