United States Senators Kirsten Gillibrand and Cynthia Lummis have unveiled new legislation aimed at setting up a regulatory framework for the use of stablecoins. Titled the Lummis-Gillibrand Payment Stablecoin Act, the bill represents a legislative effort the senators have been working on for some time. The Act targets algorithmic stablecoins without solid backing and requires a one-for-one reserve requirement. A major objective is to deter illicit use of stablecoins while also establishing regulatory guidelines at both state and federal levels.
Senator Gillibrand emphasized the importance of setting regulations for stablecoins to retain the supremacy of the U.S. dollar, safeguard consumers, and stimulate responsible innovation. The drafting process of the bill involved various federal and state agencies to ensure it was comprehensive and robust enough to garner support within the Senate and the House.
The proposed legislation permits state non-depository trust companies to issue payment stablecoins up to a value of $10 billion. Other authorized institutions have no such limit under a state charter designed for limited purposes. One of the goals of the legislation is to maintain the current dual charter system at the state and federal level. There is also an emphasis on setting rules for the safe custody of assets by non-depository trust companies.
Senator Lummis previously voiced concern over the misuse of stablecoins, in a case involving Tether allegedly being used to fund terrorist activities by Hamas. Both Lummis and Gillibrand have spearheaded legislative efforts to provide clarity on the roles of agencies such as the Securities and Exchange Commission and the Commodity Futures Trading Commission regarding digital assets regulations.
The new legislative proposal comes amidst rising concerns among legislators and industry leaders on putting safeguards for stablecoin issuers in the United States. An earlier bill, the Clarity for Payment Stablecoins Act, was approved in committee in 2023 but has yet to be presented for a full vote on the House floor. The Senate Banking Committee, chaired by Senator Sherrod Brown, has listed a stablecoin bill as one of its legislative priorities as long as certain concerns are addressed.