Senators propose new Bill regulating stablecoins, bans algorithmic variants
The new Bill mandates 1-to-1 reserves for stablecoin issuers and involves both state and federal regulators in oversight
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On April 17, 2024, U.S. Senators Kirsten Gillibrand and Cynthia Lummis introduced the bipartisan Lummis-Gillibrand Payment Stablecoin Act, a landmark Bill that creates a regulatory framework for payment stablecoins. The legislation aims to protect consumers, enable innovation, and promote U.S. dollar dominance while preserving the dual banking system.
During the press release, Senator Lummis emphasised, “To meet the growing demand in our ever-evolving financial industry, we need legislation that strikes a careful balance, establishing a clear and workable framework for stablecoins while protecting consumers.”
The Bill allows state non-depository trust companies to issue payment stablecoins up to $10 billion, with limited-purpose state/OCC depository institutions authorised to issue any amount. This provision sets clear limits on issuance while maintaining flexibility for different types of financial institutions.
Notably, the legislation restricts the issuance of stablecoins to those backed by the U.S. Dollar and approved by US regulators, preventing algorithmic stablecoins from entering the market.
At the press release, Senator Gillibrand further stated, “The bipartisan Lummis-Gillibrand Payment Stablecoin Act preserves the dual banking system and gives both federal and state agencies roles in chartering and enforcement. It protects consumers by mandating one-to-one reserves, prohibiting algorithmic stablecoins, and requiring stablecoin issuers to comply with U.S. anti-money laundering and sanctions rules.”
