Senators Lummis and Gillibrand Introduce Landmark Legislation to Regulate Stablecoins
In a groundbreaking move, United States Senators Kirsten Gillibrand and Cynthia Lummis have unveiled the Lummis-Gillibrand Payment Stablecoin Act, a comprehensive bill aimed at addressing the pressing concerns surrounding stablecoin issuance and usage.
Drafted over several months, this landmark legislation seeks to bolster the stability of the US dollar, foster responsible innovation, safeguard consumers, and combat illicit financial activities. The bill targets “unbacked, algorithmic stablecoins” and mandates one-to-one reserves for issuers, echoing the need for stability witnessed after the TerraUSD depegging incident in 2022.
The proposed legislation introduces stringent regulatory regimes at both state and federal levels, providing clear guidelines for stablecoin firms while curtailing illicit uses of these digital assets. Under the bill, state non-depository trust companies would be authorized to issue up to $10 billion in payment stablecoins, while institutions holding limited-purpose state charters would have the flexibility to issue stablecoins without predetermined limits. The legislation also emphasizes the importance of proper custody practices for issuers, particularly in light of recent developments in the cryptocurrency industry.
Gillibrand and Lummis have expressed confidence in garnering support for the bill across the Senate and the House, highlighting their collaboration with relevant federal and state agencies in its drafting. The introduction of the Lummis-Gillibrand Payment Stablecoin Act comes amidst growing concerns from lawmakers and industry leaders regarding the regulation of stablecoin issuers in the United States.
This legislation holds significant implications for companies like {Ripple}, which recently announced plans to launch its own stablecoin. Ripple’s stablecoin, designed to maintain a 1:1 peg with the U.S. dollar and be backed 100% by dollar deposits and other cash equivalents, could benefit from the regulatory clarity and certainty provided by the Payment Stablecoin Act.
As the cryptocurrency industry eagerly awaits the progress of this legislation, Ripple continues to navigate its own legal challenges, particularly its ongoing dispute with the US Securities and Exchange Commission (SEC) regarding the sale of its native digital asset, XRP.
The introduction of the Lummis-Gillibrand Payment Stablecoin Act represents a significant step forward in the regulatory landscape of the cryptocurrency market, underscoring the growing recognition of stablecoin regulation as a crucial aspect of financial oversight. With the support of lawmakers and industry leaders, this legislation has the potential to shape the future of the digital asset ecosystem and ensure the stability and integrity of the US financial system.