U.S. Senators Kirsten Gillibrand and Cynthia Lummis have introduced the Lummis-Gillibrand Payment Stablecoin Act, a landmark bipartisan legislation that aims to create a regulatory framework for payments stablecoins. The bill aims to protect consumers, promote responsible innovation and tackle money laundering and illegal financing.
The legislation, which senators have been working on for months, bans “unbacked, algorithmic stablecoins” and mandates one-for-one reserves for issuers. It also creates state and federal regulatory regimes for stablecoin companies and aims to prevent illegal use of stablecoins.
Senator Gillibrand emphasized the importance of adopting a regulatory framework for stablecoins to maintain the dominance of the US dollar, promote responsible innovation and protect consumers. She expressed confidence that the legislation, which was developed in close cooperation with relevant federal and state agencies, can receive the necessary support in the Senate and House of Representatives.
The bill includes provisions that would allow state-owned enterprises without deposit insurance to issue up to $10 billion in stablecoins for payments. Authorized institutions would be able to issue stablecoins “up to any amount” under a state charter with limited purposes. The legislation also highlights the need for good custody practices for stablecoin issuers, citing the recent FTX incident as an example.
This isn’t the first time Senators Lummis and Gillibrand have collaborated on crypto-focused legislation. In the past, they have worked together to introduce bills clarifying the role of regulators such as the Securities and Exchange Commission and the Commodity Futures Trading Commission in regulating digital assets.
The introduction of this stablecoin bill comes amid ongoing concerns from lawmakers and industry leaders about establishing guardrails for stablecoin issuers in the United States. While a similar bill, the Clarity for Payment Stablecoins Act, has made progress in the House of Representatives, there has not yet been significant movement. Senator Sherrod Brown, the chairman of the Senate Banking Committee, has expressed interest in tackling stablecoin regulation during the current legislative session.
The Lummis-Gillibrand Payment Stablecoin Act represents an important step toward establishing a comprehensive regulatory framework for stablecoins in the United States. As the crypto industry continues to evolve, regulatory clarity and consumer protection are becoming increasingly important.
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