The Lummis-Gillibrand Payment Stablecoin Act introduces regulations for stablecoin issuers to maintain one-to-one reserves and prevent unbacked algorithmic stablecoins.
U.S. Senators Kirsten Gillibrand (D-NY) and Cynthia Lummis (R-WY) announced the introduction of the Lummis-Gillibrand Payment Stablecoin Act on April 17. The bill, which has been in the works for months, aims to set restrictions for stablecoin issuers and users.
The proposed legislation responds to concerns around the stability and security of stablecoins, particularly after the infamous depegging of TerraUSD (UST) in 2022. The bill calls for prohibiting "unbacked, algorithmic stablecoins" and mandates that issuers maintain one-to-one reserves. Additionally, it outlines state and federal regulatory regimes for companies and includes measures to prevent the "illicit or unauthorized use of stablecoins."
"Passing a regulatory framework for stablecoins is absolutely critical to maintaining the U.S. dollar's dominance, promoting responsible innovation, protecting consumers and cracking down on money laundering and illicit finance," Senator Gillibrand stated.
I'm proud to join @SenLummis to introduce the Payment Stablecoin Act.
— Sen. Kirsten Gillibrand (@gillibrandny) April 17, 2024
Passing a regulatory framework for stablecoins is critical to protecting consumers, promoting responsible innovation, and cracking down on money laundering and illicit finance. https://t.co/UP9pk0uQkt pic.twitter.com/lIqA3rwQXN
The legislation, spanning 179 pages, allows state non-depository trust companies to issue up to $10 billion in payment stablecoins. Institutions with the proper authorization can issue stablecoins "up to any amount" under a limited-purpose state charter. It also insists on upholding the existing system of state and federal charters and sets forth rules on custody for non-depository trust companies, with the document explaining the bill pointing to the importance of proper custody practices, especially in light of recent issues like the FTX collapse.
Senator Lummis has been vocal about her stance on stablecoin regulation, having previously called for action against Tether and collaborating with Senator Gillibrand on other related legislation.
The House of Representatives has also been engaged in discussions on stablecoin regulation, with the Clarity for Payment Stablecoins Act being taken out of committee in July 2023. The bill has not seen significant movement since.
Senator Sherrod Brown, Chair of the Senate Banking Committee, has indicated that stablecoin regulation is on his legislative agenda, though he did not specifically refer to the bill introduced by Senators Lummis and Gillibrand.
