New bipartisan legislation introduced in the Senate proposes
to establish a framework for federal and state oversight of a specific category
of digital assets, known as stablecoins. The Lummis-Gillibrand Payment
Stablecoin Act outlines guidelines to address consumer protection and financial
stability concerns raised by the growing prevalence of stablecoin issuers.
Stablecoins are a form of digital asset tethered to the value
of a traditional form of currency. Sens. Cynthia Lummis (R-Wyo.) and Kirsten
Gillibrand (D-N.Y.) crafted the bill to address issues related to stablecoin
issuance, custody and other intermediated services.
“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,” Gillibrand said in a press release. “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.”
The senators worked closely with relevant federal and state regulatory
bodies to ensure the measure would adequately address existing concerns about
stablecoins and earn support in the Senate and the House.
“In order to meet the growing demand for our ever-evolving
financial industry, we need to craft legislation that strikes the careful
balance of establishing a clear and workable framework for stablecoins while
protecting consumers,” Lummis added. “Together, Sen. Gillibrand and I
worked to preserve our dual banking system and install guardrails that protect
consumers and prevent illicit finance while ensuring we don’t derail innovation.
Passing this bipartisan solution is critical to maintaining the U.S. dollar’s
dominance and making certain the U.S. remains the world leader in financial
innovation.”
Specifically, the legislation aims to accomplish the
following:
·
Protect consumers by requiring stablecoin
issuers to maintain one-to-one reserves and prohibiting unbacked, algorithmic
stablecoins.
·
Prevent illicit or unauthorized use of
stablecoins by issuers and users.
·
Create federal and state regulatory regimes for
stablecoin issuers that preserve the dual banking system.
The legislation provides definitions for entities eligible
to issue stablecoins, as well as how Federal Deposit Insurance would apply to
stablecoin operations to enhance transparency and accountability within the
stablecoin ecosystem.
Federal Reserve Chair Jerome Powell and Treasury Secretary Janet
Yellen reportedly urged Congress to pass legislation providing a regulatory
framework for stablecoins during a closed-door session of the House Financial
Services Committee in February, the senators noted in the release.
This bill marks the second time Lummis and Gillibrand have
co-authored digital asset-related legislation. In 2022, the senators introduced
the Responsible Financial Innovation Act, and they reintroduced the measure in
2023.