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Senators Push for Stablecoin Regulation to Protect US Dollar Dominance

New legislation by Senators Gillibrand and Lummis seeks to implement strict stablecoin regulations, enhancing U.S. financial security.

Thu, 18 Apr 2024, 09:17 am UTC

U.S. Senators Kirsten Gillibrand and Cynthia Lummis have introduced the Lummis-Gillibrand Payment Stablecoin Act. This legislation establishes stringent guidelines for stablecoin issuers to enhance consumer protection and maintain the U.S. dollar's supremacy. The bill mandates one-to-one reserves and provides comprehensive state and federal regulatory frameworks.

Gillibrand and Lummis Advocate Strong Stablecoin Regulations to Enhance U.S. Financial Security and Consumer Protection

U.S. Senators Kirsten Gillibrand and Cynthia Lummis have sponsored legislation to provide a regulatory framework for payment stablecoins.

According to Cointelegraph, the two U.S. Senators stated they had introduced the Lummis-Gillibrand Payment Stablecoin Act, a bill they had been working on for months and planned to release in 2024. According to Gillibrand and Lummis, the legislation prohibited "unbacked, algorithmic stablecoins" — a likely reference to TerraUSD (UST) de-pegging from the U.S. dollar in 2022 — required one-to-one reserves for issuers, established state and federal regulatory regimes for firms, and prohibited illicit stablecoin use.

"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," said Senator Gillibrand. "To draft the strongest bill possible, our offices worked closely with the relevant federal and state agencies and I'm confident this legislation can earn the necessary support in the Senate and the House."

The 179-page bill allows state non-depository trust corporations to issue up to $10 billion in payment stablecoins. In contrast, authorized institutions can issue stablecoins "up to any amount" under a limited-purpose state charter. The Act also attempted to maintain the current state and federal charters system and set custody regulations for non-depository trust corporations.

A one-page document explaining the bill stated, "Proper custody practices for issuers are essential, especially in light of FTX."

Senator Lummis Calls for DOJ Action Against Tether, Citing Links to Hamas Funds

In October 2023, Senator Lummis urged the Justice Department to take action against stablecoin issuer Tether for allegedly facilitating cash used by Hamas following the terrorist group's attack on Israel. She has previously collaborated with Senator Gillibrand on crypto-related legislation, including one bill that establishes a comprehensive framework outlining the roles of the Securities and Exchange Commission and the Commodity Futures Trading Commission in regulating digital assets.

Lummis and Gillibrand had been previewing the legislation despite worries from several lawmakers and industry experts about providing safeguards for stablecoin issuers in the United States. In July 2023, the House of Representatives advanced one such law, the Clarity for Payment Stablecoins Act. Although the measure appears to be ready for a full floor vote, there has been little, if any, action in months.

Senator Sherrod Brown, who chairs the Senate Banking Committee, allegedly stated on April 16 that a stablecoin bill would be one of his legislative priorities if his concerns were addressed. He did not explicitly mention Lummis or Gillibrand's efforts at the time.

Photo: MIKE STOLL/Unsplash

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