US Senators Propose Landmark Stablecoin Regulation Bill

United States Senators Cynthia Lummis and Kirsten Gillibrand have introduced the Lummis-Gillibrand Payment Stablecoin Act, aiming to establish a regulatory framework for stablecoins. The bipartisan bill seeks to protect consumers, foster innovation, and maintain the dominance of the US dollar in the global financial landscape.

The legislation requires stablecoin issuers to maintain one-to-one reserves, prohibiting unbacked algorithmic stablecoins and ensuring compliance with anti-money laundering and sanctions rules. It establishes federal and state regulatory regimes, preserving the dual banking system and granting oversight authority to both levels of government.

With support from key financial regulators and officials, including Federal Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen, the bill addresses concerns surrounding stablecoin usage in illicit finance and proposes penalties for non-compliance.

Furthermore, the bill encourages responsible innovation by providing a clear regulatory framework for dollar-backed stablecoins, highlighting their potential for facilitating instant global payments with lower fees compared to traditional systems.

Senator Lummis, known as the “Bitcoin Senator,” has been a vocal advocate for crypto assets, emphasizing their role in modernizing the financial industry while also acknowledging the need for consumer protections and regulatory clarity.

The proposed legislation imposes strict custody requirements, mandates transparency regarding reserve assets, and outlines procedures for handling issuer insolvency, including FDIC conservatorship and resolution.

This bill follows previous efforts by Senators Lummis and Gillibrand to introduce comprehensive regulatory frameworks for crypto assets, reflecting ongoing discussions within Congress about the evolving digital economy and the role of cryptocurrencies in it.