US Senate Receives Revised Stablecoin Bill

Democrat Kirsten Gillibrand of New York and Republican Cynthia Lummis of Wyoming have introduced a bill on payment stablecoins to the Senate, as reported by The Block.

The document prohibits unbacked algorithmic stablecoins and implements anti-money laundering measures.

The bill requires issuing firms to establish reserves of cash and cash equivalents in a one-to-one ratio to back the tokens.

“Establishing a regulatory framework is necessary to maintain the dominance of the US dollar, encourage responsible innovation, protect consumers, and combat […] illicit finance,” the statement reads.

The commentary mentions the use of stablecoins for rapid international transactions, reduced fees, and digital advantages for new programs and applications.

The document proposes creating regulatory regimes for issuers at both the state and national levels, preserving a two-tier banking system.

If approved, the document will empower federal and state authorities to regulate and enforce stablecoin laws.

The Lummis-Gillibrand Payment Stablecoin Act also includes provisions for the insolvency of token-issuing firms.

“For all issuers [in such cases], external management by the FDIC is established, including the order of precedence, validity of claims, and classification of payment stablecoins as client assets, not company assets,” the official release states.

In July 2023, Lummis and Gillibrand reintroduced the Lummis-Gillibrand Responsible Financial Innovation Act, aimed at creating a clearer and more comprehensive legal framework for cryptocurrencies. It was initially introduced in 2022.

In October 2023, Lummis and Representative French Hill sent a letter to the Department of Justice requesting a “thorough assessment of the extent to which Binance and Tether provide material assistance and resources to support terrorism.”