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Senators Lummis and Gillibrand Introduce New Legislation on Stablecoins

Key Takeaways

  • Senators Lummis and Gillibrand have proposed a bill that introduces stringent requirements for stablecoin issuers, including operational and reserve mandates;
  • It also aims to ban algorithmic stablecoins and sets a $10 billion limit for issuers before requiring them to become authorized national payment stablecoin issuers;
  • The legislation is part of the Senators' effort to integrate digital asset regulations into the US financial system, maintaining the US dollar’s dominance and ensuring consumer protection.
Senators Lummis and Gillibrand Introduce New Legislation on Stablecoins

US Senators Cynthia Lummis and Kirsten Gillibrand have introduced a legislative proposal to regulate stablecoinsdigital currencies pegged to stable assets.

The bill aims to establish clear operational guidelines for stablecoin issuers in the United States.

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The proposed legislation defines a payment stablecoin as any dollar-pegged digital asset used for payments or settlements.

Key provisions of the bill mandate stablecoin issuers to adhere to operational and reserve requirements to ensure the stability and reliability of these digital assets. This includes forming subsidiaries for issuing stablecoins and backing tokens with dollar-reserved assets.

To ensure oversight, stablecoin issuers would also need to register as non-depository trust companies with the Federal Reserve Board of Governors or become authorized national payment stablecoin issuers.

In their statements, both senators emphasized the importance of this legislation. Gillibrand highlighted that the regulatory framework is "absolutely critical to maintaining the US dollar's dominance," adding:

It protects consumers by mandating one-to-one reserves, prohibiting algorithmic stablecoins, and requiring stablecoin issuers to comply with US anti-money laundering and sanctions rules. 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.

One significant aspect of the bill is its prohibition of algorithmic stablecoins, which rely on algorithms rather than full collateral to stabilize their value.

The legislation also introduces a cap of $10 billion on assets handled by non-depository trust institutions before requiring them to convert into depository institutions. This measure aims to distinguish between smaller and larger firms that could pose systemic risks.

With this bill, the Senators continue their months of collaborative efforts to shape the regulatory framework of stablecoins.

Aaron S., Editor-In-Chief
Having completed a Master’s degree in Economics, Politics, and Cultures of the East Asia region, Aaron has written scientific papers analyzing the differences between Western and Collective forms of capitalism in the post-World War II era.
With close to a decade of experience in the FinTech industry, Aaron understands all of the biggest issues and struggles that crypto enthusiasts face. He’s a passionate analyst who is concerned with data-driven and fact-based content, as well as that which speaks to both Web3 natives and industry newcomers.
Aaron is the go-to person for everything and anything related to digital currencies. With a huge passion for blockchain & Web3 education, Aaron strives to transform the space as we know it, and make it more approachable to complete beginners.
Aaron has been quoted by multiple established outlets, and is a published author himself. Even during his free time, he enjoys researching the market trends, and looking for the next supernova.

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