Senators Lummis and Gillibrand Propose Payment Stablecoin Act of 2024
Senators Cynthia Lummis and Kirsten Gillibrand Introduce Bill to Regulate Stablecoins
In a move aimed at regulating the rapidly growing stablecoin market, Senators Cynthia Lummis and Kirsten Gillibrand have introduced a new bill that seeks to define how stablecoins will operate within the United States. The proposed legislation, known as the Lummis-Gillibrand Payment Stablecoin Act of 2024, represents a significant step towards creating a regulatory framework for stablecoins in the country.
Under the bill, payment stablecoin issuers would be required to adhere to reserve and operational requirements, including the establishment of subsidiaries dedicated to issuing stablecoins. Additionally, stablecoin issuers would only be allowed to deal in dollar-backed tokens, ensuring that the value of the stablecoins remains stable and secure.
The bill defines payment stablecoins as digital assets pegged to the U.S. dollar that are intended for use as a means of payment or settlement. Issuers would be obligated to convert the stablecoins to dollars and ensure that the assets backing the stablecoins are fully disclosed to the public. The legislation also prohibits the use of algorithmic stablecoins, which are often undercollateralized and pose a higher risk to investors.
One of the key provisions of the bill is the establishment of a $10 billion limit for non-depository trust institutions to issue payment stablecoins. Once an issuer surpasses this threshold, they must become an authorized national payment stablecoin issuer, typically a depository institution. This provision aims to differentiate between smaller community banks and larger financial institutions with potential systemic risk.
Stablecoin legislation has long been viewed as a crucial step towards regulating the crypto market in the U.S. While progress has been slow, Senators Lummis and Gillibrand’s bill represents a significant milestone in the effort to create a regulatory framework for stablecoins. With the support of key lawmakers and regulators, the bill has the potential to shape the future of the stablecoin market in the United States.
