U.S. Senators Kirsten Gillibrand and Cynthia Lummis introduced a bill to regulate stablecoins.
According to a press release, the bill was developed jointly with the Federal Reserve and the New York State Department of Financial Services. Stablecoin issuers must have reserves of cash or cash equivalents at a 1:1 ratio to back their tokens.
In addition, the bill introduces a ban on unbacked algorithmic stablecoins. The bill’s authors argue that neither the issuer nor the users can use stablecoins for illegal or unauthorized purposes, such as money laundering.
“To meet the growing demand for our ever-evolving financial industry, we need to craft legislation that strikes the careful balance of establishing a clear and workable framework for stablecoins while protecting consumers.”
Senator Cynthia Lummis (R-Wyo.)
The explanatory note states that the bill aims to create a framework that encourages “responsible” innovation. The piece of legislation envisions using stablecoins for faster cross-border transactions, lower fees, and unlocking the potential of the digital asset industry.
The preparation of an alternative bill on stablecoins became known in early April 2024. It became a response to the bill presented in the spring of 2023. The latter provides for the subordination of issuing companies to the Fed and a temporary ban on algorithmic stablecoins.
Gillibrand called her bill a reasonable compromise since it puts oversight responsibilities in the hands of state regulators. After publication, the head of the U.S. Senate Banking Committee, Sherrod Brown, stated that he was ready to vote for the bill’s passage under certain conditions.
