Two U.S. legislators introduced a proposed bill on Wednesday that aims to establish a regulatory framework for payment stablecoins. Senators Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-NY) announced the bipartisan Lummis-Gillibrand Payment Stablecoin Act, which seeks to safeguard consumers, foster innovation, and uphold the dominance of the U.S. dollar while preserving the dual banking system.
“To meet the increasing demand in our ever-evolving financial industry, it is essential that we create legislation that strikes a careful balance, providing a clear and practical framework for stablecoins while ensuring consumer protection,” the senators stated.
The bill aims to protect consumers by mandating that stablecoin issuers maintain a 1:1 reserve and prohibiting the use of unbacked algorithmic stablecoins, which rely on code-based mechanisms rather than a reserve of assets for their value.
If the bill is enacted, stablecoin issuers will be required to hold equivalent assets in reserve to guarantee that the stablecoins they issue are fully backed by cash and its equivalents. They will also only be permitted to issue stablecoins backed by the U.S. dollar.
In addition, the proposed law will prevent the illicit use of stablecoins by compelling issuers to comply with U.S. anti-money laundering and sanctions regulations, support the U.S. dollar as a medium of digital exchange, and counteract foreign endeavors to establish alternative settlement systems.
Gillibrand emphasized the importance of implementing a regulatory framework for stablecoins, stating, “Establishing a regulatory framework for stablecoins is absolutely crucial for maintaining the dominance of the U.S. dollar, encouraging responsible innovation, protecting consumers, and cracking down on money laundering and illicit finance.”
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