After months of anticipation, Senators Kirsten Gillibrand and Cynthia Lummis have finally introduced their comprehensive legislation to establish a federal regulatory framework for payment stablecoins in the United States. The Lummis-Gillibrand Payment Stablecoin Act aims to promote responsible innovation while cracking down on illicit finance and protecting consumers.
The 179-page bill takes a firm stance against “unbacked, algorithmic stablecoins” in the wake of the TerraUSD debacle last year. It mandates that stablecoin issuers maintain full 1:1 reserve backing and imposes robust custody requirements, citing the FTX collapse as a cautionary tale.
Under the proposed legislation, state-chartered non-depository trust companies would be permitted to issue up to $10 billion in payment stablecoins. Federal authorization would allow the issuance of any amount under a limited-purpose charter. The framework upholds the existing system of state and federal banking charters.
Senator Gillibrand expressed confidence in garnering the necessary bipartisan support, stating, “Passing a regulatory framework for stablecoins is absolutely critical to maintaining the U.S. dollar’s dominance, promoting responsible innovation, protecting consumers and cracking down on money laundering and illicit finance.”
The legislation arrives amid growing calls for stablecoin regulation from lawmakers and industry leaders. The House previously advanced the Clarity for Payment Stablecoins Act out of committee last year, though it has stalled. Senator Sherrod Brown, who chairs the influential Senate Banking Committee, identified stablecoin regulation as a key priority.
With the Lummis-Gillibrand bill now on the table, Congress appears poised to tackle the pressing issue of establishing clear rules for the rapidly expanding stablecoin market. The path forward remains uncertain, but this landmark proposal could pave the way for vital regulatory clarity in the digital asset space.
