On April 17, the two pro-crypto Senators introduced the Lummis-Gillibrand Payment Stablecoin Act.
The bill “solves key policy challenges that have lingered around previous proposals and provides prudential regulation and added consumer protections to stablecoin issuers,” said Lummis, who added, “But above all, it allows innovation to prosper.”
The Senators have been drafting the bill for months as customer protections and proper custody practices for issuers came into focus following the fallout of the FTX collapse.
The bill authorizes state non-depository trust companies to issue payment stablecoins up to $10 billion, explained Senator Lummis.
She added that the bipartisan legislation maintains the dual banking system “that is critical to preserving the parity enjoyed by the state and federal financial institutions and establishes guardrails for existing issuers.”
In essence, the legislation protects consumers by requiring stablecoin issuers to maintain 1:1 reserves and prohibiting unbacked, algorithmic stablecoins. Additionally, it aims to prevent illicit or unauthorized use of stablecoins by issuers and users.
In addition to the stablecoin framework, Senators Lummis and Gillibrand are also co-authors of the Responsible Financial Innovation Act, legislation that would create a comprehensive regulatory framework for crypto assets.
This bill also aims to clarify the roles of the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) in regulating digital assets, favoring the latter as digital assets have not been designated as securities.
Meanwhile, United States Senator Elizabeth Warren sent a letter to Treasury Secretary Janet Yellen this week regarding tighter controls for stablecoins.
Warren expressed support for legislative adoption of more comprehensive anti-money laundering and counter-terrorism financing measures for stablecoins but did not directly reference the Lummis-Gillibrand bill.
“Those authorities must be adopted into any legislation Congress advances to create a new regulatory framework around the $157 billion stablecoin market,” she said before reiterating her anti-crypto rhetoric.
“Folding stablecoins deeper into the banking system will supercharge trading in the crypto market, exploding the opportunities for terrorists and other bad actors to exploit those financing channels to both evade sanctions and receive a limitless stream of untraceable income.”
A Digital Chamber policy associate commented that Warren conveniently left out key consumer protection and enforcement aspects of the Lummis-Gillibrand bill from her talking points.