Senators Kirsten Gillibrand of New York and Cynthia Lummis of Wyoming have introduced new legislation aimed at regulating the stablecoin market. The bill, known as the Lummis-Gillibrand Payment Stablecoin Act, was reported by Bloomberg on Wednesday, April 17. It seeks to establish clear regulations for payment stablecoins, which are dollar-pegged digital assets used for transaction settlements.
Under the proposed legislation, stablecoins would not be classified as securities, but issuers would be required to manage their assets with stringent regulatory oversight. The bill stipulates that issuers must hold one-to-one cash or cash-equivalent reserves to back their stablecoins. This measure is designed to prevent issues associated with unbacked algorithmic stablecoins and to ensure that these digital assets are not used for unlawful activities such as money laundering.
The proposal also outlines that stablecoin issuers must involve a non-depository trust as a custodian, which in turn must use a depository institution as a sub-custodian. Additionally, a significant provision in the bill is the introduction of a $10 billion limit for non-depository trust institutions before they can issue payment stablecoins, aimed at ensuring responsible oversight.
Senator Gillibrand emphasized the bill’s importance in reinforcing the U.S. dollar’s global dominance and preserving the nation’s dual banking system. She noted that both senators’ offices collaborated closely with state and federal regulators to draft effective legislation.
Senator Lummis highlighted that the proposed regulations align with the evolving needs of the dynamic U.S. financial sector. If passed, this legislation could significantly impact the stablecoin industry, particularly for major issuers like Circle, which currently operates as a non-depository trust institution. The bill’s passage could usher in a new era of enhanced regulatory clarity for stablecoin operations within the United States.