- Senators Kirsten Gillibrand (D-NY) and Cynthia Lummis (R-WY) have introduced the Lummis-Gillibrand Payment Stablecoin Act.
- This bipartisan effort preserves the dual banking system and gives both federal and state agencies roles in chartering and enforcement.
- It seeks to maintain the balance between regulatory oversight and fostering innovation within the financial sector.
In a move aimed at bolstering the regulatory oversight of stablecoins, Senators Kirsten Gillibrand (D-NY) and Cynthia Lummis (R-WY) have introduced the Lummis-Gillibrand Payment Stablecoin Act. Announced through a press release dated April 17, 2024, this bipartisan effort seeks to establish a clear framework for the operation of payment stablecoins. It emphasizes consumer protection, innovation, and the preservation of the US dollar’s global standing.
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Senator Gillibrand emphasized the critical nature of this legislation, highlighting its role in safeguarding the US dollar’s dominance, fostering responsible innovation, and combating financial crimes such as money laundering.
“The bipartisan Lummis-Gillibrand Payment Stablecoin Act preserves the dual banking system and gives both federal and state agencies roles in chartering and enforcement,” said Senator Gillibrand. “It protects consumers by mandating one-to-one reserves, prohibiting algorithmic stablecoins, and requiring stablecoin issuers to comply with US anti-money laundering and sanctions rules,” she added.
Senator Lummis echoed these sentiments, underlining the necessity of striking a balance between regulatory oversight and fostering innovation within the financial sector. “We need to craft legislation that strikes the careful balance of establishing a clear and workable framework for stablecoins while protecting consumers,” Senator Lummis stated.
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Key provisions of the Lummis-Gillibrand Payment Stablecoin Act include:
- Consumer Protection: Mandating strict capital and reserve requirements for stablecoin issuers, alongside prohibiting the issuance of unbacked or algorithmic stablecoins.
- Encouraging Innovation: Providing a comprehensive regulatory framework for dollar-backed stablecoins to facilitate responsible innovation and improve financial efficiency.
- Combatting Illicit Finance: Establishing measures to prevent unauthorized use of stablecoins for illicit purposes, aligning with global efforts to regulate digital currencies.
- Preserving the Dual Banking System: Acknowledging and maintaining states’ authority over non-depository trust companies, with federal oversight ensuring coordination and enforcement consistency.
The bill has garnered support from key figures in US financial regulation, including Federal Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen, who have advocated for congressional action to regulate stablecoins.
Senators Lummis and Gillibrand have also co-authored the Lummis-Gillibrand Responsible Financial Innovation Act, which seeks to create a comprehensive regulatory framework for crypto assets, showcasing their ongoing commitment to addressing emerging financial challenges.
As the landscape of digital finance continues to evolve, bipartisan efforts such as the Lummis-Gillibrand Payment Stablecoin Act are poised to shape the regulatory environment, promoting innovation while safeguarding consumer interests and national economic stability.
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