A bipartisan effort led by Senators Cynthia Lummis of Wyoming and Kirsten Gillibrand of New York aims to introduce legislation regulating stablecoins.
The proposed bill, announced on Wednesday, seeks to safeguard consumers and the stability of the US dollar while fostering advancements in payment technologies. However, it’s unclear whether the legislation will satisfy Banking Chairman Sherrod Brown, who suggested in an interview on Tuesday that a stablecoin will be tied to a larger package that would allow banks to conduct business with marijuana companies and claw back compensation for executives of failed lenders.
“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,” Gillibrand said in a statement. The bill was drafted with technical assistance from the Federal Reserve, the Treasury Department, the Federal Deposit Insurance Corporation, and New York and Wyoming regulators, the senators said in the statement.
“Passing this bipartisan solution is critical to maintaining the US dollar’s dominance and making certain the US remains the world leader in financial innovation,” added Lummis, a longtime crypto advocate.
Apart from establishing regulations for stablecoin issuers, the bill introduces a framework for FDIC conservatorship
Apart from establishing regulations for stablecoin issuers, the bill introduces a framework for FDIC conservatorship and resolution in cases where an issuer faces insolvency.
Supporters contend that stablecoins have the potential to facilitate swift global transactions with reduced fees compared to conventional payment systems. They argue that regulation is essential to support the use of the dollar for digital transactions.
Under the proposed legislation, state trust companies would be permitted to produce and distribute payment stablecoins up to $10 billion, while federal or state depository institutions would have the authority to issue any quantity.
Sherrod Brown, known for his skepticism towards cryptocurrencies, has consistently advocated for comprehensive regulation to safeguard consumers. Meanwhile, fellow Democrat on the Banking Committee, Elizabeth Warren, has expressed concerns about potential risks to the financial system if stablecoin legislation fails to offer sufficient protections. Last week, House Financial Services Chairman Patrick McHenry and the committee’s leading Democrat, Maxine Waters, held discussions with Senate Majority Leader Chuck Schumer to explore avenues for advancing a stablecoin bill. One option under consideration involves incorporating it into legislation to reauthorize the FAA in the upcoming month.