New legislation on stablecoins unveiled by United States senators
U.S. Senators Kirsten Gillibrand and Cynthia Lummis have introduced a bill that aims to regulate stablecoins, according to a press release. The bill was developed in collaboration with the Federal Reserve and the New York State Department of Financial Services. It requires stablecoin issuers to maintain reserves of cash or cash equivalents at a 1:1 ratio to support their tokens.
Additionally, the bill includes a prohibition on unbacked algorithmic stablecoins. The authors of the bill argue that stablecoins should not be used for illegal or unauthorized activities, such as money laundering.
The bill’s explanatory note states that its purpose is to establish a framework that promotes responsible innovation. It envisions the use of stablecoins for faster cross-border transactions, reduced fees, and unlocking the potential of the digital asset industry.
The development of an alternative bill on stablecoins was first reported in early April 2024. It was prompted by a bill introduced in the spring of 2023, which proposed that issuing companies be subject to the oversight of the Federal Reserve and that algorithmic stablecoins be temporarily banned.
Gillibrand described her bill as a reasonable compromise, as it places regulatory responsibilities in the hands of state regulators. Following its publication, Sherrod Brown, the head of the U.S. Senate Banking Committee, expressed his willingness to vote for the bill’s passage under certain conditions.
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