Two U.S. legislators have put forth a bill aimed at regulating the utilization of stablecoins. The proposal, disclosed on Wednesday (April 17) by Senator Kirsten Gillibrand (D-N.Y.) and Senator Cynthia Lummis (R-Wyo.), mandates that stablecoin issuers uphold one-to-one reserves and prohibits the use of unbacked, algorithmic stablecoins.
Additionally, the bill seeks to criminalize any unauthorized or illicit activities involving stablecoins by both issuers and users. It also calls for the establishment of state and federal regulatory frameworks for stablecoin issuers, emphasizing the importance of maintaining “the dual banking system,” as stated in a press release by the senators.
Gillibrand emphasized the significance of enacting regulatory measures for stablecoins to preserve the dominance of the U.S. dollar, foster responsible innovation, safeguard consumers, and combat money laundering and illicit financial activities.
Dubbed the Lummis-Gillibrand Payment Stablecoin Act, the legislation also necessitates that stablecoin issuers adhere to U.S. anti-money laundering and sanctions regulations. Lummis, a proponent of the cryptocurrency sector, highlighted the need for legislation that balances the establishment of a coherent and feasible stablecoin framework while ensuring consumer protection to meet the evolving demands of the financial industry.
This initiative marks the third instance where the two senators have proposed regulations concerning cryptocurrencies since 2022. The development follows remarks by Senator Sherrod Brown (D-Ohio), a notable skeptic of cryptocurrencies, expressing willingness to support legislation governing stablecoins, provided it is part of a comprehensive package allowing banks to engage in transactions with legal cannabis vendors.
Senate Majority Leader Chuck Schumer (D-NY) expressed his intent to pass legislation safeguarding cannabis banking in the coming weeks and months, aiming to merge the “Secure and Fair Enforcement Regulation (SAFER) Banking Act,” which oversees cannabis sales, with a stablecoin regulation measure.
Despite the approval of the SAFER Banking Bill in committee last year, it still awaits full Senate approval. The Wall Street Journal reported earlier this month that although most Americans reside in states where marijuana is legalized, banks refrain from conducting business with cannabis merchants due to federal prohibition, leading to challenges for legitimate cannabis enterprises in handling their finances.
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