U.S. Senators Kirsten Gillibrand and Cynthia Lummis have jointly introduced a new bill aimed at regulating stablecoins. This bill, developed in collaboration with the Federal Reserve and the New York State Department of Financial Services, requires stablecoin issuers to maintain reserves of cash or cash equivalents at a 1:1 ratio to support their tokens.
Furthermore, the bill includes a provision to prohibit unbacked algorithmic stablecoins. Its creators argue that both issuers and users should not be able to use stablecoins for illicit activities such as money laundering.
The bill’s objective, as outlined in the accompanying press release, is to establish a framework that fosters responsible innovation. It envisions the use of stablecoins for facilitating faster cross-border transactions, reducing fees, and unlocking the potential of the digital asset industry.
News of an alternative bill concerning stablecoins first emerged in early April 2024 as a response to a previous bill introduced in the spring of 2023. The earlier bill proposed placing issuing companies under the oversight of the Federal Reserve and implementing a temporary ban on algorithmic stablecoins.
Senator Gillibrand described her bill as a reasonable compromise since it entrusts regulatory oversight to state authorities. Following its publication, Sherrod Brown, the chair of the U.S. Senate Banking Committee, indicated his willingness to support the bill’s passage under specific conditions.
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