US Senators Kirsten Gillibrand and Cynthia Lummis introduced a bill to regulate stablecoins.
Ph.D
- Act developed jointly with the Federal Reserve System and the New York State Department of Financial Services.
- A stablecoin must have cash reserves or the equivalent at a 1:1 ratio.
- Banning uncapped algorithmic stablecoins in the introduction.
- It calls for responsible regulation to protect consumers while encouraging innovation.
Legislation surrounding cryptocurrencies is constantly evolving. After the official announcement, the proposed law was drafted together with very serious Federal Reserve System and New York State Department of Financial Services.
Enhanced security for consumers
According to the new law, issuers of stablecoin they will now need to have 1:1 cash reserves or equivalent to secure their tokens. The text also announces ban on uncapped algorithmic stablecoinsimportant protection measures for consumers.
The authors of this project further make it clear that neither the issuer nor the users can use stablecoins for illegal or unauthorized purposes, such as money laundering, thus emphasizing the need for strict regulation.
Balancing regulation and innovation
“To meet the growing demands of our ever-evolving financial industry, we need to develop legislation that balances a clear and effective framework for stablecoins and consumer protection,” the senator said. Cynthia Lummis (R-Wyo.).
The aim of the bill is to create a framework that encourages “responsible innovation”. The legislation thus envisages the use of stablecoins for faster cross-border transactions, lower fees and unlocking the potential of the digital asset industry.
Reaction to previous law
It should be noted that the preparation of an alternative stablecoin bill was announced in April 2024 in response to another bill introduced in the spring of 2023. This older initiative envisaged the subjection of issuing companies to the Federal Reserve Government and a temporary ban on algorithmic stablecoins.
Senator Gillibrand defined his bill as a reasonable compromise because it puts responsibility for oversight in the hands of state regulators. As soon as this project was revealed, the head of the banking committee of the US Senate, Sherrod Brown, said that he was ready to vote for the approval of this text under certain conditions. The coming months determine the future of this proposal, and by extension stablecoins.