The United States Senators Cynthia Lummis (Wyoming) and Kirsten Gillibrand (New York) have unveiled the Lummis-Gillibrand Payment Stablecoin Act, a landmark bipartisan effort that aims to provide a complete legislative framework for  stablecoins payments in the United States.

A significant step has been taken in addressing the regulatory issues raised by stablecoins’ explosive rise in the digital asset ecosystem with the proposed law. In a press conference organized by Senator Gillibrand, she said that the idea of passing a regulatory law for the stablecoin is important at this time for the continued dominance of the United States dollar. 

With this bill, issuers are compelled to convert their assets to dollars and won’t be regarded as a security. Issuers are required to also operate as a non-depository trust outfit, and formally register with the Federal Reserve Board of Governors. 

New Law to Involve Frequent Independent Third-party Audits

The proposed legislation contains important clauses requiring stablecoin issuers to keep full reserves to support their digital currencies, submit to independent third-party audits on a regular basis, and get federal regulator licenses to operate in the United States.

Strict Know-Your-Customer (KYC) and Anti-Money Laundering (AML) regulations as been recommended to stablecoin issuers in order to stop illegal activity and protect the integrity of the financial system.

These concerns have led to proposals for strict regulatory control and supervision. Legislators are concerned about the durability and robustness of stablecoin marketplaces during difficult times because of the absence of legislative clarity and control.

Analysis from the CryptoGlobe platform explained that the bipartisan endeavor spearheaded by Senators Gillibrand and Lummis is indicative of an appreciation for the significance of tackling the regulatory obstacles presented by stablecoins in order to preserve financial stability and secure the interests of consumers.

Cryptocurrency Stakeholders Praise the Proposed Legislation, Gives More Detail 

Stakeholders in the industry have praised the proposed law as a step in the right direction toward providing users and stablecoin issuers with regulatory clarity and stability. Concerns regarding the possible effects of strict regulations on competition and innovation in the stablecoin market, as well as the necessity of international cooperation on stablecoin regulation to prevent fragmentation still exist.

Policymakers, industry participants, and consumer advocates is expected to work together as the stablecoin regulation discussion continues to build a regulatory framework that strikes a balance between financial stability, competitiveness, and innovation.

The senators explained the need for both depository institutions and state trust companies’ stablecoin issuers to legally take custody of the stablecoin payment data, as well as their reserves. The bill, if successful, will require a thorough separation of customer assets from the proprietary assets of the issuer. 

More Bills Surface for Legislation, Senators Remarks Importance Stablecoins Legislation

Another bill is the preservation of a dual banking system, which allows the management of the already existing state regulatory authority over a non-depository trust firm. It will also permit state-owned trust firms and state or federal depository institutions to deal with stablecoins, thus, balancing the regulatory method that recognizes the relevance of both federal and state.

The United States senators have remarked that passing a working regulatory guide for the stablecoin is important to managing the strength of the United States dollar, promoting decent innovation, fighting money laundering and associated offenses, and safeguarding customers. 

Another bill up for deliberation is the “bipartisan Lummis-Gillibrand Payment Stablecoin Act,” which protects the dual banking model and provides the state and federal agencies with it’s required roles as regards enforcement and chartering.

The  act, which was introduced on April 17, is a response to legislators’ rising worries about the possible systemic dangers and regulatory gaps related to stablecoins—digital currencies that are linked to conventional fiat currencies like the United States dollar.

The act also protects each customer’s activities by instituting one-to-one reserves, restricting the activities of algorithmic stablecoins, and mandating issuers to obey the rules guiding the United State’s money laundering activities.