Two legislators, Cynthia Lummis and Kirsten Gillibrand, have crafted a new bill regarding the regulation of stablecoins. Their aim is to establish clear guidelines for the functioning of stablecoins in the country. The bill primarily focuses on payment stablecoins, which are digital assets tied to the value of the dollar and commonly used for transactions and settlements.

Under the proposed legislation, stablecoin issuers would be subject to strict requirements, including the creation of a separate subsidiary solely for production purposes. All stablecoins would be required to be backed by dollar reserves, ensuring that each token issued is fully covered by the reserve. Issuers must also publicly disclose the assets held in reserve to build trust among users and maintain market stability.

The new rules specify that only non-depository institutions, such as the Federal Reserve or authorized deposit banks, can issue payment stablecoins. These entities must comply with federal and state regulations and maintain adequate reserves to support liquidity and stability. The bill also prohibits algorithmic stablecoins that lack collateralization at all times, aiming to mitigate risks associated with such cryptocurrencies.

Additionally, the legislation sets a limit on the issuance of payment stablecoins by non-depository commodity trusts, requiring national authorization for major financial players to reach a $10 billion threshold. The bill is part of broader efforts by U.S. lawmakers to formalize and regulate the digital currency market, with Senators Lummis and Gillibrand leading the charge.

The introduction of this bill reflects ongoing efforts to implement regulation in the digital currency space, with a focus on ensuring consumer protection and market stability. By strategically aligning the stablecoin bill with other must-pass legislation, lawmakers aim to secure its passage and establish a regulatory framework for stablecoins in the United States.