United States Senators Propose New Stablecoin Oversight Bill
Two United States Senators, Kirsten Gillibrand and Cynthia Lummis, have introduced a new bill that focuses on stablecoin oversight. The bill, known as the “Lummis-Gillibrand Payment Stablecoin Act,” aims to establish a clear regulatory framework for stablecoins while balancing consumer protection and innovation. This proposal comes in the wake of global efforts to regulate stablecoins and ensure their safety, legality, and viability within the financial system.
Reserves Requirement and Market Manipulation Prevention
- The bill mandates that stablecoin issuers maintain one-to-one reserves in cash or cash equivalents to back their tokens.
- Stablecoins not backed by reserves will be prohibited to prevent potential market manipulations and financial instability.
Ensuring Legal Compliance and Preventing Illicit Activities
The bill also aims to:
- Prohibit the use of stablecoins for illegal activities such as money laundering
- Reinforce the legal framework within which stablecoins must operate
- Benefit cross-border transactions by providing a faster and cheaper alternative
Focus on User Safety and Insolvency Protection
The bill prioritizes user safety and includes measures to protect consumers in the event of issuer insolvency. It aims to integrate stablecoin issuers into the existing dual banking system of the United States, allowing federal and state regulators to monitor stablecoin activities effectively.
Global Regulatory Trends Impacting Stablecoins
Following the collapse of the TerraUSD (UST) stablecoin, global regulators have intensified their focus on stablecoin regulation. Countries like the UK are working on legislation to regulate cryptocurrencies and stablecoins. The UK aims to enact legislation on stablecoins, staking, trading, and custody of cryptocurrencies to ensure a safe and compliant market.
EU Regulations on Stablecoins
In the EU, fiat stablecoins are considered electronic money if they represent a claim on the issuer and must comply with the existing Electronic Money Directive (EMD). The EU is set to implement additional requirements under the Markets in Crypto-assets (MiCA) regulation by July 2024, impacting stablecoin issuers in the European market.
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