Bipartisan stablecoin bill introduced by U.S. senators paves the way for U.S. FDIC insurance

The bill classifies payment stablecoins as assets owned by users rather than issuers.

According to an April 17 statement, U.S. Senators Cynthia Lummis and Kirsten Gillibrand jointly unveiled bipartisan legislation aimed at creating a clear regulatory framework for payment stablecoins.

The proposed bill, known as the Lummis-Gillibrand Payments Stablecoin Act, hopes to “protect consumers, promote innovation, and promote the dominance of the U.S. dollar while preserving a dual banking system.”

Senator Lummis said of the bill:

"This bill preserves our dual banking system and puts in place guardrails to protect consumers and prevent illegal financial activity, while ensuring we don't impede innovation."

Stablecoins like Tether’s USDT and Circle’s USDC are some of the most popular digital assets in the cryptocurrency market. These assets are increasingly being used for payments, with U.S. Treasury Department Deputy Secretary Adewale Adeyemo recently claiming that Russia is using them, especially USDT, to bypass economic sanctions.

Bill details

The bill is more targeted than previous initiatives, focusing on a framework for stablecoins to operate in the United States. Key terms include strict reserve requirements and operating guidelines for issuers.

Under the proposed legislation, the issuer must be a non-depository trust registered with the Federal Reserve Board or a depository institution licensed to issue stablecoins. At the same time, financial institutions seeking to enter the stablecoin field must establish specialized subsidiaries for this purpose.

Additionally, registered issuers must maintain full U.S. dollar backing for their stablecoins, effectively ruling out the use of algorithmic stablecoins. The bill also places a cap on the number of stablecoins issued by non-depository trust companies, limiting it to $100 billion. Above this threshold, institutions must obtain authorization from the issuer of a national payment stablecoin.

In addition, in order to establish customer confidence in the safety of funds, the bill establishes a "conservatorship" with the Federal Deposit Insurance Corporation (FDIC). The system regulates priority, claim validity, and classifies payment stablecoins as assets of the user, rather than belonging to the issuer.

Senator Gillibrand noted that the regulations “protect consumers by mandating one-to-one reserves, prohibiting algorithmic stablecoins, and requiring stablecoin issuers to comply with U.S. anti-money laundering and sanctions rules.”

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