On April 17, 2024, Republican Senator Cynthia Lummis and Democratic Senator Kirsten Gillibrand introduced the bipartisan Lummis-Gillibrand Payment Stablecoin Act, which creates a clear regulatory framework for payment stablecoins that the Senators said will protect consumers, enable innovation and promote U.S. dollar dominance while preserving the dual banking system.  Heads of both the Federal Reserve and the Treasury Department have recently called for Congress to regulate stablecoins.

The Bill provides, among other things:

(1) For depository institutions (banks) and non-banks (trust companies) with activities unrelated to stablecoins, subsidiaries must be created for the sole function of stablecoin issuance;

(2) Stablecoin issuers will be held to strict capital and reserve requirements, including holding one-to-one reserve requirements, thereby ensuring that stablecoins are fully backed by cash and cash-equivalents;

(3) U.S.-approved issuers may only issue dollar-backed stablecoins, preventing algorithmic stablecoins from entering the market; and,

(4) There will be FDIC conservatorship and resolution should a company experience insolvency.

The Senators believe that the need to pass legislation that would harmonize global rules for dollar-denominated stablecoins is urgent because other countries (e.g., Japan, Singapore, Hong Kong, UAE) are currently writing rules for the dollar.  Passing payment stablecoin legislation will also support the dollar as the medium of digital exchange.  And, according to the legislation, it will create healthy competition and a race to create compliant stablecoins among American companies including banks, payments, and financial technology companies.  In this way, malign actors will no longer have the option to use unregulated foreign stablecoins, and consumers will benefit by knowing they are using safe, compliant U.S. payment instruments.  The legislation also maintains the dual banking system (as between federal and state regulators) as it is today.

The text of the bill may be found  here.

Senators Lummis and Gillibrand are co-authors of the Lummis-Gillibrand Responsible Financial Innovation Act, aimed at creating comprehensive regulatory framework for crypto assets.


David Zaslowsky has a degree in computer science and, before going to Yale Law School, was a computer programmer. His practice focuses on international litigation and arbitration. He has been involved in cases in trial and appellate courts across the United States and before arbitral institutions around the world. Many of David’s cases, including some patent cases, have related to technology. David has been included in Chambers for his expertise in international arbitration. He is the editor of the firm's blockchain blog.