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Senators Unveil Bipartisan Bill Outlawing Algorithmic Stablecoins

U.S. capitol

Two U.S. lawmakers have introduced legislation to govern the use of stablecoins.

The legislation, announced Wednesday (April 17) by Sen. Kirsten Gillibrand (D-N.Y.) and Sen. Cynthia Lummis (R-Wyo.) would require stablecoin issuers to maintain one-to-one reserves and ban unbacked, algorithmic stablecoins.

It would also outlaw “illicit or unauthorized” use of stablecoins by issuers and users and create state and federal regulatory regimes for stablecoin issuers that uphold “the dual banking system,” the senators said in a news release.

“Passing a regulatory framework for stablecoins is absolutely critical to maintaining the U.S. dollar’s dominance, promoting responsible innovation, protecting consumers and cracking down on money laundering and illicit finance,” said Gillibrand.

The bill — dubbed the Lummis-Gillibrand Payment Stablecoin Act — also requires stablecoin issuers to comply with U.S. anti-money laundering and sanctions rules.

“In order to meet the growing demand for our ever-evolving financial industry, we need to craft legislation that strikes the careful balance of establishing a clear and workable framework for stablecoins while protecting consumers,” added Lummis, an advocate for the crypto sector.

This marks the third time the two senators have introduced crypto regulation rules since 2022.

The news also comes one day after Sen. Sherrod Brown (D-Ohio), a noted crypto skeptic, said he was willing to advance legislation governing stablecoins, provided it was part of a package that would also allow banks to do business with sellers of legal cannabis.

Speaking to Bloomberg News, Brown also noted that any stablecoin compromise would need to address his concerns about proper crypto regulation to gain his support.

This week also saw reports that there had been talks in Congress about combining the “Secure and Fair Enforcement Regulation (SAFER) Banking Act,” which governs cannabis sales, with a stablecoin measure.

Senate Majority Leader Chuck Schumer (D-NY) has said that he hopes to pass legislation to “safeguard cannabis banking” and reach that goal in the “weeks and months ahead,” according to a report by Marijuana Moment.

The SAFER Banking Bill has been approved in committee following a vote last year, but still needs the blessing of the full Senate.

A separate report earlier this month by The Wall Street Journal noted that although a majority of Americans live in a state that has legalized marijuana, banks won’t do business with cannabis sellers because the drug is still outlawed by the federal government.

That’s led to a situation where legitimate cannabis businesses are struggling with what to do with all their cash, as the law makes it nearly impossible for them to accept payments in anything other than paper currency.