US-Proposed Bill Could Ban Algorithmic Stablecoins In Supremacy Fight

Key Points

• Two US senators, a Republican and a Democrat, have just proposed a bill to regulate stablecoins.
• The move comes amidst a push in the House and Senate to pass the legislation starting next month.

According to the latest reports coming from Bloomberg, two US senators, Democrat Kirsten Gillibrand and Republican Cynthia Lummis, have just proposed a measure to regulate stablecoins. This move comes as there’s a push in the House and Senate to pass the legislation next month.

Lummis and Gillibrand said that this bill would offer consumers and the US dollar protection while bringing payment innovations.

Bloomberg also reported that it’s not yet clear whether the measure will satisfy Banking Chairman Sherrod Brown, who addressed tying a stablecoin bill to a broader package that would allow banks to do business with marijuana companies.

Gillibrand stated that the bill would protect consumers by “mandating one-to-one reserves, prohibiting algorithmic stablecoins, and requiring stablecoin issuers to comply with US anti-money laundering and sanctions rules.”

The bill was reportedly drafted with support from the Federal Reserve, the Treasury Department, the Federal Deposit Insurance Corporation, and New York and Wyoming regulators.

Keeping the US in global financial innovation leadership

Lummis, who is known to be a crypto advocate, said that passing the solution will be crucial to maintaining the US dollar dominance and making sure that the US remains the world leader in financial innovation.

Apart from setting rules for stablecoin issuers, the bill would also create a mechanism for PDIC conservatorship and resolution if an issuer were to become insolvent.

According to the backers of the measure, stablecoins are able to allow near-instant payments globally with lower fees compared to traditional payment networks. They also believe that regulation is required to support the US dollar’s use for digital transactions.

The bill would allow state trust companies to create and issue payment stablecoins up to $10B. However, federal and state depository institutions would be allowed to issue any amount.

The US has recently shown support and high interest in digital assets, with the SEC approving the Bitcoin ETFs at the beginning of this year. BTC ETFs saw huge success, with BlackRock leading the way via their product, IBIT.

The move was shortly followed recently by Hong Kong, which has just approved both Bitcoin and Ethereum types of ETFs, a move that brought a much-needed strong dose of optimism in the crypto industry amidst a market with high volatility two days ahead of the Bitcoin halving.