New stablecoin bill introduced: Sen. Lummis on why it’s needed

A new bipartisan bill has been introduced in the US Congress, aiming to create a regulatory framework for stablecoins. The bill, co-sponsored by Senator Cynthia Lummis (R-WY) and Senator Kirsten Gillibrand (D-NY), was designed to address the growing concerns around regulation of these digital assets. In an interview with Yahoo Finance's Jennifer Schonberger, Senator Lummis provides insights into the key provisions of the bill. She notes that the legislation "requires 100% asset-backed stablecoins," effectively prohibiting the use of algorithmic stablecoins. The assets backing the stablecoins can range from hard currencies to US Treasurys, but they must be "pegged to the U.S. dollar." The goal of this requirement, according to Lummis, is to protect consumers in the event of a bank failure or other financial disruption. However, she acknowledges that if a non-bank entity were to experience a failure, the bill mandates that the stablecoin backing must be held by "a separate custodian," ensuring that the funds are not used for other purposes and are "walled off" from the issuer's "non-stablecoin activities." Lummis emphasizes that this structure is designed to provide companies with "enough flexibility to innovate" while still safeguarding consumers. She notes that the "sweet spot" the bill aims to strike is one that allows for innovation in the stablecoin space while implementing safety measures to mitigate risks and protect users. By introducing this bipartisan legislation, Lummis explains the lawmakers hope to establish a clear regulatory framework for stablecoins in the United States, addressing the concerns around oversight that have arisen as the digital asset ecosystem continues to evolve. To see Yahoo Finance's explanation of stablecoins, click here. For more expert insight and the latest market action, click here to watch this full episode of Wealth! This post was written by Angel Smith