The Diminishing Prospects for a Stablecoin Legislation
Last week, U.S. Senators Cynthia Lummis (R-Wyo.) and Kirsten Gillibrand (D-N.Y.) introduced a joint bill aimed at regulating stablecoins in the United States. While this is a notable step forward in the legislative landscape, the likelihood of actual stablecoin legislation being enacted remains uncertain.
The Lummis-Gillibrand bill proposes a framework for the oversight of stablecoin issuers, outlines measures for maintaining the stability of stablecoins, and addresses consumer protection measures. However, industry participants have expressed concerns about the bill’s lack of provisions for crypto-backed tokens like DAI and its blanket ban on algorithmic stablecoins.
Additionally, the bill primarily focuses on stablecoins issued by U.S. companies and is less comprehensive in addressing foreign company-issued tokens such as Tether (USDT). While the bill states that “malign actors” will no longer have the option to use unregulated foreign stablecoins, it does not specify a mechanism to prevent this.
The fate of stablecoin legislation is further complicated by the uncertainty surrounding the treatment of stablecoins like DAI, which are issued by decentralized entities but are not algorithmic stablecoins.
Another effort to introduce stablecoin legislation is reportedly underway in the House Financial Services Committee, with Chair Patrick McHenry and Ranking Member Maxine Waters discussing the possibility of attaching a stablecoin bill to other legislation. Senate Banking Committee Chairman Sherrod Brown has also indicated potential support for a bill that addresses consumer protection and includes appropriate safeguards.
However, time is running out. Lawmakers are already in campaign mode, and the chances of dedicating attention to stablecoin legislation during this period are slim. The most probable scenario is that any progress will occur during the lame-duck session, between the election and the next Congress being sworn in. The passage of a bill would likely be dependent on being attached to must-pass legislation, such as the National Defense Authorization Act or a budget bill.
The nature and evolution of stablecoin legislation in the coming months are uncertain. While there is a possibility of a bill becoming a law by January, it is contingent on various factors, including the support of key figures like McHenry, Brown, and Schumer.