Sudden News from the U.S. Congress: Is USDT About to be Legally Recognized?

U.S. Senators Kirsten Gillibrand and Cynthia Lummis have introduced new legislation aimed at creating a regulatory framework for the payment of stablecoins. The USDT, a U.S. dollar stablecoin, briefly surged to $1.0024 from its peg to the U.S. dollar fiat currency on April 14 but returned to $1.00 on Thursday, April 17.

In a statement on Thursday, the two senators announced the "Lummis-Gillibrand Payment Stablecoin Act," a bill they have been drafting for months and expect to unveil in 2024. According to them, the bill will prohibit stablecoin bills that are not backed by any assets.

Senator Gillibrand stated, "A regulatory framework for stablecoins is absolutely crucial for maintaining the dominance of the dollar, fostering responsible innovation, protecting consumers, and combating money laundering and illegal finance."

She emphasized, "To draft the most robust bill possible, our office has worked closely with relevant federal and state agencies, and I believe this legislation will receive the necessary support in both the Senate and the House."

According to the 179-page bill text, non-depository trust companies will be allowed to issue up to $10 billion in payment stablecoins, and authorized institutions may issue stablecoins "in any amount" for a limited purpose under state charters.

The legislation also aims to maintain the existing system of state and federal charters and establishes custodial rules for non-depository trust companies.

CoinTelegraph, citing a document explaining the bill, stated, "It is crucial for issuers to adopt appropriate custodial practices, especially considering the bankrupt crypto exchange FTX."

In October 2023, Senator Lummis called on the Department of Justice to take action against Tether, the issuer of USDT stablecoins, for allegedly facilitating funds used by Hamas in attacks against Israel.

Previously, she had collaborated with Gillibrand on cryptocurrency-focused legislation, including a comprehensive framework bill that clarified the roles of the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) in regulating digital assets.

Many legislators and industry leaders have expressed concerns about establishing safeguards for U.S. stablecoin issuers, which Lummis and Gillibrand have continuously promoted.

In July 2023, the U.S. House of Representatives withdrew a "Payment Stablecoins Transparency Act" from committee. Despite being ready for a full vote, there has been little progress for months.

Reportedly, Sherrod Brown, the chairman of the Senate Banking Committee, stated on Thursday that the stablecoin bill would be one of his legislative priorities if his concerns were addressed.

However, he did not specifically mention the efforts of Lummis or Gillibrand at that time.

Earlier in February, U.S. Treasury Secretary Janet Yellen told legislators that Congress should address regulatory gaps in digital assets, which could pose risks to investors or the financial system.

During the Financial Stability Oversight Council's annual report hearing on February 6, House Financial Services Committee Chairman Patrick McHenry asked Yellen for her views on pending legislation to address clarity in regulation of stablecoins and the cryptocurrency sector. The Treasury Secretary deemed the regulations "crucial" for areas including wallet holder protection and oversight of stablecoin issuers.

Representative Maxine Waters revealed at the time that Democrats and Republicans were "very close" to a shared vision on stablecoins. She had been negotiating with McHenry for over 20 months, with many discussions focusing on how the Federal Reserve would regulate the stablecoin sector and whether rules regarding stablecoin issuance would be established.