Law Decoded: Algorithmic Stablecoins to be Banned by Lummis-Gillibrand Bill

Legislation has been introduced by United States Senators Kirsten Gillibrand and Cynthia Lummis to establish a regulatory framework for payment stablecoins. The legislation aims to prohibit algorithmic stablecoins that are not backed by reserves, likely referring to TerraUSD (UST) depegging from the U.S. dollar in 2022. It also requires stablecoin issuers to maintain one-to-one reserves and creates federal and state regulatory regimes to preserve the dual banking system. The bill allows state non-depository trust companies to issue up to $10 billion in payment stablecoins, while authorized institutions can issue stablecoins up to any amount under a limited-purpose state charter. The legislation also addresses custody rules for non-depository trust companies and upholds the current system of state and federal charters. However, advocacy group Coin Center has expressed concerns about the bill, arguing that banning algorithmic stablecoins could violate the First Amendment as it targets code. Coin Center suggested that the Clarity for Payment Stablecoins Act, which proposes a two-year moratorium instead of an outright ban, takes a more reasonable approach to algorithmic stablecoins. In other news, Canada plans to adopt the international Crypto-Asset Reporting Framework (CARF) for taxation by 2026, ahead of 47 other countries expected to observe the standard by 2027. The CARF would introduce new reporting requirements for crypto asset service providers (CASPs), including cryptocurrency exchanges, brokers, dealers, and automated teller machine operators. CASPs would need to report transactions between crypto assets and fiat, as well as crypto asset transfers and payments exceeding $50,000. Additionally, an Arkansas Senate committee has passed two bills that may restrict cryptocurrency mining in the state. The bills address concerns such as noise reduction, foreign ownership, and the proximity of crypto mines to residential areas. The committee will continue discussions and gather public comments on the matter. Finally, Binance crypto exchange is set to return to India after a four-month ban, having paid a $2 million fine for noncompliance. Binance was the largest crypto trading platform in India before the ban. The company has also obtained a Dubai Virtual Asset Service Provider (VASP) license, with co-founder Changpeng Zhao reportedly giving up his voting power in the exchange’s local entity to meet the regulatory requirements. However, Binance’s CEO, Richard Teng, stated that Zhao giving up his voting power was merely speculation.