Lummis and Gillibrand Put a Stablecoin Framework Before the Senate

U.S. Senators Cynthia Lummis, Republican of Wyoming, and Kirsten Gillibrand, Democrat of New York, introduced S. 4155, the Lummis-Gillibrand Payment Stablecoin Act, on April 17, 2024. The Senate record shows the bill was read twice and referred to the Committee on Banking, Housing, and Urban Affairs.

That procedural status is essential: S. 4155 was a proposal, not enacted law, and it changed no issuer’s legal obligations on April 17. Its importance lay in the specificity of a cross-party Senate framework for dollar-linked tokens that were already core settlement instruments in crypto markets.

Two regulated paths for issuers

The bill defined a payment stablecoin as a crypto asset designed for payment or settlement whose issuer must redeem it for a fixed amount of U.S. dollars, or represents that it will maintain a stable value against a fixed dollar amount. It proposed two U.S. issuance paths.

A state-chartered non-depository trust company could issue after registering with the Federal Reserve, provided its outstanding payment stablecoins did not exceed $10 billion. The threshold would be adjusted for inflation at least once every four years. A state trust issuer crossing $9 billion would have to prepare a conversion plan; after exceeding $10 billion, it would have 180 days to apply for a depository-institution charter or coordinate a plan to reduce issuance to or below the threshold. Federally or state-chartered depository institutions authorized by the Federal Reserve as national payment stablecoin issuers would face no corresponding issuance cap.

That structure attempted to preserve state chartering while making the Federal Reserve a gatekeeper. The senators said their offices received technical assistance from federal and state agencies, but that statement described consultation; it did not mean those agencies endorsed the bill.

Reserves, redemption and failure rules

S. 4155 would require reserves worth at least 100% of outstanding payment stablecoins at the end of each business day. Eligible assets included U.S. legal tender, insured-limit demand deposits, U.S. Treasury obligations maturing within 90 days, and qualifying repurchase agreements maturing within seven days. Depository issuers could also hold Federal Reserve balances.

The proposal paired those reserve rules with operational protections. Issuers would have to redeem customers at par in legal tender within one business day, publish monthly summaries of reserve assets and outstanding tokens, disclose that stablecoins were neither U.S.-government guaranteed nor covered by federal deposit or share insurance, and segregate customer property from proprietary assets. Reuse of reserves would generally be barred, subject to a narrow liquidity exception for qualifying repurchase agreements.

The bill also proposed an FDIC conservatorship and receivership regime for failed issuers. It treated customer payment stablecoins as customer property within that framework rather than as the issuer’s general assets. Those provisions addressed a crucial distinction: full-reserve rules can reduce asset risk, but they do not by themselves determine how customers are treated when an issuer fails.

A broader crypto policy vehicle

The measure went beyond reserve regulation. It would prohibit the business of issuing algorithmic payment stablecoins, treat issuers and covered service providers as financial institutions under the Bank Secrecy Act, and place contracted services under risk-management and supervisory requirements, with an exception aimed at hardware or software used for customer self-custody.

Section 14 also proposed off-balance-sheet treatment for crypto assets properly held in custody. That made S. 4155 relevant to banks and custodians beyond stablecoin issuance, because it directly addressed how custodied crypto assets would be reflected in accounting and capital calculations.

The sponsors framed the bill as consumer protection, an anti-illicit-finance measure and support for the dollar’s role in digital payments. Those were contemporaneous policy claims, not demonstrated outcomes. What the April 17 record verifies is narrower but consequential: two senators from different parties placed a detailed stablecoin chartering, reserve, redemption, supervision and resolution system into the formal legislative process. Whether the Senate committee would advance it, amend it or leave it pending remained unresolved on that date.