United States Senators Kirsten Gillibrand and Cynthia Lummis have introduced the Lummis-Gillibrand Payment Stablecoin Act, a bill that aims to establish a regulatory framework for payment stablecoins.

The legislation seeks to address concerns about unbacked, algorithmic stablecoins and prevent illicit uses of stablecoins. It requires one-to-one reserves for issuers and creates state and federal regulatory regimes for firms. The bill also aims to uphold the current system of state and federal charters and establish rules on custody for non-depository trust companies.

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. Proper custody practices for issuers are emphasized in light of recent events, such as the FTX controversy.

Senator Lummis had previously called for action against stablecoin issuer Tether for allegedly facilitating funds used by Hamas after the terrorist group's attack on Israel. She has worked with Senator Gillibrand in introducing crypto-focused legislation in the past.

Lawmakers and industry leaders have expressed concerns about establishing regulations for stablecoin issuers in the United States. The Clarity for Payment Stablecoins Act, a similar bill, has made progress in the House of Representatives but has seen little movement recently.

Senator Sherrod Brown, chair of the Senate Banking Committee, has indicated that a stablecoin bill would be a legislative goal if his concerns are addressed. However, he did not specifically mention the efforts of Senators Lummis and Gillibrand.

The introduction of the Lummis-Gillibrand Payment Stablecoin Act reflects the increasing focus on regulating stablecoins to ensure consumer protection, combat money laundering, and promote responsible innovation.