Stablecoin legislation should be a top priority for everyone who cares about crypto policy.

But the Lummis-Gillibrand Payment Stablecoin Act draft published today is deeply flawed: it appears to ban nearly everything except a narrow band of centralized, custodial stablecoins.

This would be far worse than status quo.

I agree with your observation above. Algorithmic stablecoins would be illegal. Payment stablecoins would be allowed, but issuance by non-depository entities would require registration with the Federal Reserve and total value in circulation could not exceed $10B. USDT and USDC both exceed this.

To issue more that $10B, you would have to convert into a depository institution.  So effectively, only banks could issue more than $10B in payment stablecoins.

Final observation for now. If I am reading this right, it seems like this only applies to USD-denominated stablecoins. So an overly restrictive US regime will drive demand for stablecoins denominated in other currencies.