Senator Pat Toomey Proposes Legislation to Regulated Stablecoins

Stablecoin TRUST Act of 2022

Senator Pat Toomey has proposed legislation to regulate stablecoins. Toomey is the ranking Republican on the Senate Banking Committee.

The Senator’s legislation incorporates the key components:

Authorizes three different options to issue payment stablecoins:

    • Establishes a new federal license designed specifically for stablecoin issuers;
    • Preserves the state-registered money transmitter status for most existing stablecoin issuers; and
    • Clarifies that insured depository institutions are permitted to issue stablecoins.

Protects consumers by subjecting all payment stablecoin issuers—regardless of whether they are a state money transmitter or receiving a new federal license—to standardized requirements, including:

    • Disclosures regarding the reserve assets backing the stablecoin;
    • Clear redemption policies; and
    • Subjecting them to routine audits by registered public accounting firms.

Provides much-needed clarity that, at a minimum, stablecoins that do not offer interest are not securities.

    • Provides a clear regulatory framework for payment stablecoins and rejects the Securities and Exchange Commission’s approach of regulating through enforcement actions.

Applies privacy protections to transactions involving stablecoins and other virtual currencies.

Asked today about a dollar-based Central Bank Digital Currency (CBDC), Toomey told CNBC that the government can continue to work through that process in parallel. He also reflected on China’s lead in offering a digital yuan noting that it will be used to survail its population, adding that the RMB will not become a reserve currency anytime soon. He also expressed his opinion that private stablecoins may be a better approach for a dollar-based digital asset. Toomey’s statements appear to challenge recent comments made by SEC Chairman Gary Gensler who appears poised to label stablecoins as securities.

The draft legislation is available below.

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