U.S. Sen. Pat Toomey (R-PA) introduced a bill this week to establish the first federal regulatory framework for payment stablecoins.
Specifically, the bill seeks to encourage competition by authorizing several types of regulated entities to issue payment stablecoins; enhance financial stability by requiring that all payment stablecoins are fully backed by high-quality liquid assets; establish transparency by subjecting all payment stablecoin issuers to standardized disclosure requirements and attestations by registered accounting firms; provide clarity that, at a minimum, stablecoins that do not offer interest are not securities; protects consumers by clarifying that payment stablecoin holders would have priority in the event of an issuer’s insolvency; restore privacy protections to financial transactions involving stablecoins and other digital assets; preserve state-based regimes under which existing stablecoins are issued and regulated; and authorize the Office of the Comptroller of the Currency, the primary federal regulator of national banks, to establish a new federal license designed specifically for payment stablecoin issuers.
“Stablecoins are an exciting technological development that could transform money and payments. By digitizing the U.S. dollar and making it available on a global, instant, and nearly cost-free basis, stablecoins could be widely used across the physical economy in a variety of ways,” Toomey, ranking member on the Senate Banking Committee, said.
In April, Toomey proposed a discussion draft of the bill, the Stablecoin Transparency of Reserves and Uniform Safe Transactions (TRUST) Act, the first Senate bill to establish a regulatory framework for payment stablecoins. To0omey said this proposed legislation recognizes the wide range of payments innovation occurring at the state level and avoids the regulatory conflict of interest that could emerge if the Federal Reserve were to have unchecked power over stablecoins.
“I hope this framework lays the groundwork for my colleagues to pass legislation next year safeguarding customer funds without inhibiting innovation. I’ve put forward a regulatory model that won’t undermine competition by favoring entrenched incumbents—for example, by limiting payment stablecoin issuance to insured depository institutions. This bill will also ensure the Federal Reserve, which has displayed significant skepticism about stablecoins, won’t be in a position to stop this activity,” Toomey added.