Senator Pat Toomey (R-PA) unveiled a draught of his Stablecoin Transparency of Reserves and Uniform Safe Transactions Act, also known as the Stablecoin TRUST Act, on April 6.
As drafted, the law concentrates on a new concept of “payment stablecoin,” which must be redeemable for fiat money. Its assets must also be confined to cash and cash equivalents and level 1 high-quality liquid assets denominated in US dollars.
The fourth category is a little broader than the cash and 3-month T-notes that have become typical among most of the bigger stablecoins, although it would exclude commercial paper, for example.
Toomey issues a proper framework for stablecoins
Payment stablecoin issuers would subsequently be allowed to operate under one of three different licensing regimes for “payment stablecoins” issuers.
Traditional bank charters, a new charter for payment stablecoins, and state-by-state money transmitter licenses — the latter of which is already held by the majority of US crypto exchanges.
Disclosure of backing, redemption rules, and periodical attestations would all be required under the existing legislation. It makes no mention of audits, which is a significant flaw.
It further stipulates that “the word “security” does not include a payment stablecoin,” exempting stablecoins from the regulatory monitoring needed of equities.
Toomey issued requests for feedback on stablecoin legislation last year and announced critical principles for any current legislation.
Since the President’s Working Group produced a report advocating for stablecoin issuance to be confined to insured depository institutions — basically, banks — it’s been at the top of the legislative priority list.
It’s worth noting that Toomey has not yet formally presented the bill. Instead, he’s distributing it for public discussion, which means the final version might be radically different before it’s officially released.
“As Congress continues to work on stablecoin regulation, I look forward to hearing comments on this proposal from my colleagues and stakeholders,” he said in a statement.
Stablecoins have previously been addressed by US politicians in both the House of Representatives and the Senate as a way to integrate them into the financial regulatory system.
In December, Toomey advocated that stablecoin supply not be confined to insured depository institutions at a hearing on stablecoins.
During a House hearing on digital assets in February, North Carolina Representative Patrick McHenry recommended a state-level regulatory framework for stablecoins in place of complete federal law.