Top US Lawmaker Proposes Sweeping Stablecoin Regulation Framework

The Stablecoin TRUST Act would give stablecoin issuers a variety of regulatory regimes to abide by, but enforce disclosure and redemption requirements.

AccessTimeIconApr 6, 2022 at 7:00 p.m. UTC
Updated May 11, 2023 at 3:42 p.m. UTC

A leading member of the Senate Banking Committee introduced a bill Wednesday to create a three-pronged regulatory framework for stablecoin issuers in the U.S.

Sen. Patrick Toomey (R-Pa.), the ranking member of the committee, announced the "Stablecoin Transparency of Reserves and Uniform Safe Transactions Act of 2022," dubbed the Stablecoin TRUST Act for short, as part of an effort to specify how the U.S.'s different regulatory agencies could approach companies issuing cryptocurrencies whose prices are pegged to the U.S. dollar or other assets.

As written, the discussion draft of the bill would define a "payment stablecoin," authorize the Office of the Comptroller of the Currency (OCC) to create a new license specific to stablecoin issuers, allow insured depository banks to issue payment stablecoins and address state regulatory oversight of this segment of the crypto industry.

"Payment stablecoins" would include stablecoins issued by a centralized entity, are pegged to and can be converted to a fiat currency (or currencies), are "designed to be widely used as a medium of exchange," do not confer interest and where transactions are recorded on a "public distributed ledger."

Stablecoin issuers would have to choose between securing the OCC license, a state money transmitter or similar license or a traditional bank charter. These companies would be subject to a disclosure regime that would require them to secure regular attestations, detail redemption policies and specify what actually backs the stablecoins they issue.

OCC-licensed issuers would also have access to the Federal Reserve's master account system, which would give them the ability to tap the broader financial system and larger amounts of liquidity in transacting.

In remarks introducing the bill, Toomey said the bill would clarify that payment stablecoins are not securities.

"I think there's a growing awareness that this category is not going away," Toomey said.

Open questions

Lawmakers in the U.S. and around the world have closely scrutinized stablecoins since social media giant Facebook introduced the short-lived Libra (later Diem) project in 2019.

The House of Representatives Financial Services Committee held a hearing earlier this year focused on the issue specifically, based on a President's Working Group on Financial Markets report addressing stablecoins from 2021.

Last month, Sen. Bill Hagerty (R-Tenn.) and Rep. Trey Hollingsworth (R-Ind.) introduced a bill of their own aimed at forcing stablecoin issuers to provide further transparency about the reserves backing their circulating tokens.

On Wednesday, Toomey said he focused on his "payment stablecoin" term as algorithmic stablecoins (and seemingly decentralized stablecoins at large) may behave differently from the cryptocurrencies his bill addresses.

The discussion draft of a bill is meant to circulate and garner feedback, rather than be immediately introduced as possible legislation. Toomey, whose term ends at the end of the year, has announced he will not seek re-election, meaning he has roughly eight months to chart a path forward for the proposal if it is not passed by Congress by 2023.

In a statement, Toomey noted that stablecoins are currently mainly used for cryptocurrency trades, but suggested they could be used in the broader economy in future.

"They have the potential, among other things, to speed up payments and automate transactions. The proposed regulatory framework I’m releasing today will allow this crypto innovation to continue flourishing while protecting consumers and minimizing potential risks from stablecoins to the financial system. I look forward to receiving feedback on this legislation from my colleagues and stakeholders as Congress continues its work on stablecoin regulation," he said.

UPDATE (April 6, 2022, 20:55 UTC): Adds additional information.


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Nikhilesh De

Nikhilesh De is CoinDesk's managing editor for global policy and regulation. He owns marginal amounts of bitcoin and ether.