Republican Senator Pat Toomey, the ranking member for the Senate Banking Committee, has drafted a bill proposing a regulatory framework for stablecoins in the United States.
According to a draft released Wednesday, the ‘Stablecoin Transparency of Reserves and Uniform Safe Transactions Act’, otherwise known as the Stablecoin TRUST Act, proposed the digital assets be identified as “payment stablecoins” — a convertible virtual currency used as a medium of exchange that can be redeemed for fiat by the issuer.
Critically, the bill proposed such offerings be exempt from securities regulations by amending existing laws to ensure the definition of “security” does not include a payment stablecoin.
The legislation also proposed that stablecoin issuers — which would include national trust banks and licensed state-chartered trusts — be licensed by the Office of the Comptroller of the Currency. The issuers would be required to back up their stablecoin reserves with assets “that are cash and cash equivalents or level 1 high-quality liquid assets denominated in United States dollars.”
Toomey said the draft bill was focused on stablecoins due to their “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.”
Related: Does a Fed digital dollar leave any room for crypto stablecoins?
U.S. lawmakers in both the House of Representatives and Senate have previously discussed how stablecoins might be integrated into the financial regulatory framework. In a December hearing on stablecoins, Toomey proposed that stablecoin issuance not be limited to insured depository institutions. North Carolina Representative Patrick McHenry proposed a state-level regulatory framework on stablecoins in lieu of a comprehensive federal law during a House hearing on digital assets in February.