Another proposed approach to stablecoin regulation has entered the Congressional arena.
On April 6, Senator Pat Toomey (R-PN) released a draft of his Stablecoin Transparency of Reserves and Uniform Safe Transactions Act, or Stablecoin TRUST Act.
The bill as currently written focuses on a new definition, "payment stablecoin," which must be redeemable for fiat currency. Its backing must also be limited to assets "that are cash and cash equivalents or level 1 high-quality liquid assets denominated in United States dollars." The last category is slightly more expansive than the cash and 3-month T-notes that have become standard among most of the larger stablecoins, but would limit, for example, commercial paper.
Payment stablecoin issuers would then be able to operate within one of three separate licensing regimes for issuers of what it defines as "payment stablecoins." These are traditional bank charters, a new charter for payment stablecoins, and state-by-state money transmitter licenses — the latter of which is what most US crypto exchanges currently possess.
The current text would also mandate disclosure of backing, redemption policies, and regular attestations. Critically, it makes no mention of audits. It also mandates that the Securities Exchange Act read ‘‘[t]he term ‘security’ does not include a payment stablecoin," preserving stablecoins from the oversight required of, say, stocks.
Last year, Toomey put out requests for comment on stablecoin legislation and published core principles for any pending measure. It's a subject that has been at the top of the legislative priorities list since the President's Working Group released a report calling for stablecoin issuance to be limited to insured depository institutions — effectively, banks.
Important to note is that Toomey has not formally introduced the draft legislation. Instead, he is circulating it for public comment, meaning that any final version could vary drastically before a formal introduction.
"I look forward to receiving feedback on this legislation from my colleagues and stakeholders as Congress continues its work on stablecoin regulation,” he said in a statement.
Given that Toomey has said he will not run for another term, time is limited for any legislation addressing stablecoins during his tenure in the Senate.