Retiring Sen. Toomey introduces stablecoin regulation bill

Sen. Pat Toomey, R-Pa., has introduced a bill that would create a federal framework for stablecoins, just two weeks before he is set to retire. The Stablecoin Transparency of Reserves and Uniform Safe Transactions Act of 2022, or TRUST Act, aims to guide Congress in future cryptocurrency regulation and establish a new federal license for payment stablecoin issuers. This includes depository institutions, state-based money transmitting businesses, non-depository trust companies, and national trust banks.

In order to receive this license, payment stablecoin issuers would be required to fully back their stablecoins with "high-quality liquid assets" and adhere to new, standardized public disclosure requirements. The TRUST Act also defines key terms such as "digital asset," "payment stablecoin," "payment stablecoin issuer," and "national limited payment stablecoin issuer." Importantly, it clarifies that payment stablecoins are not securities and that issuers are not investment companies or investment advisors.

The TRUST Act includes privacy provisions, stating that private transactions that do not involve a financial institution or intermediary do not need to be reported. Toomey, who is the ranking Republican on the Senate Banking Committee and is seen as an influential figure in cryptocurrency policy, released a stablecoin discussion draft in April.

Toomey has said that the TRUST Act aims to create a regulatory model that does not "undermine competition by favoring entrenched incumbents." He believes that stablecoins could have a significant impact on the economy, allowing for the digitization of the U.S. dollar and making it available on a global, instant, and nearly cost-free basis.

House lawmakers are also reportedly drafting their own stablecoin proposal and plan to advance a stablecoin bill next year. Toomey has stated that he hopes the TRUST Act will lay the groundwork for Congress to pass legislation in the future that safeguards customer funds without inhibiting innovation.

Stablecoins, which are digital assets that are pegged to a real-world asset like a currency or commodity, have seen increasing adoption in recent years. However, there has been a lack of clear regulation surrounding them, leading to concerns about their stability and potential risks to consumers.

The introduction of the TRUST Act comes at a time when the use of cryptocurrencies and stablecoins is on the rise. The COVID-19 pandemic has accelerated the shift towards digital payments, and stablecoins offer an alternative to traditional financial systems that may be perceived as slower or less efficient. As such, it is important that there are clear guidelines in place to ensure the safety and stability of these assets.