More Stablecoin Legislation: Senator Toomey Proposes The Stablecoin Trust Act

In the second bill associated with stablecoins in a week from Republicans, Senator Pat Toomey (R., PA), Ranking Member on the Senate Banking Committee,  announced a draft (PDF) of his new legislation today titled, “Stablecoin Transparency of Reserves and Uniform Safe Transactions Act of 2022,” or more succinctly, “The Stablecoin Trust Act of 2022.”

Sen. Toomey, who sits on the U.S. Senate Banking Committee, explained the what the new legislation does in a press release:

Authorizes three different options to issue payment stablecoins:

    1. Establishes a new federal license designed specifically for stablecoin issuers;
    2. Preserves the state-registered money transmitter status for most existing stablecoin issuers; and
    3. Clarifies that insured depository institutions are permitted to issue stablecoins.

Protects consumers by subjecting all payment stablecoin issuers—regardless of whether they are a state money transmitter or receiving a new federal license—to standardized requirements, including:

      1. Disclosures regarding the reserve assets backing the stablecoin;
      2. Clear redemption policies; and
      3. Subjecting them to routine audits by registered public accounting firms.

Provides much-needed clarity that, at a minimum, stablecoins that do not offer interest are not securities.

Provides a clear regulatory framework for payment stablecoins and rejects the Securities and Exchange Commission’s approach of regulating through enforcement actions.

Applies privacy protections to transactions involving stablecoins and other virtual currencies.

Last week’s bills submitted by Senator Bill Hagerty (R., TN) and Congressman Trey Hollingsworth (R., IN) seek to “establish reporting requirements for issuers of fiat currency-backed stablecoins.” Toomey’s bill appears to aim more broadly.

Senator Toomey will retire at the end of 2022 but has nevertheless been active in the digital asset legislation beginning with his “Requests Feedback on Clarifying Laws Around Cryptocurrency and Blockchain Technologies” in August 2021. In December 2021, he offered a “set of principles” for “Legislation should promote innovation in the rapidly evolving global digital economy” including stablecoins.

Tipsheet tip: Will the blockchain industry see Senator Toomey in an advocacy role in 2023 after he retires from the Senate? Toomey commands respect on both sides of the aisle and will be a young 61 in November.