While there has been a rising demand for crypto regulation, a substantial need for a more transparent and more explicit stablecoin regulation has been laid on the lawmaker’s tables across the globe.
Recently, Republican Senator Pat Toomey, who also serves as the Ranking Member of the U.S. Banking Committee and is on the verge of retirement, used his last weeks in office to introduce a new stablecoin bill. The new bill aims at creating a regulatory framework for “payment stablecoins.”
On Wednesday, Toomey introduced a bill called the Stablecoin TRUST Act of 2022 to his fellow senators looking forward to implementing stablecoin legislation in the coming year. The bill introduced would aim to serve as a framework for stablecoin regulation in the country.
In a statement, the senator called stablecoins an “exciting technological development that could transform money and payments.” Further, he saw the long-term perspective behind the stablecoins and said:
“By digitizing the U.S. dollar and making it available on a global, instant, and nearly cost-free basis, stablecoins could be widely used across the physical economy in various ways.”
If Congress passes the proposed stablecoin bill, it will permit non-state and non-bank institutions to issue stablecoins. However, they have to obtain a federal license created and issued by the U.S. Office of the Comptroller of the Currency (OCC), and the stablecoins are backed up with “high-quality liquid assets.”
The stablecoin issuers must also comply with a new public disclosure standard, clearly outline redemption policies and provide regular attestations from authorized accounting firms.
Toomey’s proposed bill would exempt stablecoin issuers from the U.S. securities laws as long as they don’t offer interest-bearing products or services or act like an investment or advisory firm.
The bill also vividly covers investor protection, stating that in the event of an issuer’s insolvency, stablecoin holders will be the first to receive compensation. This is being seen as the most significant difference between Toomey’s recent bill and the one introduced into Congress earlier in April this year.
Sources reveal that the bill would only apply to “payment” stablecoins that can be directly converted to fiat by the issuer- such as the U.S. Dollar – not commodity-like or algorithmically-backed stablecoins.
Toomey opined that he hoped the latest bill would lay the groundwork for his colleagues to pass legislation next year that would safeguard customer funds “without inhibiting innovation.”
However, it remains unclear how Toomey’s latest legislation will stack up against the Stablecoin Transparency Act, which was introduced into Congress by fellow Republican Senator Bill Hagerty on March 31, 2022.
Reportedly, a critical difference between the two legislations is that the passing of the Stablecoin Transparency Act would categorize the issuance of stablecoins as securities under U.S. securities laws, and fully collateralized security repurchase agreements would need to be in place.
On December 16, Toomey announced his retirement at the end of the Congressional session scheduled for January 3, 2023. Replacing him is Republican senator Tim Scott, whose views on the digital asset industry haven’t been revealed yet.
Countries across the globe have been working on their stablecoin regulation. Todayq News reported in June that Japan’s parliament passed a bill that clarified the legal status of stablecoins. The bill defines stablecoins as digital money. In addition, it says stablecoins must be linked to the Yen or another legal tender.
The new law also says that holders of such coins have the right to redeem them at face value. However, another bill was introduced this month addressing the algorithmic stablecoins, which weren’t mentioned in the previous bill.