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Senator Toomey offers Stablecoin Legislation As Congress Adjourns

Payment Stablecoins:

A few weeks remained in the 117th U.S. legislative session when the soon-to-retire senator introduced the new stablecoin legislation.

In his final few weeks in office, Republican Senator Pat Toomey, who will leave the U.S. Congress at the end of the current session, introduced a new stablecoin bill to establish a legal framework for “payment stablecoins.”

The Stablecoin TRUST Act of 2022, according to Toomey, who is also the ranking member of the U.S. Banking Committee, will provide a framework for stablecoin regulation for his colleague’s senators as they strive to pass stablecoin legislation in 2023.

The senator described stablecoins as an “exciting technological development that could alter money and payments” in a statement on December 21.

“Stablecoins might be widely employed across the physical economy in a variety of ways by digitizing the U.S. dollar and making it available on a worldwide, immediate, and almost cost-free basis,” according to the study.
Obtaining a federal license created and issued by the U.S. Office of the Comptroller of the Currency (OCC) is required to issue stablecoins. The stablecoins must be backed by “high-quality liquid assets” if Congress approves the bill. Non-state and non-bank institutions would also be allowed to issue stablecoins.

Additionally, the stablecoin issuers must adhere to a new public disclosure requirement, spell out their redemption rules, and submit regular attestations from certified accounting firms.

According to the proposed legislation, stablecoin issuers would not be subject to U.S. securities laws if they do not provide interest-bearing goods or services or behave like investing or consulting firms.

Stablecoin Transparency Act:

The most notable difference between this bill and an earlier one by Toomey that was introduced into Congress in April is the statement that stablecoin holders will be the first to be reimbursed in the event of an issuer’s insolvency. Investor protection is also well integrated into the bill.

Additionally, this measure would only apply to “payment” stablecoins that the issuer can instantly convert to fiat, such as the U.S. dollar, and not to stablecoins that resemble commodities or are supported by algorithms.

Toomey expressed his hope that the most recent bill would serve as a springboard for his colleagues to produce legislation protecting customer cash “without stifling innovation” the following year.

But it’s still unclear how Toomey’s most recent stablecoin would compare to the Stablecoin Transparency Act, which fellow Republican Senator Bill Hagerty introduced on March 31.

The Stablecoin Transparency Act’s passage would classify the issuing of stablecoins as securities under U.S. securities laws, necessitating the establishment of fully collateralized security repurchase agreements. This is a significant distinction between the two.

Toomey informed his fellow senators on December 16 that he would leave office on January 3, the last day of the current congressional term.

Republican Senator Tim Scott, whose opinions on the digital asset market haven’t yet been made public, will take over for Toomey as the ranking member of the Senate Banking Committee.

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