Securities Regulation Daily Wrap Up, BLOCKCHAIN—Senator Toomey releases draft of ‘Stablecoin TRUST Act of 2022’ for discussion, (Apr 7, 2022)
The draft proposal seeks to “provide a regulatory framework and consumer protections for the issuance of stablecoins.”
United States Senator Pat Toomey (R-Pa), Ranking Member of the Senate Banking, Housing, and Urban Affairs Committee, has released a “discussion draft” of the “Stablecoin Transparency of Reserves and Uniform Safe Transactions Act of 2022” (Stablecoin TRUST Act), which seeks to establish a new regulatory framework for payment stablecoins. In releasing his discussion draft, Toomey stated that the proposed measure would allow “crypto-innovation to continue flourishing while protecting consumers and minimizing potential risks from stablecoins to the financial system.”
The proposal aims to “provide a regulatory framework and consumer protections for the issuance of stablecoins.” According to Toomey, the Stablecoin TRUST Act authorizes three different options to issue payment stablecoins. First, the proposal “establishes a new federal license designed specifically for stablecoin issuers.” Second, it “preserves the state-registered money transmitter status for most existing stablecoin issuers.” And third, it “clarifies that insured depository institutions are permitted to issue stablecoins.”
Consumer, privacy protections. Toomey communicated that the Stablecoin TRUST Act seeks to protect 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.” These standardized requirements include: (i) disclosures pertaining to “the reserve assets backing the stablecoin;” (ii) clear redemption policies; and (iii) subjecting payment stablecoin issuers to “routine audits by registered public accounting firms.” Further, the proposed Stablecoin TRUST Act would apply privacy protections to “transactions involving stablecoins and other virtual currencies.”
Stablecoins are not securities. According to Toomey, the draft proposal provides “much-needed clarity that, at a minimum, stablecoins that do not offer interest are not securities.” Moreover, the discussion draft that sets forth the regulatory framework for payment stablecoins “rejects the Securities and Exchange Commission’s approach of regulating through enforcement actions,” Toomey’s release noted.
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