Recent Stablecoin Regulation

It has been a busy month for stablecoin regulation. Two separate bills were introduced in the US Senate on the matter: one by Bill Hagerty (R-TN) and one by Pat Toomey (R-PA). Here’s a brief overview of the bills.

Hagerty’s “Stablecoin Transparency Act” is short and focused on the “fiat currency-backed stablecoin.” It calls for two requirements for a stablecoin issuer. One, it states that all backing reserves will have to consist of short-term Treasuries, fully collateralized repurchase agreements, and US dollars. (However, the bill does not state the extent of the reserve requirements, such as 100%.) Two, stablecoin issuers would have to publish monthly, audited reports on the reserves. No details are given on what the report would include.

Toomey’s “Stablecoin Transparency of Reserves and Uniform Safe Transactions (Stablecoin TRUST) Act” is far lengthier and sweeping. It starts by establishing a “National Limited Stablecoin Issuer,” which is a person or institution granted a license by the OCC to issue stablecoins. In particular, this is a “payment stablecoin.” These are fiat-backed stablecoins “designed to be widely used as a medium of exchange” and using DLT. National Limited Stablecoin Issuers, banks and money transmitters are all allowed to issue payment stablecoins.

Issuers must publicly state their stablecoin arrangements and make monthly reserve reports with regular audits filed with the US Treasury. But, overall, the OCC will be in charge of monitoring stablecoin issuance.

Required reserves are to be at least 100% of issuance and made up of cash, cash equivalents, and/or high-quality Treasuries. And, issuers will be allowed to keep their reserves with the Federal Reserve. Lastly, the act clearly states that payment stablecoins are not securities.

I support the Toomey act as it largely follows the plan I called for last year.