US Senator Patrick Toomey proposes a stablecoin regulation bill

The cryptocurrency regulatory framework in the US has been shifting over the past few months. Lawmakers have introduced several bills that seek to bring regulatory clarity to the buzzing industry.

Senator Patrick Toomey has proposed a bill for the regulation of stablecoins to bring flexibility globally regarding the groups that need to be regulated.

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Senator Patrick Toomey introduced crypto regulations

Toomey released a proposal on Wednesday saying that a federal license was needed for stablecoin issuers. This license would also allow most existing stablecoin issuers to continue operating as state-registered money transmitters.

The bill further says that deposit institutions are allowed to issue stablecoins. This draft bill comes as legislatures continue discussions over the institutions permitted to issue stablecoins.

Senator Toomey’s bill further says that stablecoin issuers will have to follow a specified guideline. They should also disclose the assets backing these stablecoins. Over the years, there has been debate on whether stablecoins are fully backed by reserves.

Tether, the largest stablecoin issuer, has faced scrutiny over whether USDT is fully backed. The company has failed to disclose the details of its reserve backing, saying that it would undermine its competitive advantage.

Stablecoin regulations in the US

Lawmakers in the US have been fighting to regulate stablecoins as their usage continues to grow in the cryptocurrency sector and beyond. The undersecretary for domestic finance at the Department of Treasury, Jean Nelly Liang, appeared before the US Congress, saying that stablecoins should only be issued by depository institutions insured on a federal level.

“I don’t think it’s a good idea to apply the existing antiquated transaction reporting regime that exists in the payment system today to new technologies like stablecoins,” Toomey said. Toomey’s bill further says that stablecoins should not be classified as securities. He pointed to the US Securities and Exchange Commission (SEC), which has been classifying some tokens as securities.

US legislatures have also been divided on how to regulate stablecoins. The chair of the US Federal Reserve, Jerome Powell, has previously expressed concern over the use of stablecoins and how they pose a threat to the monetary system.