Senator Pat Toomey Introduces the TRUST Act to Regulate Stablecoins
Issuers of stablecoins will be required to publicly identify the assets behind them—whether they are cash reserves or something else.
Senator Pat Toomey (R-Pa.) published a draught of the Stablecoin Reserves Transparency and Uniform Safe Transactions Act on Wednesday.
The TRUST Act requires stablecoin issuers to follow specific standards. Additionally, the law refers to stablecoins as “payment stablecoins”—digital assets that are “directly convertible to fiat currency” and have a “stable value relative to a fiat currency or currencies” and may be “converted directly to fiat money by the issuer.” Additionally, stablecoins would not be considered securities.
Remember all the hullabaloo about Tether only being partially backed by the US dollar? Two members of Congress—Rep. Trey Hollingsworth (R-IN) in the House and Sen. Bill Hagerty (R-TN) in the upper chamber—have been…
Toomey’s bill, which may be amended before it becomes law, states that only three entities would be eligible to issue stablecoins: a money transmitting business or individual authorised by a state banking authority (or similar), a national limited payment stablecoin issuer, or an insured depository institution.
Perhaps most significantly, those creating stablecoins will be required to publicise the assets behind them—whether they are cash reserves or something else.
A stablecoin is a cryptocurrency that is supposed to be less volatile than other cryptocurrencies such as Bitcoin or Ethereum, which can experience huge price fluctuations. The notion is that such digital assets may be used to make payments. Toomey stated in a statement that stablecoins may “accelerate payments and automate transactions.”
While the most popular stablecoins are tied to the dollar, others are backed by gold, other fiat currencies, or even algorithms, and they form the backbone of the cryptocurrency economy.
When it comes to regulating the crypto sector, US politicians often make reference to stablecoins. Indeed, Decrypt revealed in January that the Biden Administration intended to restrict stablecoin issuers entirely.