Senator Pat Toomey of Pennsylvania is proposing a different regulatory framework for stablecoins than what US President Joe Biden had previously announced.
In the bill, Toomey proposes a new license for current stablecoin issuers that would maintain their standing as legal money transmitting businesses while also allowing Federal Depository Insurance Corporation (FDIC) insured entities such as centralized banks and trust companies to issue stablecoins.
Previously, The White House announced that the Biden administration plans to regulate issuers of the dollar-pegged currencies much like they do banks, including asking them to register themselves as banks.
Stablecoins are crypto assets pegged to fiat currencies or other cryptocurrencies to reduce price volatility while trading, borrowing, and lending virtual assets.
Toomey says that stablecoins could one day be pegged to physical assets rather than just fiat or digital currencies.
As Toomey says to Yahoo Finance,
“While today stablecoins facilitate trading with cryptocurrencies, tomorrow stablecoins could be widely used in the physical economy.
They have the potential, among other things, to speed up payments and automate transactions.”
Toomey’s framework also includes provisions to protect consumers, such as forcing stablecoin issuers to comply with routine quarterly audits and disclose to traders the specific asset that is backing the stablecoin they are providing, according to Yahoo.
Furthermore, the bill would mandate that stablecoin issuers ensure privacy protections when it comes to trading digital assets, provide clear redemption policies, and explain to investors that stablecoins don’t count as securities unless they generate interest.
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