Senator Bill Hagerty (R-TN) has introduced a discussion draft of new legislation aimed at providing a clear regulatory framework for stablecoin issuers. As a member of the Senate Banking Committee, Hagerty’s goal is to eliminate regulatory uncertainty and unleash the full potential of stablecoins in improving payment systems and supporting the demand for US Treasury.
In a statement, Hagerty emphasized the importance of stablecoins in enhancing transactions and payment systems, as well as their potential to create new demand for US Treasuries amidst the country’s unsustainable deficit. He highlighted that the lack of clear regulation has hindered the growth and promise of stablecoins in the US, and his proposed legislation seeks to establish the necessary framework to unlock the technology’s full potential for the benefit of Americans.
Key provisions of the draft legislation include exemptions for stablecoin issuers with less than $10 billion in total assets from federal oversight, allowing them to operate under state regulatory regimes. Issuers exceeding the $10 billion threshold may request a waiver to continue under state regulation. The legislation also mandates that stablecoin issuers maintain reserves on a one-to-one basis with the stablecoins they issue, consisting of high-quality assets like US currency, Treasury bills, or other secure financial instruments.
Furthermore, stablecoin issuers are required to disclose the composition of their reserves monthly to ensure transparency and consumer confidence in the full backing of stablecoins. The legislation also calls for the development of interoperability standards for stablecoin transactions to facilitate seamless integration with other financial systems and international payment networks.
The bill designates the Federal Reserve as the primary regulator for depository institution stablecoin issuers, while the Office of the Comptroller of the Currency (OCC) will oversee nonbank issuers. Both agencies will monitor compliance, risk management, and operational practices to uphold safety and soundness standards.
In terms of consumer protection, the legislation emphasizes the segregation of customer assets to prevent commingling with issuer assets, ensuring customer funds are protected in case of insolvency. It also prohibits the rehypothecation of customer assets held in reserve, except under controlled circumstances for liquidity needs.
Overall, the legislation aims to strike a balance between promoting stablecoin adoption and safeguarding financial stability, paving the way for the integration of digital assets into the broader financial system. It underscores the importance of cooperation between state and federal regulators, as well as reciprocal arrangements with foreign jurisdictions to facilitate international transactions. The bill sets a clear legal framework, reduces regulatory barriers, and fosters innovation within the stablecoin space.