Federal Stablecoin Standards

Sharp disruptions in cryptoasset markets, and especially those for stablecoins, have energized calls for rapid U.S. statutory and regulatory action along lines initially laid out by the President’s Working Group on Financial Markets (PWG).1 The most comprehensive stablecoin legislative proposal so far is the Stablecoin TRUST Act, a discussion draft released by Senate Banking Ranking Member Toomey (R-PA). Setting the parameters for what Republicans support and thus what might pass the Senate, the draft differs in many ways from the PWG’s approach. It would allow nonbanks to offer stablecoins as mediums of exchange under OCC licenses as long as the entity holds dollar-for-dollar high quality reserves against outstanding coins and discloses both these assets and the results of quarterly reviews by an independent accountant. The prudential rules governing these nonbank issuers would be considerably less onerous than those governing insured depository institutions, which could choose to house their payment stablecoins in a separate unit under these light-touch rules or in the bank under applicable banking standards and without reserve requirements specific to stablecoin balances.