Stablecoin Transparency Act introduced in Congress
Senator Bill Hagerty (R-TN) has introduced a bill in the US Senate (S.3970) called the Stablecoin Transparency Act; Representative Trey Hollingsworth (R-IN) also introduced a companion bill (H.R.7328) in the House. Senator Hagerty stated, “This legislation aims to provide much-needed clarity without giving the keys away to unaccountable bureaucrats who threaten to choke off innovation.”
If passed by Congress, the Stablecoin Transparency Act would be the first congressional statute to regulate stablecoins.
Importantly, the Stablecoin Transparency Act defines a “fiat currency-backed stablecoin” as a digital asset that (1) maintains its price by backing the value of the digital asset to a nondigital currency that is denominated in the same currency as the digital asset; and (2) is redeemable on a one-to-one basis in the denominated currency backing the digital asset. The language of the statute mandates that both requirements are met to comply with the definition of fiat currency backed stablecoin. In turn, the bill defines a “stablecoin issuer” as “a person that issues a fiat currency backed stablecoin.”
The Stablecoin Transparency Act also would regulate the quality of the assets that a stablecoin issuer should have in its reserves. Specifically, the bill states in mandatory language that each stablecoin issuer shall hold all reserves associated with each fiat currency-backed stablecoin in:
- Government securities that have maturities of no longer than 12 months
- Fully collateralized security repurchase agreements or
- United States dollars or any other nondigital currency.
Finally, the Stablecoin Transparency Act would require a stablecoin issuer to publish in its website a report on its reserves that back its stablecoin. According to the bill, the stablecoin issuer shall submit its first reserve report no later than 30 days after the date of enactment of the Act and every 30 days thereafter. The bill specifically mandates that the report must be audited by a third-party auditor.
As of July 2022, the Senate Committee on Banking, Housing, and Urban Affairs and the House Committee on Financial Services have not taken significant action to approve the Stablecoin Transparency Act.