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Pat Toomey – a crypto-supportive Republican senator – recently spoke at a congressional hearing discussing stablecoins and their risks. He proposed that stablecoin issuers should operate under three different regulatory models – including under bank charter. This comes following the stablecoin report’s release last month, which recommended that chartered banks only issue them.
Three Models For Stablecoin Issuers
On Tuesday, the hearing titled “Stablecoins: How Do They Work, How Are They Used, and What Are Their Risks?” happened. While there, Toomey detailed a blueprint whereby issuers could register either under a bank charter or a special-purpose stablecoin charter. Another option was to register as a state-level money transmitter and federal level money services business.
The senator added that non-interest-bearing stablecoins shouldn’t have the securities label.
“The legislation should address consumer protection and financial system risks, but it should also be designed to promote innovation in the rapidly evolving global digital economy,” said Toomey.
The senator has been on the side of the crypto community, defending it from irresponsible overregulation and unclear government expectations. In September, he issued a letter directly to SEC chairman Gary Gensler with several questions on behalf of the industry.
Recently, industry members had the chance to speak with congress at a hearing on crypto’s risks and benefits. These included BitFury CEO Brian Brooks, who called out the senselessness in only allowing chartered banks to issue stablecoins. He said they should at least enable existing issuers to register under such a bank charter.
The Growing Partisan Divide
As the U.S. continues to discuss and debate relevant crypto regulation, a clear partisan divide is forming on the issue. While Republicans generally favor leaving the industry to flourish on its terms, Democrats are far more hawkish. The latter thrives on investor protection concerns and fears of threats to the financial system.
During the stablecoin hearing, Democrat senator Sherrod Brown stated that stablecoins offer no money-back guarantee.
“Let’s be clear about one thing: if you put your money in stablecoins, there’s no guarantee you’re going to get it back… and if there’s no guarantee you’ll get your money back, that’s not a currency with a fixed value–it’s gambling,” he said.
Stablecoins are digital assets with a pegged value to fiat currency. This makes them more suitable as a medium of exchange than typical cryptos. Yet regulators – especially Democrats – have other concerns about them, like their potential to harm the integrity of US markets. Furthermore, rumors are abundant about whether the world’s most popular stablecoin “Tether” is fully backed.