Dive Brief:

• Sen. Pat Toomey, R-PA, said he doesn’t fully agree with the Biden administration’s proposal that stablecoin issuers be regulated in the same manner as banks, he told Yahoo News Thursday.
• "It is not at all obvious to me that the optimal outcome is to treat all stablecoin issuers as though they’re banks and force them to become banks," Toomey, the top Republican member of the Senate Committee on Banking, Housing and Urban Affairs, told the news outlet. "I can see an argument for that, but I can see arguments for treating stablecoin issuers very differently as well."
• Toomey’s comments follow the release of a long-awaited report on stablecoins issued Monday by the President’s Working Group on Financial Markets. The group, which received input from the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency, concluded more oversight of stablecoins is needed, and asked Congress to pass legislation that would require issuers of the digital assets to be insured depository institutions subject to the same regulations as traditional banks. 

Dive Insight:

The Senate committee is led by Chairman Sherrod Brown, D-OH, who's likely to share the views of the Democratic Biden administration. Still, in a closely divided Senate, Toomey's say carries weight.

Toomey said a strong argument could be made for pushing for more transparency and disclosure about the assets that back a stablecoin, but warned it should not come at the expense of innovation. 

"I think we have to really think long and hard before we put some onerous regulatory regime on a new technology," he said.

Under the working group’s proposal, Toomey said banks could be given an unfair advantage if they are the only entities allowed to issue digital assets. 

"That's one of the dangers–that's one of the risks that is implicit in forcing stablecoin issuers to be banks," he said. 

Toomey said he felt the document "had a feel of a report that was issued by bankers, people who have a very bank-centric mindset."

Trade associations such as the Bank Policy Institute, the Independent Community Bankers of America and the National Association of Federally-Insured Credit Unions, as well as stablecoin issuers Tether, Coinbase, Circle and the Diem Association, were among the groups and companies that provided input for the report, according to the document. 

Toomey also disputed the report’s suggestion that in the absence of congressional action, the Financial Stability Oversight Council (FSOC) should designate the digital assets as systemically risky.

"That takes us down the wrong road," he said, adding decisions regarding the oversight of stablecoins should fall on Congress, not regulators.

"That’s something that should be debated publicly in Congress," he said. "The people who are responsible to the American people are in Congress. We get elected and we get fired. Regulators play an important role, but they're not accountable to the American people, so they shouldn't be making these big, important sweeping value judgments.

"There's no question it’s very difficult to get comprehensive legislation that would create a new regulatory regime for stablecoins or something else in the crypto space," he added. "That's difficult, but I do think that's our responsibility."

Stablecoins, which are pegged to a fiat currency such as the U.S. dollar, are used to facilitate the trading of other digital assets and are designed to withstand volatility, an issue that plagues many cryptocurrencies. 

More than $130 billion worth of stablecoins are in circulation, up from $28 billion in January, The New York Times reported.