U.S. Sen. Bill Hagerty (R-Tenn.), a member of the Senate Banking Committee, has released a discussion draft for legislation aimed at creating a regulatory framework for stablecoin issuers. This move seeks to clarify regulations that have been seen as obstacles to the growth of stablecoins.

Senator Hagerty emphasized the potential benefits of stablecoins in enhancing transactions and payment systems while also contributing to new demand for U.S. Treasuries. 

"Stablecoins have the potential not only to enhance transactions and payment systems, but also to help create new demand for U.S. Treasuries as we work to address our unsustainable deficit," stated Senator Hagerty. He noted that a lack of clear regulations has hindered these advantages, adding, "My draft legislation provides much-needed clarity, putting in place the legal framework necessary to unlock this technology’s full potential for the benefit of Americans."

The draft builds on prior efforts such as the Clarity for Payment Stablecoins Act introduced by House Financial Services Committee Chairman Patrick McHenry. Under Hagerty's proposal, stablecoin issuers with less than $10 billion in total issuance would be exempt from federal regulation and remain under state oversight. Issuers surpassing this threshold could apply for a waiver from their federal regulator to continue under state regulation.

Additionally, the Federal Reserve is designated as the supervisor for depository institution issuers, while the Office of the Comptroller of the Currency would oversee federally qualified nonbank issuers. These provisions aim to support innovation while ensuring consumer protection through a tailored regulatory approach.

Feedback on this discussion draft can be submitted until November 1.