"We are not showing enough respect to Genghis Khan," Erdeniin Bat-Uul, a Mongolian politician, said as parliament started debating the law on Thursday.
Since Mongolia broke free of communist rule in 1991, the isolated Asian nation has applied the name of its favourite son to more than half a dozen brands of vodka and beer and a variety of other commercial products.
The trend reflects the immense pride Mongolians feel about a man who established an empire that stretched across Asia and all the way to central Europe in the early 13th century.
Bat-Uul said that since the prohibition on the use of Genghis Khan's name and image had been lifted after the collapse of communism, Mongolians had attached them to products and brands that brought disrepute on a revered national symbol.
"We tend to use his name more on vodka bottles," Bat-Uul said.
"If today somebody produces toilet paper with Genghis Khan's name, we do not know what to do about it as currently there is no law to regulate this issue".
Under the proposed law, only the government would be able to grant use of the name Genghis Khan for commercial purposes, and they would set a fee for its licensing.
The law would also give the Mongolian president the right to select an official Genghis Khan portrait from one of about ten currently in circulation and say which organisations were allowed to use it.
Using Genghis Khan's name or portrait in a degrading or insulting manner, or to serve the interests of political parties or non-governmental bodies, would be forbidden.
Another politician, D Arvin, said a major feature of the legislation would be to prevent foreigners from cashing in on the name for their own purposes.
"Foreigners are attempting to use the Genghis Khan name and image for their use," he said. "They are saying Genghis Khan was born in Kazakhstan or the Siberian part of Russia or Chinese Inner Mongolia and thus distorting our history".
Although Genghis Khan is portrayed as a bloodthirsty conqueror across much of the world, Mongolians see him as the father of the Mongol nation as well as a symbol of order and civilization.