Crypto Twitter, like the U.S. Congress, is largely divided between warring factions and in-groups. But for once it looks unified. All it took was a proposed bill to further regulate stablecoin issuers, the so-called STABLE Act.
The Stablecoin Tethering and Bank Licensing Enforcement (STABLE) Act would require stablecoin issuers – like Tether, Centre or Diem (formerly Libra) – to apply for federal banking charters, hold minimum Federal Deposit Insurance Corporation reserves and register with the Federal Reserve. They would also be required to undergo ongoing analysis of any systemic risk.
In essence, the bill is applying a key component of banking regulation to the emergent stablecoin industry. Dollar-backed stablecoins are a small fraction of global financial activity, though it is a rapidly growing sector. As of October, there were some $20 billion in various programmable dollar analogues floating around the cryptoverse.
A number of high-profile crypto commenters immediately issued public comments lambasting the proposal, introduced by Rep. Rashida Tlaib and co-sponsored by Reps. Jesús “Chuy” García and Stephen Lynch.
Circle CEO Jeremy Allaire said the bill “would represent a huge step backwards” by limiting industry innovation.
“An enormous amount of the innovation brought to the underbanked and small businesses has been driven by non-bank fintech companies, and forcing crypto, fintech and blockchain companies into the enormous regulatory burdens of Federal Reserve and FDIC regulation and supervision is inconsistent with the goals of supporting innovation in the fair and inclusive delivery of payments that comes from stablecoins,” he said in a statement emailed to CoinDesk.
For their part, Tlaib, García and Lynch see the rules as leveling the playing field and could be a key part of creating an inclusive financial ecosystem. The idea is to prevent novel financial instruments from falling into the same exclusionary traps of the banking industry.
Tlaib explained the mission statement in a tweet: “Preventing cryptocurrency providers from repeating the crimes against low- and moderate-income residents of color traditional big banks have is critically important.”
Many in crypto think the proposed law would do just the opposite: By introducing burdensome compliance costs and reifying the power of traditional banks.
The bill overlooks “two core promises of decentralized networks: the chance to put more power in the hands of individual consumers and to catalyze innovation across payments and other financial services,” Blockchain Association Executive Director Kristin Smith said in a statement.
“Cryptocurrencies LOWER the cost of servicing populations that have historically been excluded from the banking sector,” Meltem Demirors, CoinShares’ chief strategy officer, tweeted. “Raising costs and compliance obligations forces companies to cut access for unprofitable clientele.”
Despite the pushback, it might be worth wrestling with some of the ideas in the document. The STABLE Act raises questions around what exactly a deposit is, what sorts of obligations issuers have towards their users and the novel regulatory challenges around an industry just getting started. That’s to say nothing of liquidity and credit risks.
“Any entity that wants to issue something that walks and talks like money or like a deposit should be regulated like a depository institution,” Rohan Grey, an assistant professor at the Willamette University College of Law (and an adviser for the bill), told CoinDesk.
To be sure, not all stablecoin issuers are the same – and many make promises about maintaining full, or partial reserves that are difficult to scrutinize.
“What is not clear, however, is whether the word “tethering” in the legislation’s name is a pun on the largest stablecoin, tether – or USDT – which is not otherwise mentioned in the congressmembers’ press release,” Modern Consensus Editor in Chief Leo Jakobson wrote.
- EARNED RALLY? Jill Carlson: Bitcoin’s price is a poor proxy for its utility – has it earned this rally? (CoinDesk op-ed)
- ETH EXPLAINER: Ethereum is not bitcoin, and that’s a good thing. (CoinDesk)
- ETH SPLIT: Grayscale announced a 9-1 stock split for its Ethereum trust. (CoinDesk)
- BANK BACKED: Hauck & Aufhauser, a private German bank, is launching a cryptocurrency fund in January 2021. (CoinDesk)
- BITMEX CHIEF: In wake of indictments, BitMEX operator appoints former Börse Stuttgart exec as CEO. (Modern Consensus)
- CORPORATE TREASURY: Real Vision invested 10% of its cash holdings in bitcoin. (Decrypt)
- DARK YEAR: Darknet markets face headwinds and consolidation after a year of mixed results. (CoinDesk)
Looking Back, Moving Forward: Crypto’s Most Influential in 2020
Each year since 2014, CoinDesk has identified the crypto community’s “most influential” members. The community needed influencers to spread awareness, build confidence and set precedents for the digital currency industry to reach its full potential.
These evangelists broke through all the white noise and ushered in a new wave of enthusiasts into the space. To recognize their contributions, CoinDesk launched its “Most Influential” franchise to highlight individuals who moved the needle.
Over two days, Dec. 7-8, a special CoinDesk Live series looks back to the first list and takes stock of the industry’s progress, and zooms forward to reveal CoinDesks’ seventh Most Influential list to recognize the latest pioneers who helped take the industry forward.
Watch CoinDesk Live: Most Influential 2020 on CoinDesk.com, YouTube and Twitter, Dec. 7-8.
A weakening dollar bodes well for bitcoin. The U.S. 10-year breakeven inflation rate, which represents how the market foresees long-term inflation, rose to its highest levels since May 2019 on Wednesday, CoinDesk’s Omkar Godbole reports. Growing fears of inflation typically drive both institutions and retail investors into store-of-value assets. Traditionally this has been gold, but this year, people are making their hedges with bitcoin. Bitcoin’s price has nearly doubled in the past eight weeks, and this may continue, as hedging demand for the cryptocurrency may now be set to rise further.
S&P Dow Jones Indices will launch a customizable cryptocurrency indexing service in partnership with crypto tax service Lukka in 2021. In a press release announcing the product on Wednesday, Peter Roffman, global head of innovation and strategy at S&P Dow Jones Indices, noted surging institutional interest for decent crypto pricing data. “With digital assets such as cryptocurrencies becoming a rapidly emerging asset class, the time is right for independent, reliable and user-friendly benchmarks,” he said.
Switzerland-based Valour has launched what it claims is the first bitcoin exchange–traded product (ETP) without management fees. Listed on the Stockholm-based Nordic Growth Market, the Bitcoin Zero ETP brings investors exposure to bitcoin in a similar way to exchange-traded funds and shares. The ETP structure is a type of security with a value derived from other investment vehicles – such as currencies, commodities or, in this case, bitcoin – to which it is benchmarked.
Staying or going?
Ripple CEO Brad Garlinghouse appears to have walked back comments made about relocating his San Francisco-based payments firm. Six weeks ago, Garlinghouse floated the move, citing a lack of clarity about XRP’s legal status, the cryptocurrency at the heart of its payments operation, and a number of private investor lawsuits claiming said crypto is an unregistered security. Other countries, he said, had more favorable regulatory environments. Now he’s waiting to see what impact an in-coming Biden administration would mean for the startup. Ripple is reportedly eyeing an initial public offering.
Theta Labs is moving forward with its vision of democratizing content delivery with the beta release of its decentralized video streaming platform. Announced Thursday, the Theta Edgecast platform aims to reward its users while lowering cost of video content delivery by using a distributed network. Edgecast is a decentralized application (dapp) built on Theta’s peer-to-peer video blockchain technology, powered by the Theta Edge Network. According to the announcement, the network currently consists of over 2,690 nodes worldwide.
Kraken will fund open-source Ethereum development through Gitcoin. In a first for the exchange, Kraken will match up to $150,000 in donations made in Gitcoin’s “Ethereum Infrastructure Tech” category in the eighth round of Gitcoin Grants. Gitcoin maintains an Ethereum-based marketplace to connect developers and donors, crowdfund fundraising and provide opportunities for builders to generate relationships and contribute to projects – all in an attempt to advance open-source tech infrastructure.