Blockchain Bites: Bitcoin’s Edge as a Hedge and Crypto’s Reaction to the STABLE Act

A destabilizing act?
Crypto Twitter, like the US Congress, is widely divided between warring factions and internal groups. But for once it seems unified. A bill was enough to further regulate issuers of stablecoins, the so-called STABLE Act.

The Stablecoin Tethering and Bank Licensing Enforcement (STABLE) law would require issuers of stablecoins – such as Tether, Center or Diem (formerly Libra) – to apply for federal bank cards, hold Federal Deposit Insurance Corporation minimum reserves, and register with the Federal Reserve. They would also be required to undergo an ongoing analysis of any systemic risk.

In essence, the bill is applying a key component of banking regulation to the emerging stablecoin industry. Dollar-backed stablecoins are a small fraction of global financial activity, although it is a fast-growing sector. As of October, there were around $ 20 billion in various programmable dollar analogs floating around the cryptoverse.

A number of high-profile cryptocurrency commentators immediately released public comments criticizing 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 back” by limiting industry innovation.

“A huge amount of innovation brought to small businesses and small businesses has been driven by non-bank fintech companies and forcing cryptocurrency, fintech and blockchain companies to bear the huge regulatory burden of Federal Reserve and FDIC regulation and oversight. it is not consistent with the goals of supporting innovation in fair and inclusive payment delivery that comes from stablecoins, “he said in a statement sent 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 new financial instruments from falling into the same exclusive traps as the banking sector.

Tlaib explained the mission statement in a tweet: “Preventing cryptocurrency providers from repeating the crimes against low- and moderate-income residents of color that large traditional banks have is critically important.”

Many in cryptocurrency think the bill would do the exact opposite: introducing onerous compliance costs and reifying the power of traditional banks.

The bill overlooks “two fundamental promises of decentralized networks: the ability to put more power in the hands of individual consumers and to catalyze innovation through payments and other financial services,” Kristin Smith, Executive Director of the company, said in a statement. Blockchain Association.

“Cryptocurrencies LOWER the cost of service to populations that have historically been excluded from the banking sector,” tweeted Meltem Demirors, CoinShares’ chief strategy officer. “Rising costs and compliance obligations are forcing companies to cut access to unprofitable customers.”

Despite the push back, some of the ideas in the document may be worth wrestling with. The STABLE Act raises questions about what exactly a deposit is, what kind of obligations issuers have towards their users, and the new regulatory challenges around an industry that’s just getting started. This is not to mention liquidity and credit risks.

“Any entity that wants to issue something that walks and talks like money or a deposit should be regulated as a depository institution,” said Rohan Gray, assistant professor at Willamette University College of Law (and consultant on the account) 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 control.

“What is unclear, however, is whether the word” tethering “in the name of the legislation is a pun on the larger stablecoin, tether – or USDT – which is not otherwise mentioned in the press release from congressmen,” Modern Consensus Editor in Chief Leo Jakobson wrote.

Looking Back, Moving Forward: Crypto’s Most Influential in 2020
Every year since 2014, CoinDesk has identified the “most influential” members of the crypto community. The community needed influencers to spread awareness, build trust, and set precedents for the digital currency industry to reach its full potential.

These evangelists broke all the white noise and ushered in a new wave of space enthusiasts. To recognize their contributions, CoinDesk launched its “Most Influential” franchise to highlight the people who moved the needle.

Over two days, December 7-8, a special CoinDesk Live series looks back at the first list and takes stock of industry progress and zooms in to reveal CoinDesks’ seventh most influential list to recognize the latest pioneers who have helped take the industry forward.

Watch CoinDesk Live: Most Influential 2020 on CoinDesk.com, YouTube and Twitter, December 7-8.

Hedge, border
A weakening of the dollar bodes well for bitcoin. The US 10-year break-even inflation rate, which represents how the market predicts long-term inflation, rose to its highest levels since May 2019 on Wednesday, according to CoinDesk’s Omkar Godbole. Rising inflation fears typically push both institutions and retail investors to invest in store-of-value assets. Traditionally this has been gold, but this year people are doing their hedging 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.

The Dow data
S&P Dow Jones Indices will launch a customizable cryptocurrency indexing service in partnership with cryptocurrency 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 a growing institutional interest in decent data on cryptocurrency prices. “With digital assets such as cryptocurrencies becoming a fast-growing asset class, the time is right for independent, reliable and easy-to-use benchmarks,” he said.

Commission-free ETFs
Valor, based in Switzerland, has launched what it claims to be the first exchange-traded product (ETP) bitcoin with no management fees. Listed on the Stockholm-based Nordic Growth Market, Bitcoin Zero ETP offers investors exposure to bitcoin in a similar way to exchange-traded funds and stocks. 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 compared.

Stay or leave?
Ripple CEO Brad Garlinghouse appears to have responded to comments made about the relocation of his San Francisco-based payment company. Six weeks ago, Garlinghouse launched the move, citing a lack of clarity about the legal status of XRP, the cryptocurrency at the center of its payment operations, and a series of private investor lawsuits claiming that the cryptocurrency is a non-stock. registered. Other countries, he said, had more favorable regulatory environments. Now he’s waiting to see what impact an upcoming Biden administration might have for starting. Ripple is reportedly looking at an initial public offering.

Decentralized streaming
Theta Labs is pursuing 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 by reducing the cost of delivering video content 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 more than 2,690 nodes around the world.

Open development
Kraken will finance the development of open source Ethereum through Gitcoin. For the first time in the exchange, Kraken will match up to $ 150,000 in donations made to Gitcoin’s “Ethereum Infrastructure Tech” category in the eighth round of Gitcoin Grants. Gitcoin maintains an Ethereum-based marketplace to connect developers and donors, raise funds via crowdfunds, and provide opportunities for builders to generate relationships and contribute to projects, all in an effort to advance the open source technology infrastructure.