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The stablecoin regulation law proposed to the US Congress has once again highlighted an important difference between centralized and decentralized projects in terms of regulation. (Updated at 13:22 UTC: updates in bold.)
There is a lot of discussion currently in the Cryptoverse over the recent announcement of an act seeking to regulate stablecoins in the United States. One of the main is that the act proves once again that decentralized options need to be developed more, as anything that is remotely centralized will be suppressed by heavy regulation. “This is why it is imperative to focus on * truly * decentralized, permissionless finance across the entire stack,” supported Eric Conner, product researcher at a blockchain startup Gnosis. “Any centralized points of failure will be stifled by regulations written by those who don’t understand what we are building.”
Bitcoin educator Andreas M. Antonopoulos also supported that the act will not be enacted, but what is interesting is that “it can be applied, by definition, only to centralized stablecoins backed by fiat, thus making decentralized alternatives even more attractive”.
2 / I don’t like having fewer options for my money, but OTOH there is a reason why OGs push for things like denominating value in sats instead of USD … ultimately, peggedcoins are another form of slavery for fiat and technological companies, are centralized and are therefore fair game for regs …
– _gabrielShapir0 (@lex_node) December 3, 2020
The restrictions posed by the bill
This week, US Congresswoman Rashida Tlaib, with members of Congress Jesús “Chuy” García and the Chair of the Task Force for Financial Technology Representative Stephen Lynch, introduced the so-called “Stablecoin Tethering and Bank Licensing Enforcement Act (STABLE) Act. “, also known as the” Stablecoin Classification and Regulatory Act of 2020. ”
The announcement stated that this act would “protect consumers from the risks posed by emerging digital payment tools, such as FacebookLibra and the other stablecoins currently offered on the market, regulating their issuance and related commercial activities “, which they deem particularly necessary during the COVID-19 pandemic.
However, significantly for all current and future stablecoin issuers wishing to do business in the US, they should get a bank card; obtain approval from Federal Reserve, Federal Deposit Insurance Corporation (FDIC) and an appropriate federal banking agency; provide conducting an ongoing analysis of any potential systemic risk; and obtain FDIC insurance or otherwise hold reserves with the Federal Reserve to ensure that all stablecoins can be readily converted to US dollars upon request.
But many, like Meltem Demirors, CoinSharesChief Strategy Officer, argued that the act would have the opposite effect of what the trio said they wanted to accomplish.
this has the OPPOSITE effect
cryptocurrencies LOWER the cost of service for populations that have historically been excluded from the banking sector. rising costs and compliance obligations are forcing companies to cut access to unprofitable customers.
please no more clowns 🤡 https://t.co/IbjqXJpT4F
– Meltem Demirors (@Melt_Dem) 2 December 2020
The 116th Congress will end on January 3, the deadline for the approval of this regulation.
@davidgerard @haydentiff @ stf18 @djangobits @galgitron @powers_chris @RashidaTlaib @ChuyForCongress @RepLynch My un… https://t.co/T0RmVK0MJ0
“Diem” or the Diem Association, and the new name of the Facebooksustained Libra Association, responsible for the development of the Libra stablecoin project. As reported last week, Libra is said to be launched as a single coin backed 1: 1 by USD reserves as early as January 2021.
“We are reading the 2020 Stablecoin Classification and Regulation Act. At the moment, we have no comment on its provisions or its prospects for passage in the current session of the US Congress. As more and more governments discuss public policy on stablecoins, To tie will be ready to respond and offer the benefit of its success and experience in the space to interested and appropriate parties, “said Stuart Hoegner, General Counsel of Tether, the broadcaster of the most popular stablecoin, USDT, Cryptonews.com.
Do regulations affect Bitcoin and Ethereum?
This initiative has sparked numerous other debates within the Cryptoverse on very complex issues, raising some unanswered questions. Among them, there is an undertelling that this regulation could also be relevant for Ethereum (ETH), while Bitcoin (BTC) could be off the hook.
The basis of this very complex and unsolved argument is the nodes, who executes them, what is done by choice, what they are processing, and the act would make it illegal to run the nodes, among various other layered questions. “Someone could attack Ethereum by spamming it with millions of complex transactions resulting in stablecoin deposits,” he said. Uniswap founder Hayden Adams. “Ethereum would stop.” But Rohan Gray, JSD (Doctor of Juridical Science) third year candidate at Cornell Law School, responded to those who supported this and similar positions, stating “You are taking the Ethereum network as a fixed variable and saying that it is impossible for node validators on it to know what transactions they are verifying. I am saying that running Ethereum itself is a * choice * and if that’s a problem, change the code or run a diff network. “
Nothing is regulated out of existence. The bill requires actors issuing stablecoins, i.e. deposits, to obtain a deposit license.
– Rohan Gray (@rohangrey) December 3, 2020
At the same time, Gray agreed that BTC’s properties would keep it unaffected by this regulation.
Indeed. This is a crucial distinction and note that while I have no particular love for bitcoin, this bill does not seek in any way to regulate it from existence or anything else precisely b / c it is not a systemic risk to the monetary system at the same. way as stablecoin.
– Rohan Gray (@rohangrey) December 3, 2020
The long discussion between Gray, OpenLaw CEO Aaron Wright and others were detained for the lack of a deal, with Wright warning that the US could be at a competitive disadvantage.
We will have to agree to disagree. I think it is increasingly difficult to argue that public blockchains are not the future financial infrastructure.
Trying to stop it will put the US at a competitive disadvantage and likely do more harm than good in the long run.
– Aaron Wright (@ awrigh01) December 3, 2020
But while Gray sustained that it is not uncommon for “new entrants to the financial space to deem themselves worthy of exemption from regulatory scrutiny and public liability”, there are opinions that centralized stablecoins are not innovative and perhaps need to be regulated, as some believe their issuers are slowly turning into traditional institutions anyway, but still leave the issue of decentralized stablecoins like DAI.
“The bill is extremely broad and applies to” any person “who issues any type of stablecoin or who” engages in any other way[s] in any business related to stablecoins[.]’, ” She said Jake Chervinsky, General Counsel at Compound finance. “So technically, it would require a bank card for anyone who wants to mint DAI too.”
It is a joke and represents a crazy authoritarianism of power of the universal jurisdiction of the United States.
Precisely why decentralized systems are needed and precisely what they face against.
– Andreas ☮ 🌈 ⚛ ⚖ 🌐 📡 📖 📹 🔑 🛩 (@aantonop) December 3, 2020
Other discussions to include questions about what ambiguous projects could be defined as stablecoins, could the act ultimately lead to a ban on cryptocurrencies and self the perceived harms that authorities are trying to regulate are actually “inherent in the existing financial system that cryptocurrencies are designed to replace.”
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Other discussions:
The so-called “stablecoins” are not cryptocurrencies.
They are only PayPal competitors.
Should existing regulations already be applied …?Cryptocurrencies have no suppliers.
FYI, the longest running cryptocurrency developer in the world.
– Luke Dashjr aka @[email protected] (@LukeDashjr) December 3, 2020
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The guy trying to regulate our stablecoins also wanted to print a trillion dollar coin (two of them, actually).
Imagine that you are worried about the deposit risk but also that you agree with the government that it saves itself with a trillion dollar coin. https://t.co/YSXyPzAdz5
– cyrus.ismoney.eth (@ cyounessi1) December 3, 2020
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And force them to seek overseas regulatory arbitrage, except for the few select projects that are funded … https://t.co/Qun7S98oDv
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The looming problem in the Stable Bill is the impact on DeFi / crypto protocols that facilitate traffic adjacent to the stablecoin … https://t.co/NmXEEsLmL2
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Cryptographic regulation in BASIC
10. Banks suck
20. Crypto works best
30. Banks fear competition, appeal to government regulators
40. The regulators go crazy
50. Governments regulate the parts of cryptocurrencies that look like banks
60. Crypto evolves to look less like banks
70. GOTO 10– Andreas ☮ 🌈 ⚛ ⚖ 🌐 📡 📖 📹 🔑 🛩 (@aantonop) December 3, 2020
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