The Biden Administration aims to force stablecoins into a banking wood-chipper. We have known for sometime stablecoin regulation is coming. Is it the boogeyman many think it will be? Here’s the details. Covered: Stablecoin Regulation Strategy Their Plans Does it Change Protocol Decentralization? Stablecoin Regulation Strategy An investigative report from Decrypt has drilled down the […] The post Regulation Report: Big Banks Want To Hijack Crypto Industry appeared first on CryptosRus.

Regulation Report: Big Banks Want To Hijack Crypto Industry

The Biden Administration aims to force stablecoins into a banking wood-chipper. We have known for sometime stablecoin regulation is coming. Is it the boogeyman many think it will be? Here’s the details.

Covered:

  • Stablecoin Regulation Strategy
  • Their Plans
  • Does it Change Protocol Decentralization?

Stablecoin Regulation Strategy

An investigative report from Decrypt has drilled down the motives of the Biden administrations goals for the crypto industry. The strategy is focused on stablecoins, how to rein them in, and how to graft them into the current banking system.

We have already seen regulation bearing down on us in 2021, with an infrastructure bill that sought to redefine the definition of broker; which had the potential to force KYC and other reporting requirements on everyone from hardware wallet developers, to miners, to proof-of-stake validators.

Crypto as a whole is posited as an anti-government, quasi-anarchic vehicle to obtain financial sovereignty. After all, many bitcoiners earnestly call bitcoin a non-violent revolution. All this is to say, it is no surprise that the hoody-clad devs in neon-lit Parisian cafes have always been at odds with the polished, elbow-rubbing elites of Wall Street or Capital Hill. 

The tact has changed though, since Biden came in. Decrypt claims the goal is no longer to “ban” crypto in any meaningful way, but rather co-opt it “by handing a core part of the crypto industry—stablecoins—to the big banks.” According to the article, Gary Gensler at the SEC, Janet Yellen of the Treasury, and Senator Elizabeth Warren are the trilateral commission behind the anti-crypto endeavor.

Recommended:USDC Is Killing Tether FUD

Their Plans

The claim is, more or less, to get rid of Tether and replace it with “regulator-friendly” ones like Circle and Paxos under the umbrella of the U.S. banking system.” In many ways, you could argue this has already been obvious. USDC is clearly the darling of the stablecoin stable. Case in point: in November, USDC actually proposed regulation to become an actual bank. 

To this point, in November the Biden administration proposed a new “special-purpose charter” for stablecoin issuers, putting them in the same category as banks. The CEO of USDC Jeremy Allaire is supportive of the recommendation. Considering that VISA is already settling with and using USDC, there is doubt that strict regulations will be in place.

In many ways, it was always clear that dollar coins (which is what stablecoins are) would always become tethered (pun intended) to the banking system. Every trading pair, like ETH/USDC are tied and denominated to the dollar. This is how we make trades and buy crypto. If those stablecoins go belly up, it could cause a massive calamity in the markets.

As noted by Decrypt: “trades involving stablecoins account for more than 70% of all crypto transactions on any given day.” So it makes sense that the fact that Tether, a company worth more than many banks but with as many employees as you can count on your hands and feet, raised the eyebrows of regulators and should be scrutinized to ensure “1 Tether=1 USD.”

The real problem with increased regulation, as the report notes, is that “new restrictions on stablecoins are therefore likely to create friction for traders.” More likely, is the effects of the friction will be felt more by exchanges, which will be forced to become more like the Charles Schwabs of the world. Margin trading on Kucoin with USDT likely becomes a more cumbersome process.

Does it Change Protocol Decentralization? 

Mary Beth Buchanan, a former US Attorney told Decrypt “there are many ways these banking regulators can strangle crypto if they force all these requirements from the traditional banking space into the crypto space.” The nuance is, we want decentralization at the protocol base layer, that is to say, at the consensus layer where blocks are mined or validated by nodes or miners.

What Buchanan is talking about would make user-facing dApps more burdensome via regulations and other measures, which would be undoubtedly a bad thing, but isn’t a death knell to the space. They could kneecap the industry at this level, but it doesn’t change the fact you can buy Bitcoin, have your private keys and HODL. It wouldn’t change the uncensorable monetary network that is Bitcoin or Monero.

Decrypt predicts that “it’s conceivable by year’s end that the likes of Circle and Paxos could become subsidiaries of JP Morgan and Bank of America.” Again, while this is a negative outcome, it wouldn’t harm Bitcoin per se, or any other Layer-1 who aims at hard money and decentralization. It will actually drive massive adoption, as USDC runs on protocols like Ethereum, Algorand, Avalanche and Solana. For these holders, would this not be a boon?

Dollar coins are gonna do what dollar coins do. After all, USDC has to run on Layer-1s.

So, as long as those consensus mechanisms stay decentralized, the banking graft of stablecoins won’t intrinsically change anything for the worse.

Recommended:  Brian Brooks – “Stablecoin Issuers Don’t Present All The Risks That Banking Presents”

The post Regulation Report: Big Banks Want To Hijack Crypto Industry appeared first on CryptosRus.