Showing posts with label cryptocurrency regulations. Show all posts
Showing posts with label cryptocurrency regulations. Show all posts

President Biden's Financial Market Advisors Issue Report on Stablecoins - Here's What To Expect Next...


Stablecoin Regulations

As expected, the President's Working Group on Financial Markets (PWG) has released its report on stablecoins. According to the report, which is available here and below, if stablecoins are properly regulated, they could emerge as a more efficient and "inclusive" payment option. Simultaneously, stablecoins and stablecoin-related activities “present a variety of risks.”

The FDIC and the Comptroller of the Currency collaborated with the PWG to create the report.

These risks, according to the PWG Stablecoin report, include market integrity and investor protection against fraud and misconduct in digital asset trading, including market manipulation, insider trading, and front running, as well as a lack of trading or price transparency.

Furthermore, stablecoins may raise illicit finance concerns and risks to financial integrity, such as anti-money laundering (AML) and counter-terrorism financing (CFT), as well as prudential concerns such as a run on stablecoin assets when questions about redemptions arise.

According to the PWG, digital asset regulations are the responsibility of the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), and these two agencies "have broad enforcement, rulemaking, and oversight authorities that may address certain of these concerns." According to the report, stablecoins or parts of stablecoin arrangements may be securities, commodities, or derivatives depending on the structure.

The PWG requests that Congress pass legislation requiring "stablecoin issuers to be insured depository institutions, subject to appropriate supervision and regulation at both the depository institution and the holding company level."

According to the proposed legislation, "custodial wallet providers should be subject to appropriate federal oversight."

Congress should also give a stablecoin issuer's federal supervisor the authority to require any entity that performs activities critical to the operation of the stablecoin arrangement to meet appropriate risk-management standards.

In advance of any new regulations, the PWG states;

“[regulatory agencies are] committed to taking action to address risks falling within each agency’s jurisdiction, including efforts to ensure that stablecoins and related activity comply with existing legal obligations, as well as continued coordination and collaboration on issues of common interest.”

Treasury Secretary Janet L. Yellen issued a statement on the report:

“Stablecoins that are well-designed and subject to appropriate oversight have the potential to support beneficial payments options.  But the absence of appropriate oversight presents risks to users and the broader system. Current oversight is inconsistent and fragmented, with some stablecoins effectively falling outside the regulatory perimeter. Treasury and the agencies involved in this report look forward to working with Members of Congress from both parties on this issue.  While Congress considers action, regulators will continue to operate within their mandates to address the risks of these assets.”

While the legislative process can be slow, you can expect the CFTC and SEC to make independent statements while coordinating any activity. In the absence of legislation from Congress, the group may take additional action as outlined in the document.

The stablecoin market is currently valued at around $127 billion, with Tether (USDT) and Circle's dollar-based cryptocurrency USDC leading the way.

Author: Justin Derbek
New York News Desk
Breaking Crypto News

If The US Doesn't Take The Lead On Crypto, China Will...

us and china cryptocurrency policy
Even casual viewers of cable news are familiar with commercials featuring actor William Devane – usually golfing or horseback riding – exhorting them to invest in precious metals. Lately, Devane has been joined in this pursuit by financial educator Robert Kiyosaki, creator of the “Rich Dad, Poor Dad” series. The prevalence of these ads should not be surprising. In these volatile times, the Trump administration has spent big and printed money. (The United States is not alone in borrowing and printing its way out of this pandemic.) There is no reason to expect different behavior under Joe Biden.

It’s no wonder that alternative stores of value are flourishing. Days ago, the cryptocurrency Bitcoin reached yet another all-time high, just as it became clear that a Biden-Harris administration was a fait accompli. But while Bitcoin is the best-known digital currency, it is only a small part of a technological shift that could satisfy our demand for safer, cheaper, and faster ways of doing business in times of crisis and disruption. Bitcoin’s underlying technology, blockchain – a sort of shared, secure ledger of transactions between networked computers – has applications ranging from supply-chain management to securing international payments. It could be “a game changer for the global economy,” according to JPMorgan Chase. In fact, the investment giant started using its own JPM Coin in October to move investor money across its global financial platforms. Consulting firm Gartner forecasts that the business value-add from blockchain will blow past $3 trillion by the end of this new decade.

The industry powering all this change, however, is finding it harder to stay in the United States due to Washington’s dysfunction. Silicon Valley start-ups are investing billions in research and development, but there is still no clear set of rules to help them bring products to market. Congress has punted on writing a regulatory framework, and the country’s oversight agencies are – as usual – fighting over turf. Experts say that this “regulatory chaos” is suppressing American innovation while other market centers like Britain and Singapore have quickly updated their rules to lure American blockchain developers away, while Beijing scrambles to establish tech dominance.

Roslyn Layton of the American Enterprise Institute sent the Senate a blunt message this month: regulators, lacking guidance, are killing innovation. China could soon overtake us, she warned, unless the Senate holds Biden to his promises of “technocratic competence” and firm economic competition with China.

At least eight regulatory agencies are fighting over who gets to play U.S. crypto cop. Without any direction, regulators “copy-paste their bureaucracy on anything that moves,” Layton observed. The Securities and Exchange Commission is applying archaic 1930s rules that “never imagined blockchain solutions,” comparing all digital assets to securities no matter how they are designed or used.

Critics like Layton point to China’s new “digital yuan” – the country’s sole legal cryptocurrency – as a disturbing signal that the Chinese are gaining on us. The People’s Bank of China formally issued it in October and has enticed 2 million Chinese to bid on U.S. $10 million worth of the official token, says Wayne Brough of the Innovation Defense Foundation. Big American companies including Starbucks, McDonald’s, and Subway have embraced China’s new currency. France, Sweden, Switzerland, and Japan are developing central bank digital currencies of their own. Brough frets that through inaction, the U.S. will “blunder our way out of winning a race that we were born to win.” 

George Nethercutt, former Republican congressman from Washington State, warned in The Hill that Washington’s neglect could create “a needless trainwreck.” China and Singapore are paving the way for their own blockchain industries, he wrote, “while the U.S. is struggling with a coin shortage, stimulus check complications, and an obvious dearth of understanding on Capitol Hill about what a cryptocurrency even is.” This is “embarrassing” for the most technologically developed country in the world, he lamented.

Layton and Nethercutt point the finger at outgoing SEC Chairman Jay Clayton, who, Layton said, made “a deliberate lack of regulatory clarity” the “cornerstone of his crypto policy approach.” Clayton demonstrated “no understanding for the need for a regulatory framework” with his “notoriously guarded approach” to blockchain solutions, Nethercutt added, “significantly constraining American innovators.”

Clayton empowered the SEC by treating any digital asset as a “security,” justifying enforcement actions with a 1946 Supreme Court ruling. Clayton’s SEC lowered the boom on “utility tokens” – a core feature of business software using blockchain – according to Layton, even if they “had no resemblance to investment contracts.” This treatment extended to utility token XRP, the third-highest-valued cryptocurrency in the world, used by American developers like Ripple and R3 to power the kind of payment systems that JPMorgan has already rolled out. Just by putting this token under “a bewilderingly persistent enforcement threat,” the SEC hurt every developer on the XRP ledger. Clayton preserved his own agency’s power “but steadily eroded U.S. leadership as the best place to do business.”

It remains to be seen what Biden thinks of Clayton’s view of unlimited power over digital assets, or whether Biden’s promise of bipartisan cooperation will extend to ending the regulatory chaos.  Republicans have spent the last four years slashing regulations and reining in the administrative state and should understand that China can’t be allowed to win the crypto race. Senate Democrats on the Banking Committee like Elizabeth Warren and Sherrod Brown should remember that a president of their party, Bill Clinton, enacted the regulatory framework for e-commerce in 1997. It created millions of American businesses, reaching tens of millions of customers, and spawned a long list of occupations that had never existed before.

Coming together to vet Biden’s SEC pick on crypto policy and move the country closer to a clear set of rules would be a win-win for both parties and for the U.S. economy. Our competitors abroad can never beat us on innovation – unless we continue to shoot ourselves in the foot.

Guest Contributor: Bill Zeiser