Discover and read the best of Twitter Threads about #SPDI

Most recents (18)

1/ JUST PUBLISHED article abt #stablecoin interoperability in @CentralBanking_ (yep...!)--another collaboration w/ Dr.Manmohan Singh of @IMFNews + my 1st w/ Dr Charles Kahn of Univ of IL. 🚨VERY IMPORTANT NEW POINT included🔥 (behind a firewall but 🧵👇).…
2/ Best historical analogy for #stablecoins isn't wildcat banking--it's check clearing. Private pre-Fed check clearing networks are analogous to different private stablecoin networks today. What made checks interoperable?

💡2 things: common standard+Fed guarantee of pymt at par
3/ We argue #stablecoin issuers should gain access to Fed payment systems so they can back stablecoins w/ central bank reserves (ie, guarantee of pymt at par to members of Fed's network), but ALSO that the choice of tech should be agnostic. (The mkt has already voted on this.)
Read 10 tweets
1/ "Even in the face of regulatory threats, #crypto enthusiasts see each development as a step towards mainstream acceptance. So it's no surprise that a new crypto-friendly bank becoming a member of the Federal Reserve would be a headline grab."🤠@AvantiBT…
2/US banking law is confusing but @lailamaidan got it right--@AvantiBT is different--is eligible for BOTH access to Fed's payment system & to become Fed member PLUS has applied for BOTH. (OCC trust banks aren't depository institutions so aren't eligible for payment system access)
3/ I can't think of another industry that is so deposit-constrained: ~$80bn of USD bank deposits supports >$2trn in assets. Our industry has a big single point of failure risk: USD banking access. Plus there's lots of settlement risk in trad banks when they bank #crypto industry.
Read 10 tweets
1/ @NYtimes story on #crypto/#banking deserves a thoughtful reply. Issue isn't black & white: anti-crypto forces try to paint us all w/ a broad brush. Bad actors deserve to be called out, but the article ignores fact that regulatory-compliant firms exist.…
2/ First--@ericliptonnyt/@el72champs you got a fact wrong & it deserves a correction. #Wyoming’s special bank charter doesn't allow “cryptocurrency deposits.” “Deposit” has a v specific meaning in banking: banks can only take deposits in fiat money (US$)--not in crypto. Pls fix.
3/ That’s a key distinction. Regulated banks can provide CUSTODY services for #crypto (like for securities) but CAN’T take deposits in ANYTHING except money. Article misses that critical point--it’s a firewall protecting Fed's payment system from exposure to anything other than $
Read 24 tweets
1/ ~FIVE YEARS AGO, I first said #bitcoin cld take down a GSIB (global systemically important bank)--NOT because of anything wrong w/ Bitcoin, but bc the banks just aren't set up to handle an asset that settles in minutes & is irreversible. @ChrisBrummerDr…
2/ If banks are going to start owning #bitcoin/#crypto on their books(ie, not just being custodians like w/ stocks), banks need special rules to deal w/ the huge differences in settlement terms. Banks use systems set up ~40yrs ago (esp in US),most of which reconcile only 1x/day😱
3/ Again-issue is w/ banks' IT & operational systems, not w/ #Bitcoin (which I consider the most significant financial technology invention of human history. Yep, really💪). In this @ChrisBrummerDr podcast w/ former Fed Governor Dan Tarullo, we discuss how bank capital rules work
Read 8 tweets
1/ THREAD ABT REGULATORY NEWS in #crypto, which I’ve been chronicling on twitter since April. Seems crackdown has begun. I dunno how it'll turn out but:
* it won't impact #BTC #ETH etc directly. Base layers will keep addin' blocks
* it'll impact intermediaries & US$ access points
2/ Today was a key event that few in #crypto were probably watching, but it REALLY matters: the comment period ended for the Fed’s proposed payment system access guidelines. See comment letters here (including @AvantiBT’s 18-page tome--awaiting upload):…
3/ Why does it matter? Fed guidelines are partly aimed at #crypto (despite not mentioning crypto even once). Given what’s happening w/ US$ #stablecoins, the guidelines are esp relevant (see WSJ story last wk-FSOC wants Fed to regulate stablecoins per “ppl familiar w/discussion”)
Read 24 tweets
1/ IT'S CLEAR a US #crypto regulatory crackdown is starting but I'm optimistic bc most of the major players/agencies have spoken already & the policy is taking shape: it's "pay taxes, comply w/ laws & don't take shortcuts, & we'll enable the innovation." It's NOT a "#bitcoin ban"
2/ A clear chronology:🧐
* Fed releases pymt system access guidelines (5/5)
* SEC warns abt #bitcoin futures (5/11)
* Binance IRS/DOJ story in Bloomberg (5/13)
* IRS article in WSJ=warning to pay taxes (5/14)
* FDIC ice thaws--it issues its first RFI (5/17)
3/ ...continuing:
* OCC says reviewing all prior #crypto bank actions (5/18)
* Senate Banking Chairman warns OCC to clamp down on trust bank charters (5/19)
* Treasury Sec Yellen announces big IRS tax compliance push (5/20)
* Fed's Powell plans paper on payment innovation (5/20)
Read 7 tweets
1/ SOME THOUGHTS on #stablecoins & the #crypto selloff, which are probably connected.

HUGE news last week & it matters far more than @elonmusk or @binance news. A long thread 👇:
2/ First, #Tether finally disclosed how it invests reserves & it was a big negative surprise (not previously knowable at this level of detail). This news probably contributed a lot to #crypto selloff since Wednesday.
3/ Why? Because now risk managers at #crypto hedge funds almost certainly will require haircuts on #Tether, which means traders had to sell #crypto to reduce their total risk exposure.
Read 37 tweets
1/ HAPPY #TESLA DAY, #bitcoin! Two things in the announcement caught my eye🧐& are worth pondering.🤔

* the $1.5bn #bitcoin purchase was 7.7% of @Tesla's $19.4bn of cash. Why only 7.7%?

* Tesla plans to accept bitcoin as payment but "may or may not liquidate upon receipt." Why?
2/ Why only 7.7% of cash? Well, @Tesla confirmed it's using indefinite intangible accounting, which is UGLY treatment (lower of cost or market+risk of impairment charges). We bitcoiners must work to get bitcoin acctg fixed. It's prob why Square only put 2% of its cash into #BTC.
3/ What gives? "Impairment charge"=☠️. Cos hate them bc they cause sudden hits to earnings. I'd guess Tesla & Square ran scenario analyses to see how big an impairment charge they cld tolerate in a #bitcoin bear mkt, & sized their investment based partly on that (+other factors).
Read 14 tweets
WOW--#crypto lawyers will be EVEN BUSIER over the break (as if the Mnuchin rule, SEC v Ripple & CSBS v OCC lawsuits weren't enough...). There are weeks when decades happen, as they way. For crypto law, this is one of those weeks
2/ PS--I suspect both SEC moves this week are tied to @coinbase's IPO filing, which will force the open questions re: which cryptos are securities to be answered in 2021. As mentioned earlier, IMHO the SEC will be one of (if not *THE*) most important players in US #crypto in 2021
3/ oops -- as they *say (excuse the typo!)
Read 4 tweets
1/ GREAT ARTICLE abt how financial mkt plumbing really works, incl the real reason why Lehman failed & why the same probs still mostly exist: #rehypothecation + a shortage (!) of collateral despite frenzy of new govt debt issued. @JeffSnider_AIP @RaoulGMI…
2/ But lemme connect 3 dots abt how it relates to #crypto

* There's a SHORTAGE of collateral (T-bills, etc)--the stuff big dealer banks NEED in order to fund themselves. Facebook Libra/Diem could worsen that shortage a lot, so you can see why central bankers view it as a threat.
3/ The #repo mkt periodically has disruptions caused by collateral shortages/undercapitalization of the big dealer banks. @JeffSnider_AIP looks at March 2020 in this piece but many other examples exist, eg Lehman in 2008. When repo mkt seizes up, the probs ripple across fin mkts.
Read 14 tweets
BIG NEWS FROM SEC🚨-clarity in US #crypto regulation did come w/ #Wyoming's Oct 23 #NoActionLetter regarding #qualifiedcustodian (SEC just confirmed)

tl;dr=SEC Custody Rule favors banks as QCs, bc state trust cos may not give as much protection as banks…
2/ Lack of clarity has kept the HUGE #RIA & asset mgr market out of #crypto but this should help. Sum:

* banks are #qualifiedcustodian by def'n, but
* state-chartered trust cos may not be

RIA must defend that a state trust co provides as much protection as a bank, broker, FCM.
3/ Consider how SEC frames the ?s:
* do state trust cos have "characteristics similar to" institutions "SEC has identified as QCs" (ie, state trust cos aren't in group SEC identifies as QCs)
* wld state trust co as QC add gaps/enhancements? (again the ? presumes they're not QCs)
Read 6 tweets
1/ HEY CRYPTO LAWYERS: buckle in bc a big piece of US #crypto regulatory puzzle fell in place yesterday. Culminates >2yr process, coordinating w/ SEC & other regulators, to clarify "#qualifiedcustodian." #NoActionLetter by #Wyoming Banking Division🤠here:…
2/ Here's an article from @ForbesCrypto's @AndreaTinianow & a post from McDermott Will & Emery, the attorneys who obtained the letter for @TwoOceanTrust of #Wyoming.

3/ Follow along! Under SEC Custody Rule & SEC Customer Protection Rule, #RIAs (Registered Investment Advisers) & investment managers must hire a #qualifiedcustodian to store customers' assets.

But traditional custody banks can't/won't touch #bitcoin & other #crypto right now.
Read 22 tweets
1/ FASCINATING MOVE by SEC on whether a trust company qualifies as a bank under its rules. This enforcement action doesn't pertain to #crypto specifically but it applies broadly to the key question--does a trust co qualify as a bank under SEC custody rule?…
2/ Answer was a resounding "NO" in this case--the trust co didn't qualify for exemptions that apply to banks bc trust co didn't exercise "substantial investment authority." This is a KEY POINT--a trust co that doesn't act as a fiduciary is NOT A BANK under SEC's rules.
3/ This is one of the big reasons why #Wyoming created #SPDI bank charter--bc trust cos are prob not qualified custodians under SEC rules. To be a bank under SEC rules custodian must either (1) take deposits or (2) act as fiduciary. Trust cos can't take deposits (only banks can).
Read 8 tweets
1/ MORE ANALYSIS-Goldman's new head of #digitalassets is a #repo trader based in LONDON. This is significant bc UK law basically has no limits on #rehypothecation. To be clear I'm not worried abt #bitcoin--as a system it's immune to WallSt's leverage games
2/ That doesn't mean its price won't be impacted tho--bc #rehypothecation fulfills real demand w/ artificially created supply & thereby suppresses price, all else equal. Rehypothecation works as long as there's a lender of last resort. But #bitcoin has no lender of last resort!🚧
3/ So, how many times could a #bitcoin be rehypothecated? In UK there's basically no limit bc the broker/dealer takes outright title to the customer's asset. This is why Lehman transferred so many of its assets to its UK subsidiary from its US subsidiary.…
Read 6 tweets
1/ NEWS out of #Wyoming ahead of #ConsensusInvest, previewed by Chris Land, gen. counsel of WY Banking Division at #FordhamLaw #blockchain regulation conf today:(1) solution to #BitLicense prob for #crypto cos=open a NY branch of a WY SPDI; (2) Wyoming just released custody rules
2/ Chris explained today that #Wyoming #SPDI, which is a state-chartered bank, is a passport into ~42 US states w/o need for addl state license. In the other states, such as NY, it may need to open a branch. Federal law protects parity of national banks & state-chartered banks...
3/ ...of other states, so if a state exempts a national bank from a regulation, then other state-chartered banks are exempt from it too. Thus...drum roll...since NY law exempts national banks from the #BitLicense, #Wyoming's #SPDI almost certainly exempt too (NOT LEGAL ADVICE!)
Read 8 tweets
1/ The Senate Banking Comm staff reached out last week regarding @Facebook @Libra pursuant to my @ForbesCrypto article. During a conf call they indicated interest in receiving formal testimony from me. Here it is + summary follows 👇:… @DoWithCare
2/ Big takeaway--politicians that weaponize the US banking system (blocking access to disfavored industries/countries) are modern-day Herbert Hoovers bc these barriers block both unlawful & LAWFUL commerce, & these barriers caused the invention of #stablecoins in the first place.
3/ (OK, I didn't actually call them modern-day Herbert Hoovers the testimony, but I digress...) If Congress isn't happy about @facebook @Libra, it can immediately make #stablecoins irrelevant by letting #banks bank the #crypto industry (& I give v specific recommendations here:
Read 19 tweets
@DamianGawryluk You’re very warm...keep going! There are profound implications for #crypto custodians from footnote 13 of the SEC’s new guidance...I’ll be back with more later 🤠🤠🤠... @propelforward @NYcryptolawyer @josh_blockchain @AndreaTinianow @AnnetteNazareth @stephendpalley
@DamianGawryluk @propelforward @NYcryptolawyer @josh_blockchain @AndreaTinianow @AnnetteNazareth @stephendpalley 1/ OK here's what it means. The SEC's new guidance would have been a bummer for the #crypto custody industry were it not for #Wyoming's new #SPDI law, bc there's precisely one--only one--type of bank that satisfies the SEC's key rqmt w/o tripping over other regulatory landmines.
@DamianGawryluk @propelforward @NYcryptolawyer @josh_blockchain @AndreaTinianow @AnnetteNazareth @stephendpalley 2/ #Wyoming designed the #SPDI law to thread this v precise needle--to be a bank when it NEEDS to be (eg, to satisfy good control location) but not to be a bank when it doesn't want to be (eg, to avoid tripping bank holding co status). The impact? The #crypto custodians that...
Read 12 tweets
1/ 6 PREDICTIONS about what @Facebook's #cryptocurrency means. Grab the popcorn bc I analyzed publicly disclosed info to make 6 predictions, of which 2 will be controversial (#2 and #6). @ForbesCrypto #Libra #bitcoin…
2/ First prediction: @Facebook's #stablecoin will be a positive force in developing countries. Second: @Facebook will pay #interest to users of its #cryptocurrency, which will eventually lead to populist calls to repeal subsidies at the heart of the US banking system.
3/ It's true that #stablecoin issuers generally pocket the float on the assets backing the coins, but I go out on a limb & predict there's no way @Facebook will be able to pocket these big profits w/o sharing them with users. To be clear I haven't seen @Facebook disclose this.
Read 11 tweets

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