1/ NOT MUCH HAS BEEN WRITTEN yet abt this #stablecoin paper by @bankofengland June 7. I'm just getting to it. Big deal.🧐"HMT propose to bring systemic #stablecoins into BOE's regulatory remit, in line w/ its responsibilities for systemic payments systems"
bankofengland.co.uk/paper/2021/new…
2/ Yep, I've warned this is an issue central bankers have w/ #stablecoins issued by non-banks:

"A large-scale displacement of commercial bank money by new forms of digital money cld mean a higher fraction of money in economy backed by high-quality liquid assets (HQLA)."
3/ "Commercial banks would have to adapt their balance sheets in response to deposits leaving the banking system...the Bank may wish to limit migration, so financial system could adjust to the presence of new forms of digital money in an orderly fashion." Oh boy, BOE went there.
4/ Yep: "There could also be implications for money markets. The smooth functioning of these markets is important for the Bank to meet its objectives. Any large-scale reallocation of cash around the financial system has the potential to impact how money markets function."
5/ "The expectations aim to ensure the safety of #stablecoins as an alternative to both existing payment systems and commercial bank money."
6/ "...a key requirement will be to ensure that, unless the #stablecoin is operating as a bank, the backing assets for stablecoins cover the outstanding coin issuance at all times." Um...the same should be true if it's operating as a bank too--otherwise too much bank run risk.πŸ€”
7/ Side comment: #stablecoins settle in minutes w/ irreversibility. Banks just aren't used to dealing in products w/ such settlement characteristics (fast speed + irreversibility). Faster speed of settlement of anything=bigger risk of a bank run, by def'n. But BOE didn't go there
8/ Regulation: "One option is for a stablecoin issuer to be subject to the current banking regime. This is flexible and risk sensitive and would adapt to reflect the risks of stablecoins. However, it may not be the best fit for firms such as stablecoins that do not lend."
9/ cont'd: "There may be a case for offering an alternative model that restricts the assets that #stablecoins can use to back their liabilities. This would rebalance the focus towards those risks most relevant to the stablecoin issuer... operational and outsourcing risks."
10/ "A model that restricts stablecoins to holding liquid assets cld allow a regulatory approach that is more aligned to risks. A model in which liabs are backed by central bank reserves wld eliminate many risks for coinholders, but still expose stablecoins to operational risk."
11/ "a model in which liabs are backed by commercial bank deposits wld lead to greater tiering in banking system...a symbiotic relationship btwn stablecoin & its custodian bank can result in higher fin stability risks due to interconnectedness btwn systemically important firms."
12/ "Any regulatory model for stablecoins wld further need to be supported by arrangements by which issuers can obtain liquidity support from the Bank. This is important for ensuring liquidity problems do not result in failure."
13/ "There is a strong case for considering value of transitional arrangements that aim to ensure that new forms of digital money can emerge without threatening monetary and financial stability. The Bank is considering the need for the use of limits during any transition period"

β€’ β€’ β€’

Missing some Tweet in this thread? You can try to force a refresh
γ€€

Keep Current with Caitlin Long πŸ”‘

Caitlin Long πŸ”‘ Profile picture

Stay in touch and get notified when new unrolls are available from this author!

Read all threads

This Thread may be Removed Anytime!

PDF

Twitter may remove this content at anytime! Save it as PDF for later use!

Try unrolling a thread yourself!

how to unroll video
  1. Follow @ThreadReaderApp to mention us!

  2. From a Twitter thread mention us with a keyword "unroll"
@threadreaderapp unroll

Practice here first or read more on our help page!

More from @CaitlinLong_

9 Jun
🧐 Wow this is #ElSalvador’s proposed #bitcoin-as-legal-tender law, English translation
"Article 7: Every economic agent must accept #bitcoin as payment when offered to him by whoever acquires a good or service."

"Article 13: All obligations in money expressed in USD, existing before the effective date of this law, may be paid in #bitcoin."
"Art 14: ...the State will guarantee, thru the creation of a trust at the Banco de Desarrollo de ElSalvador, the automatic & instantaneous convertibility of #bitcoin to USD necessary for the alternatives provided by the State in Art 8."

Oh boy, I see practical problems here tho
Read 5 tweets
8 Jun
1/ I'M PSYCHED to announce new advisors for @AvantiBT, helping design & build services for traditional institutional investors & corporate treasurers, incl @Ford's former treasurer, Neil Schloss, Ford's ex-treasury IT head Bob Cullinan & ex-@blackrock managing director Tim Keefe.
2/ "I see @AvantiBT’s solutions as potential game changers for corporate treasurers."--Neil Schloss, ex-Treasurer of @Ford. "Avanti is building API-based payment solutions...to solve day-to-day problems by seamlessly integrating payments processes w/ treasury cash mgmt systems."
3/ It's a thrill to bring these 3 accomplished execs into @AvantiBT's fold. Tim Keefe is one of the smartest portfolio managers w/ whom I've ever worked, dating back to 1997. He's now "all-in" on #bitcoin & a founder at @LedgerstatC & partner at @OffTheChainCap.
Read 6 tweets
6 Jun
1/ WELL WRITTEN article--thx @Vlajournaliste. A couple of key points: "The assumption that #WallSt matters to #bitcoin is a fallacy because the information frontier is not in New York. It's not in Silicon Valley either. These mkts are decentralized."
businessinsider.com/bitcoin-invest…
2/ "It means at the end of the day that Wall Street will never be able to have [central] clearing for digital assets," she said, "because Wall Street will never be able to get its hands on a sufficient amount of the collateral to create a true clearinghouse."
3/ "She explains that 75% to 80% of #bitcoin and ether, on average, are held by individuals rather than intermediaries, and during bull markets, even less crypto is held by intermediaries." (h/t @nic__carter)
Read 7 tweets
6 Jun
1/ THREAD ABOUT A HISTORIC DAY in #bitcoin: #ElSalvador president publicly announced support for legislation to make #BTC legal tender. *IF* it does become law, it wld have many secondary effects. Steel yourselves bc a big fight on this probably coming tho
businesswire.com/news/home/2021…
2/ I dunno anything about politics in #ElSalvador, but the world is about to pressure it given what's at stake (see details below). But before turning to that, SERIOUS HATS OFF🀠to President Bukele, @JackMallers & @Blockstream for pulling this off. Guys this is REALLY big!!! πŸ™πŸ‘‹
3/ OK let's dig in. Here's a tl;dr: *IF* #ElSalvador adopts legislation to make #bitcoin legal tender, bitcoin:
* likely gets status as "money" so treated on par w/ foreign currency by banks
* possibly gets "cash" accounting treatment under USGAAP/IFRS (solves #BTC adverse acctg)
Read 14 tweets
24 May
MORE FED COMMENTS ABOUT #stablecoins. Watch this space--putting pieces together, Fed action is coming:
federalreserve.gov/newsevents/spe… #Consensus2021
"Depending on underlying arrangements, some may expose consumers and businesses to risk. If widely adopted, #stablecoins could serve as the basis of an alternative payments system oriented around new private forms of money."
"Given the network externalities associated w/ achieving scale in payments, there is a risk that the widespread use of private monies for consumer payments could fragment parts of the U.S. payment system in ways that impose burdens and raise costs for households and businesses."
Read 11 tweets
20 May
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)
...continuedπŸ‘‡...
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

Did Thread Reader help you today?

Support us! We are indie developers!


This site is made by just two indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member ($3/month or $30/year) and get exclusive features!

Become Premium

Too expensive? Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal Become our Patreon

Thank you for your support!

Follow Us on Twitter!

:(