Thread by @CaitlinLong_

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 rollcall.com/podcasts/finte…

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

4/ We also discuss the @BIS_org Basel III capital proposal for banks to require 1:1 equity capital for all #crypto held on their books (except certain #stablecoins), why #bitcoin will probably never have central clearing & why all custody banks have elevated operational risk.

5/ We end up pretty much agreeing that trad banks shouldn't own #bitcoin/#crypto (tho custody is OK) until special rules are in place. And, gee, thankfully there already is a bank charter with such special rules (the #Wyoming #SPDI), & it's already available to the Fed today.🤠

6/ Tarullo also talks about the history of the decision to keep money market funds (MMMFs) outside of the banking system--since then, the Fed has had to bail out MMMFs 3x & the commercial paper market 4x. It doesn't want to face bailouts of anything related to #crypto in future.

7/ The information frontier in #bitcoin & #crypto is not on #WallSt. (Gee, how many Bitcoin Core devs work for large banks??🤔)

PayPal has been subject of vigorous debate for yrs abt bringing fintech activities inside banking system--but #stablecoins are now 3x size of PayPal!

8/ Will #stablecoins finally trigger resolution of decades-long debate on whether to start chartering fintechs as banks? US didn't charter ANY new banks in the decade following 2008 crisis, so #fintech activities proliferate outside of Fed. Seems it's all coming to a head now.🧐