1/24

One thing really stands out about @GaryGensler's written testimony that he submitted before his banking committee hearing later today.

His continued use of the phrase: "stable value coins"

Why is that relevant?
2/24

Gensler is well informed of the industry and likely knows the jargon we use around 'stablecoins' choosing to repetitively name them something else signals either:

1) He is trying to frame a difference between name expectation and reality.
3/24

2) He is trying to make stablecoins seem closer to something else that he already has clear jurisdiction and guidance on.

or

3) He is trying to widen the definition to catch more things under existing regulation.
4/24

There has been a lot of debate as to which parts of crypto the SEC has jurisdiction over versus other regulators such as the CFTC, as well as which products fall under current definition, and which need refinement.
5/24

One asset the SEC does regulate is called "Stable Value Funds" which are stable bond portfolios that the issuer guarantees interest on to the holder.

The asset remains stable, backed by bonds, with a yield provided by the issuer. Sound familiar?
6/24

That "Stable Value Funds" definition seems to me that it *might* have been the grounds for the SEC to block Coinbase on their lending platform for USDC.
7/24

Coinbase (through the USDC consortium) issues USDC, which is backed by cash and commercial paper (although this is evolving into cash and T-Notes)

Coinbase was taking on the risk of those underlying assets and going to also offer users a guaranteed flat interest return.
8/24

That's an argument to be made that 'stablecoins' are 'stable value funds' and by calling them 'stable value coins' you begin to slowly walk the logic over in that direction and set the tone for how other regulators understand the asset.
9/24

But, there could also be a few other explanations.

First, as I mentioned, he may be trying to illustrate that lots of 'stable' assets aren't actually 'stable' but attempt to provide 'stable value'
10/24

By doing this he is try to heavily point to the fact that these assets aren't all just 1:1 backed depository institution held issuance.
11/24

He's trying to point to variance risk and argue that because its focused on value and not just denoting an on chain representation of another asset, which would shift it from being CFTC jurisdiction to SEC jurisdiction.
12/24

Finally, he could be attempting to draw a wider catchment by using this language he seems to be trying to lump all types of 'stablecoin' together:

-Depository assets (PAX)
-USD Backed Issuance (USDC, USDT)
-Non USD Backed Issuance (DAI, sUSD)
-Synthetics (sEUR)
13/24

Synthetic assets are much more likely to fall under SEC jurisdiction in their current model with things like sEUR where on Synthetics/Kewnta there is an infinite mint/burn oracle pegged set up.
14/24

This is likely why we saw most of Synthetics, UMAs and Mirrors assets blocked on the Uniswap frontend in recent months.

But, did you notice what was missing?

DAI and sUSD.
15/24

DAI is one thing, but having sUSD missing from that list when all the other sCurrencies were blocked is striking and purposeful.

It's because there are key structural differences between sEUR and sUSD.
16/24

One is oracle driven and exchanged into from the issuing exchange and not directly backed by the underlying assets.

The other is collateralized and issued, just like DAI is.
17/24

My hunch is that while the SEC can clearly argue the case that sEUR is a security tracking the price of a foreign asset, they are struggling to have the same robust arguments about DAI and sUSD.
18/24

But, if at the end of the day, you view all 'stablecoins' as 'stable value funds' and make the leap that APY rewards on farming are the interest payments, and the underlying collateral is the basket of bonds, then the structure doesn't matter.
19/24

If you accept that those two are like-kind, then all of a sudden something that was hard to prove as a security would be easy to lump in and to cover in regulation related to stablecoins.
20/24

You'll remember that when Facebook attempted their project Libra, the Senate Banking Committee was proposing pretty clear rules on not having a basket of currencies.
21/24

It's also appears to slowly be creeping towards consensus around concepts that backed stablecoin issuers need regulatory oversight and standards (probably fair)

But, that regulation wouldn't give any jurisdictional clarity or ammo to the SEC on things like DAI.
22/24

Gensler is a very smart guy, a professor, with exposure to public policy and a team of comms professionals.

One thing I've learned from working in comms in regulated industries, is you pick your words for the fight you want to have.
23/24

There is no better way to win a debate, especially in regulation, than to subtly make word choices that frame the debate in a different arena.
24/24

In that regard, Gensler's choice of 'stable value coins' speaks volumes. It's just unclear which shift he is trying to make.

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More from @adamscochran

16 Sep
1/21

At this point I'm convinced that the SEC's current regulatory stance on crypto is more someone's personal political agenda.

Highly technical, educated people, informed on this space cannot reach the conclusion that defi platforms can simply 'come in and register'
2/21

First take @brian_armstrong's post about the SEC blocking Coinbase aggressively, something the entirely doesn't align with a department that should be acting in good faith to support innovation while protecting consumers.
3/21

Then we factor in Gensler's history at MIT where he spent so much time looking into crypto and decentralized systems.

Yet the statements he makes in hearings don't align with his knowledge.

Read 21 tweets
14 Sep
1/

Tuning in late to the banking committee hearing but will dump anything interesting here.
2/

Sen Warner specifically notes that he has *never* seen a community so well organized and in strong communication as the crypto community.
3/

Gensler suggested that crypto is a problem for subverting AML laws and references some matter of intelligence debriefings that aren't public.

Seems a stretch.
Read 14 tweets
14 Sep
1/9

Part of the problem Evergrande is in their balance sheet.

They've listed properties *under development* as an asset and not a liability.

That means empty, unfinished or unrented buildings were used to help them secure loans.
2/9

These buildings could range from completed and operating, nearly complete but empty, right up to being only land or concrete shells of a building.

Using this they became extremely overleveraged.
3/9

The whole predicament kicked off when their subsidiaries in electric vehicles and financial products failed to meet payment obligations, which lead to questions about cash flow in the company.
Read 9 tweets
14 Sep
1/4

Chinese commodities like coal, nickel and aluminum starting to show weakness in the afternoon session as well.

2/4

Meanwhile the Shanghai Composite Index at a moderate day showing a loss of momentum compared to its long run up
3/4

The composite index has been on a tear up since 2019 and just retouched its 2020 highs despite concerns with Evergrande, commodities and inflation, leaving it well off all moving average points
Read 4 tweets
14 Sep
1/31

Evergande and other Chinese developers stocks dropping off a cliff in the HK morning session today.

Here is what you need to know about why Chinese Real Estate may impact crypto and even US markets.
2/31

Evergande ($3333.HK) is a major Chinese real estate developer, who through leveraged properties and issuing US denominated junk bonds, built up a real estate empire making it the second biggest in the country.
3/31

Assets and equity boomed over the past decade, but net income struggled. The reason is debated, but it seems they were over leveraging properties that were getting very little actual revenue to grow their empire.
Read 34 tweets
13 Sep
1/24

Gensler's approach here makes it feel like the SEC still thinks its 1934 when the Securities Act was passed and that the US is the only country that matters in a digital era.
2/24

Look, I'll echo again, I *strongly* support investor protections. The *GOAL* of the SEC is noble, but outdated frameworks like the Howey test and accredited investor status do not take into account the realities of today, nor the technologies they hope to govern.
3/24

Yes, the SEC has the responsibility to protect American investors, and that is exactly what they should be doing.

But protection isn't a single problem.
Read 25 tweets

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