Thread by @EricLiptonNYT

THREAD: To those who consider cryptocurrency hard to understand & aren't paying attention. Time to rethink. Bitcoin may seem speculative--and yes, it is. But global financial system is being revolutionized. Nature of $$ is transforming. This is a BIG deal nytimes.com/2021/09/23/us/…

The US government increasingly recognizes this. As the global value of cryptocurrency booms, regulators in the United States are rushing to create the first major new rules governing this virtual currency--a push that will start with so-called stablecoins. nytimes.com/2021/09/17/bus…

A lobbying frenzy is underway in Washington as the cryptocurrency industry knows that a major set of new federal rules will soon be imposed to regulate so-called stablecoins--and industry players want to shape how the rules are written.

A boom in the use of stablecoins — cryptos ostensibly pegged 1-to-1 w/the dollar — could lead to a postmodern bank run that threatens financial stability without strict new rules soon, federal regulators fear.

Stablecoins are an essential element of the burgeoning $2 trillion cryptosphere, serving as a kind of conversion mechanism to lock in the value of deals in volatile markets, where prices swing quickly. They also help connect that realm to the traditional financial system.

As crypto increasingly goes from niche to mainstream, and the world of alternative financial services on the blockchain disrupts old banking and finance, stablecoin use is likely to increase and become more entwined with the wider system.

Stablecoin issuers like Tether, Circle and Paxos, crypto exchanges like Coinbase and Gemini and old- and new-school financial services companies like BlockFi and Mastercard have taken part in the Treasury Department-convened debate over stablecoin rules.

In recent meetings in Washington — across agencies, in Congress, and with White House staffers — they have each tried to make the case for the way forward that will place them ahead of competitors

There are more than $125 billion in stablecoins circulating as of this month. The payments company Circle, which created USD Coin with the crypto exchange Coinbase, has seen a 750% increase in growth in 2021 and projects it will exceed $200 billion by late 2023 at this rate.

The danger of stablecoins is that they may be more wobbly than they appear. Tether, with about $70 billion in circulation, has very little cash in its reserves, even after settling an inquiry into financial mismanagement by the NY AG and committing to transparency.

Beyond reserve requirements to ensure stablecoins are adequately backed if a mass of users want to cash out simultaneously, federal regulators are concerned about tech issues as use scales up, data security and measures to prevent their use in financial crimes.

Crypto advocates say alt-finance services on the blockchain could bring billions of unbanked people globally into the financial system with just mobile phones, internet connections and digital wallets. They argue that harsh stablecoin rules could diminish crypto’s promise.

Here again is today's NYT piece on the topic. This decade will be remembered as the era where the nature of money was radically transformed in the world. You are living it. with @el72champs & @jeannasmialek nytimes.com/2021/09/23/us/…

Here as well is a NYT "explainer" that gives more background on what stablecoins are and how they are starting to disrupt the financial system. @jeannasmialek nytimes.com/2021/09/17/bus…

And here is a piece we did earlier this month that explains how cryptocurrency is upending traditional banking in the United States. JP Morgan Chase, they are coming for you. With my colleague @el72champs nytimes.com/2021/09/05/us/…