@MoneyGodRAI deserves to be at the top here--a non-pegged but volatility-resistant store of value fully collateralized with only cryptonative assets (currently ETH). But here are my broader legal-ish thoughts on the stablecoin space:
Pegged stablecoins are either collateralized or un-collateralized.

Collateralized pegged stablecoins (like DAI, not RAI) are probably all securities & regulation-vulnerable. Even if some are not securities, they require too much trust & pose too much systemic risk.
Un-collateralized 'algo' stables have failed repeatedly, but in theory can be non-securities & reg-resistant because not 'governed' or 'backed'--they just rely on a native incentive for arbing to peg, & 'hope' that people sufficiently respond to that incentive to hold the peg.
I am confident that algo stablecoins need not be "investment contracts" for the same reason as with Bitcoin--the required 'efforts' are undertaken by unaffiliated 3rd parties (arbers, miners) running independent competitive businesses which generate consensus as a side-effect.
Because algo stablecoins aren't 'backed' by 'collateral' and do not involve borrowing, interest rates, etc., they are also obviously not a "bond, debenture, evidence of indebtedness, certificate of interest...collateral-trust certificate," etc. and, thus, are not debt securities.
But another question is whether the algo system's 2nd token (the unstable one with potential upside) is a security. If so, the system is centralized & vulnerable--a regulator can crush arbs' demand for the 2nd token by crushing the token issuer, & thus also wreck the peg.
In my mind, this is where algo stablecoins have failed so far--the 2nd token was a mere 'governance token' whose only potential source of *extrinsic*, *non-circular* value was the fealty of a small, early-stage dev team. This led to rugs and collapses.
I have absolutely no idea whether UST will work or scale long-term, but I do think it's the last best hope for algo stablecoins--why? Because it was carefully built with hooks for independent suppliers of extrinsic, non-circular value.
With UST, the '2nd token' (LUNA) is not a mere DeFi governance token--it's also a block production/validation token and gas token. This creates the *chance* of gaining non-circular, extrinsic value drivers to LUNA if Terra becomes a popular smart contract platform.
On the flipside, UST is accepted by real, meatspace merchants through the Chai app/network, which creates the *chance* of gaining non-circular, extrinsic value drivers to UST.
Thus, both sides of the arb are addressed, on a *decentralized* basis--LUNA demand could be driven by third-party NFTs, DeFi apps, etc. and UST demand could be driven by third-party meatspace merchants & the products they sell.
Once this flywheel gets spinning fast enough, LUNA value-increasing-efforts are sufficiently decentralized like ETH's. Regulating LUNA as a security would make no sense, and, by extension, UST would be regulation-resistant (unlike other pegged coins).
Will it work? Who knows. Could it work? I don't see why not. I'm a Terra n00b & token-econ lightweight, but the Terra community reminds me of early Ethereum days & token econ experts like @ZeMariaMacedo make me want to believe:

Likewise, with devs like @lukedelphi involved, I'm cautiously optimistic that Terra can attract sufficient dev talent to sustain an ecosystem (though EVM architecture would be a huge plus for gaining devshare):

So, if you care about decentralization: play with RAI & UST & wind down your corporate stablecoins. Corporations can cave to regulators or profit by hiding risk, blacklisting addresses & coercing contentious fork outcomes. We need trustless stables.


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More from @lex_node

22 Sep
no, letting a multi-billion-$ financial system develop for years with little guidance & then crashing it with a sudden politically motivated 'crackdown' is a "threat to the financial system"
Enron was an SEC-reporting company
Read 11 tweets
21 Sep
this would indeed be a wonderful thing

but it's not the full story...put simply, if most tokens are securities and AMMs are securities exchanges, then essentially all current token transactions are illegal, whether informed or uninformed
there is no current way to register any smart contract system with the SEC as a securities exchange

even if you could, it would automatically be violating the exchange requirements, as it cannot KYC its users, reverse transactions, etc.
in other words: a government-regulated disclosure regime relating to crypto technology risks would, in my opinion, be a wonderful thing...but it has to work without simply killing the technology...the non-disclosure parts of the securities laws would kill current tech
Read 4 tweets
20 Sep
so far just talking about regular capital markets 🙄
why does he call Satoshi "she"? I could understand "he or she" or "they".
Read 10 tweets
1 Sep
someone asked me 'isn't coding protected by 1st amendment? how can it be regulated?'
the answer is that publishing code is protected by 1st amendment

there is an open issue/question (I think)--is *deploying* a smart contract to Ethereum a form of 'publication', or is it 'operation'?

to what extent are 'results of operation of software' protected speech?
to get an idea of how complex and debatable the line-drawing exercise is, see here: stanfordlawreview.org/online/softwar… Image
Read 4 tweets
1 Sep
Gensler speaking at @EP_Economics on crypto:
-repeats they are very focused on "platform" (exchanging, lending), "whether centralized or decentralized"
-repeats crypto can be a "catalyst for change";
-repeats he is "technology neutral"
-repeats that tech innovations in finance do not thrive unless brought under "public policy goals" incl. "investor protection"
-notes that DeFi platforms remove broker-dealers, therefore it is incumbent "on the platform" [?] to provide broker-dealer-style protections
-notes they are also very focused on "stablecoins"; says primary purpose of stablecoins is to 'sidestep public policy goals. . .such as AML and tax reporting'
Read 9 tweets
7 Aug
been talking to a lot of DeFi teams lately

some are even more decentralized than I thought & rapidly decentralizing more

don't know what regulators will argue; that it's illegal to create an incentive system that gives rise to a transactional network as an emergent phenomenon?
or maybe that a website can itself be a securities exchange, futures exchange, etc.?

but you realize what that means right?

you can perform the same transactions and get the same info from etherscan

is a block explorer website also a securities exchange?

makes no sense
I think all regulators can do is:

(a) argue governance tokens were securities at some point & get Section 5 liability from founding team

(b) use 'cui bono' logic to say someone who benefits a lot should be liable as an exchange operator, even if they don't operate the exchange
Read 5 tweets

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