.@SenSherrodBrown is coming out swinging, warning that crypto might be in a bubble and saying the industry has yet to live up to the lofty goals it's set for itself
@SenSherrodBrown "Stablecoins and crypto markets aren’t actually an alternative to our banking system. They’re a mirror of the same broken system –with even less accountability, and no rules at all," @SenSherrodBrown says in the opening to this @SenateBanking hearing
@SenSherrodBrown .@SenToomey taking a different tone, highlighting some of the benefits he sees in stablecoins and noting their differences from more volatile cryptocurrencies
@SenSherrodBrown@SenToomey .@SenToomey says he will introduce some guiding principles for stablecoin regulation + that he disagrees with some of the recommendations from the PWG report
@SenSherrodBrown@SenToomey "This framework should protect the privacy, security and confidentiality of individuals using stablecoins," @SenToomey says in his opening remarks
@SenToomey .@alexisgoldstein says she's an investor who's participated in DeFi and otherwise invested in crypto: "Stablecoins essentially act as a waystation in between speculative trades and as a way to avoid losses" in her opening remarks
@SenToomey@alexisgoldstein .@JaiMassari of Davis Polk says she's advised stablecoin issuers, digital wallet providers and other financial institutions: "The regulation of stablecoins should address [risks] while supporting their potential benefits."
@SenToomey@alexisgoldstein@JaiMassari .@JaiMassari says not all of the PWG report's recommendations are necessary, pointing to FDIC insurance requirement for properly regulated stablecoins with 100% of backing in short-term liquid assets as an example
@SenToomey@alexisgoldstein@JaiMassari "Stablecoins in effect are designed to reference and impart the economic properties of an underlying asset by circulation, the most successful of which all reference the dollar," @ddisparte says in his opening statement
.@ProfHilaryAllen warns that stablecoins could pose a risk to the financial system and suggests banning or requiring a licensing regime for stablecoins "that would only authorize the issuance ... if they can demonstrate a purpose outside the DeFi ecosystem"
.@alexisgoldstein: "I think for that to be true, you need 4 things" - low fees, predictability, exchange for business purposes and consistently fast -- "and I don't think stablecoins meet all of those needed objectives"
"I think it's also important to think about the structure of the distributed ledger if there are problems. There's not someone you can go to if there's a problem," @ProfHilaryAllen says
.@SenSherrodBrown asks @ddisparte if USDC would still be used for crypto speculation if Circle was treated as a bank
Disparte: "The end users of USDC have no expectation of profit, it's ultimately a medium of exchange"
"If you were a traditional finance company, could you metal [coins] and say US dollar coin on top of them?" @SenSherrodBrown asks
.@SenToomey asked @ddisparte "what else is actually happening outside of the facilitation of crypto trading?"
Disparte pointed to lending, capital markets, trading, settlements and payments as some examples
"Do you think that maybe people in other countries would develop stablecoins and then anybody who has access to a computer and the internet would be able to access those coins" if the US banned stablecoins, @SenToomey asks
"I would argue 'do no harm' and allow these innovations to continue thriving inside the U.S. regulatory perimeter," @ddisparte says
.@ProfHilaryAllen says central banks are concerned about losing control over monetary supply as one concern around stablecoins
.@SenJackReed asks @alexisgoldstein about where she sees data gaps. Goldstein says unlike the stock market, crypto exchanges might not report all data on trades throughout the day.
"You also will see sort of arbitrage opportunities crop up, the price of bitcoin on one exchange may be different than it is on another exchange," @alexisgoldstein says
@alexisgoldstein Sen @MarkWarner pointing out that Virginia's legislature has just been hit by a ransomware attack and says his fear is the ransom will be paid with bitcoin "potentially using a stablecoin to transfer to a fiat currency"
@alexisgoldstein@MarkWarner .@MarkWarner asks @ddisparte how Circle will make any money if Circle moves to a frictionless payment system. @ddisparte says Circle is in the process of going public, points to licensing platform, reserve structure (cash + short-term treasuries), de minimus tx fees
@alexisgoldstein@MarkWarner@ddisparte .@SenWarren opens her questions by saying "stablecoins like Tether and USDC are supposedly pegged to the dollar" to reassure people that stablecoins are stable
"You're sort of dependent on the exchange where you're trading it," @alexisgoldstein says
"I just want to underscore this point that if these Tethers were actually 1:1, it would be one of the 50 largest banks in the country. But we know it is not. And that's because ... only about 10% of the assets backing the stablecoin are real dollars," @SenWarren says
Lots of concerns about a bank run on stablecoins floating around right now
.@SenWarren: "Can DeFi continue to grow without stablecoins?"
@ProfHilaryAllen: "I don't think DeFi can grow without stablecoins. I think it would struggle. Right now, I think DeFi is contained to the point where it won't impact financial stability, but if it grows" (1/2)
(2/2) "I think there's a real threat here," @ProfHilaryAllen says
Stablecoins "are propping up the shadiest [part] of the crypto world, the place where consumers are least protected from getting scammed. Our regulators need to get serious about clamping down on these risks," @SenWarren says
.@SenSherrodBrown asks @alexisgoldstein if it's true "cryptocurrency speculation on decentralized finance platforms wouldn't work without stablecoins."
Goldstein: "I think that's right, or at least it would be a lot smaller."
.@ProfHilaryAllen says the biggest risk is if a stablecoin is offered by a tech company like Facebook or Amazon due to the potential to scale up in response to another q from @SenSherrodBrown
.@SenToomey asked about treating stablecoins like securities; @JaiMassari said a non-interest bearing stablecoin that's fully reserved and regulated as a money transmitter shouldn't be viewed as a security
.@SenToomey asks about use cases for ordinary consumers. @ddisparte points to insurance as one example: "A homeowner's policy that can liquidate a claim based on a geo-reference when a disaster took place and there's no equivocation would be a game changer."
After a brief 1 hour 45 min this hearing is over
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3/ By that definition, “broker” could mean wallet developers, software engineers, DAO token holders, miners and other parties that don’t have customers the way a trading platform does.
That would entail specific tax information reporting rules:
Okay so it is 9:45pm ET and here's where things stand:
- Senate is currently voting on a judicial nomination
- Senate Majority Leader @chuckschumer has filed cloture on the overall infrastructure bill, IE moved to end debate around it and start voting
- It's unclear when, specifically, we might start seeing votes on the amendments around this infrastructure bill, but there are TWO amendments the crypto industry should be paying attention to. 1) The @RonWyden@SenLummis@SenToomey version: coindesk.com/crypto-tax-exe…
.@SenToomey is currently on the Senate floor discussing the amendment, says there are many use cases such as a "Disbersed mechanism for validating ownership" coindesk.com/crypto-tax-exe…
@SenToomey "How do you ensure that a person who has a copyright is properly compensated when that copyright is used?" @SenToomey says of programmable money as another use case
@SenToomey "In this legislation, there is a very reasonable intent but I think the drafting doesn't get it quite right," @SenToomey says, adds that centralized exchanges should have same reporting reqs that conventional brokers have