Thread by @coinbase

This week the NYDFS ordered US-based Paxos to stop issuing US dollar-denominated stablecoin BUSD and the SEC issued a Wells notice to Paxos. We don’t know what aspects of BUSD might be of interest to the SEC.
What we do know: stablecoins are not securities 🧵

2/ Let’s unpack what US Dollar-backed stablecoins are, their role in creating a more equitable and efficient financial system, and why it’s imperative that the US fosters development of stablecoins at home.

3/ First, what’s a US Dollar-backed stablecoin? US Dollar-backed (or cash equivalent) stablecoins are digital currencies pegged to a reserve asset like the US Dollar and are designed to remain equal to the value of their peg.

4/ One way to peg digital currency to USD: take $1 in cash or cash equivalents for every stablecoin created and hold it in cash, t-bills, or other cash equivalent funds that back up the full value in circulation. Disclosures then drive transparency of the 1:1 backing, like USDC.

5/ Why use a stablecoin like USDC? The value of fiat-pegged stablecoins stays stable over time, and their digital properties make them faster, more efficient, and more accessible ways to conduct commerce. Their stable value over time is also why they’re not used as investments.

6/ For customers, stablecoins like USDC transcend banking hours and global borders. You can send anyone in the world USDC and they’ll receive it instantly. You don’t need a US bank account to hold value pegged to USD, protecting against local currency devaluation.

7/ For businesses, stablecoins like USDC make settling payments instant and cost-effective. They allow you to receive payments in just seconds, without the long processing time and high fees that can be associated with intermediaries like banks and credit card companies.

8/ Stablecoins help bridge the gap from traditional finance to a more efficient and equitable financial system. As more global cash digitizes, the US will benefit enormously if USD continues to be the most trusted and used global reserve currency for fiat-backed stablecoins.

9/ We can only do this if we foster development of stablecoins within our borders. Imposing securities law onto stablecoins through enforcement instead of guidance or dialogue with the industry will simply push innovation offshore and weaken our global role.

10/ Remember, stablecoins are already regulated. Paxos is regulated as a NY Trust Company by NYDFS. USDC is regulated as a stored value instrument, just the same as a simple money order is, under US state money transmitter laws.

11/ Getting this right means real dialogue between regulators and the industry followed by clear rules for the industry and lanes for the various regulators themselves.

12/ This is how we ensure the promise of greater financial accessibility, efficiency, and innovation that safe technology like stablecoins can provide in the US. Not through threats of litigation without explanation or a basis in existing law.

13/ As always, Coinbase welcomes dialogue with regulators, policymakers, and the public on the best way to regulate our industry, including stablecoins.