U.S. bill proposes only banks should issue stablecoins | Hacker News Reader

U.S. bill proposes only banks should issue stablecoins

ledgerinsights.com

20 pointsjpkoning25 comments

Any member of Congress can propose a bill, including bills that have no chance of passing. Most bills go nowhere. Flagging this as off-topic.

See these posts by dang for why https://hn.algolia.com/?dateRange=all&page=0&prefix=true&que...

I think its still news

Its a “they did what!?!” as much as any article about company or VC or influential person

Just because many bills don't pass doesn't mean that bills in progress shouldn't be discussed on forums such as this one.

This seems like a fairly level-headed bill that recognizes that organizations that create stablecoins are not materially different from banks, these coins aren't materially different from dollars and therefore should have to follow the same rules as banks.

We can have a looong discussion about the regulations that surround banks but that doesn't change whether these entities are banks.

But this is technology, where the usual rules don't apply because we're smart and special.

I kinda hope this helps brings stablecoins above-board because I think they do offer a real difference to card payments as digital cash.

Being able to say that your coins are functionally identical to USD, FDIC insured and directly spendable P2P-ish adds a lot of legitimacy.

In what ways are stablecoin issuance similar to traditional banking services?

In what way is it not? You put some dollars in them and you get some variable set to a value somewhere. (In traditional banking, the value is the number of dollars you put in, and it might be stored on a computer or perhaps on paper; with a stablecoin, it's a cryptographic capability and it's hopefully stored on your machine.) You can then either request that the service transfer some of that value to / from other people, or ask for your dollars to come back out at a later point.

Furthermore, while the entity you've given the dollars to promises you can ask for them back (plus/minus any transfers you've arranged with others) at any point, there's no guarantee that they have a bag of dollar bills in a hole in the ground somewhere, and in fact they probably don't: they're almost certainly doing something with the dollar bills to make themselves money, in a way where they preserve enough liquidity to return dollars for the people who ask for them, but not all at once.

The only difference is the technical form of the variable associated with your account. The API and the social purpose is the same.

Many stablecoins started out with claims of being fully backed. Over time, they then retreated into more ambiguous territory, and independent audits were few and far in between.

Putting stable coin issuers under banking regulations would have obvious benefits for the public in terms of trustworthiness. It would even have benefits for the no-coin public by reducing systemic risk. And it would have benefits for stable coin issuers and crypto exchanges by making it easier for them to establish conventional banking connections for their customers — right now, the on/offramps for many of exchanges seem to look dangerously close to money laundering in many cases.

For instance, the largest stablecoin right now, Tether:

* Has issued $16B in new currency in 2020 alone, after starting the year with $4B total: https://coinmarketcap.com/currencies/tether/

* Has never been independently audited, and the size, composition, and location of its reserves is not known.

* Has ownership with significant overlap with Bitfinex, one of the larger Cryptocurrency exchanges, and seems to have commingled funds with them to some extent.

This is really a situation that ought to be audited sooner rather than later. And, whether that audit reveals massive fraud or an upstanding, misunderstood business, the cryptocurrency community should welcome such transparency.

What is a “stablecoin”? I’ve been around the block a few times and have never heard this term before.

It's a cryptocurrency whose value is pinned to a traditional currency because the organizational backer is willing to issue and redeem it 1:1, but it can be traded using cryptocurrency mechanisms.

The value vs USD doesn't change.

More correctly, their value vs their pegged asset doesn't change.

In this case the US cares about USD denominated stablecoins, but they existing for a variety of underlying assets.

It is a $25 billion market that has grown over most of the last decade. Expected to continue growing at a fast pace, with all major central banks looking to release their own version for their respective monetary unions.

They are digital assets that are convertible one for one to fiat currencies or assets held by a custodian's account with a bank or brokerage. Not all are convertible and they maintain their stable exchange rate by other means.

They primarily use blockchains like Ethereum for their settlement layer, while keeping their fixed exchange rate, so therefore they inherit all the technology to leap frog the legacy financial system and service people marginalized from that system.

eCoins backed by stable assets to reduce their volatility. It looks suspiciously like regular money.

https://en.wikipedia.org/wiki/Stablecoin

The pattern of people that would seek to promulgate this bill is that they believe the "unbanked" are victims who can only be cured by banking them.

This is a distortion and perversion of what representatives and their constituents really want, which is financial security and access to credit.

They lack inspiration to see that the infrastructure being created in the non-bank private sector is also aiming to create a more egalitarian system, which does not require banks.

I have to say this doesn't make a lot of sense at first glance.

1) some people are underserved by traditional banks

2) as a result, they might turn to stablecoin issuers and potentially be exploited

3) therefore we must restrict stablecoins so they can only be issued by traditional banks

seems like a lot of work just to go back to step 1).

right, the STABLE bill's rationale does not make a lot of sense and the sponsoring representative's rationale makes even less sense.

They probably don't want stablecoin to be like check cashing or payday loans

They should rewrite it then, they'll have to in 30 days anyway

Or, say, the Federal Reserve Bank could issue electrodollars.

That’s the direction all central banks are headed, although the ECB is ahead of the pack. I expect the Fed to get there with the same delays and feet dragging US financial infrastructure is known for.

People want stable currencies, not the ability to transact day to day with volatile commodities having no intrinsic value.

https://www.ecb.europa.eu/euro/html/digitaleuro.en.html (“A digital euro”)

https://www.bis.org/publ/work880.pdf (“Rise of the central bank digital currencies: drivers, approaches and technologies”, pdf)

Congrats you just created debit cards.

Why bring race into this?

Is it nonsensical emotional junk used to move the uneducated masses?

I'm no Trump supporter, but when I hear something so disconnected from policy it has a "Mexico will pay for it" vibe.

Edit- you guys read the article?

> “Getting ahead of the curve on preventing cryptocurrency providers from repeating the crimes against low- and moderate-income residents of color that traditional big banks have is- and has been- critically important,” said Congresswoman Tlaib. “From the OCC to the Federal Reserve to those peddling stablecoins the protections the STABLE Act would make possible are more needed than ever amid a pandemic that will breed riskier financial decisions out of necessity because our federal government continues to fail us all by not providing adequate relief legislation.”

You mean this part? I was going to downvote you, but it does seem a bit demagogic, because other minorities besides blacks are being financially exploited too. People of all colors can make bad financial decisions, it's not their color but their lower income and education.

Ideally, I'd expect legislation to steer these eCoins to less muddy waters for everyone, not to appeal to emotion.

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