Global banking regulators call for toughest rules for cryptocurrencies | Hacker News Reader

Global banking regulators call for toughest rules for cryptocurrencies

theguardian.com

131 pointselorant91 comments

Here's what's going on here: banks use debt to increase their returns. A bank might have $100M in capital, $1B in assets, and $900M in debt. Now, to keep things from getting too crazy, there are national and international regulations limiting how much they can borrow. Those limits depend on how risky the assets are that they're buying. US government bonds? You might need to have 3 cents in capital for every dollar of T Bonds. For high quality commercial bonds, maybe 5 or 10 cents.

Cryptocurrency is a new asset class, so they have to decide how much capital a bank needs to hold. Quite sensibly, given its volatility, you need $1 in capital to hold $1 in crypto. I.e. a bank cannot borrow against its crypto holdings.

In this cheap debt environment, I'm not sure "sensible" applies to the market's mindset when it comes to leverage

This.

To add a little more context to this, the first banks took deposits and lent that money out to borrowers. They would keep a certain percentage of that for liquidity ie to cover withdrawals.

This became viewed as overly conservative so banks started retaining a smaller percentage of the loans in hard currency and/or gold.

This is the origin of the fractional reserve system.

Some Luddites who often bemoan abandoning the gold standard point to this is a mistake but the last few centuries has shown this to be wildly successful.

Ultimately this led to the formation of central banks (sometimes called the lenders of last resort) to, in part at least, avoid the issues of runs on individual banks.

Nowadays debt tends to be securitized and not even on a bank's books anymore anyway.

This is actually one of the desirable properties of a currency that cryptos (or Bitcoin at least) just doesn't have. Combine that with highly volatile values and it's a mistake (IMHO) to call cryptos "currencies". They're assets not currencies.

> This is actually one of the desirable properties of a currency that cryptos (or Bitcoin at least) just doesn't have.

You've got to be careful making these kinds of assertions. Maybe they'd be accurate if you put Bitcoin in a vacuum, but if you consider the entire crypto ecosystem that revolves around bitcoin, it's completely false. Not only is DeFi a burgeoning asset class, it's gotten so popular (via yield farming) that many an institutional hedge fund has gotten in on the action. The decentralized lending ecosystem in crypto is surprisingly mature.

With that said, it's not inaccurate to say that by virtue of volatility and commensurate reserve requirements, bitcoin is more challenging to keep on a balance sheet, nevermind use as currency. There's also something about stablecoins that I can't quite put my finger on but which makes me nervous.

> Some Luddites who often bemoan abandoning the gold standard point to this is a mistake but the last few centuries has shown this to be wildly successful.

First, that's not accurate. Federal reserve system is ~100 years old (and arguably caused the great depression, 1970 inflation crisis, 2008 and what may be coming in 2021-2022). The gold standard was only abandoned completely in 1970's (~50 years).

> Starting in the 1959–1969 administration of President Charles de Gaulle and continuing until 1970, France reduced its dollar reserves, exchanging them for gold at the official exchange rate, reducing U.S. economic influence. This, along with the fiscal strain of federal expenditures for the Vietnam War and persistent balance of payments deficits, led U.S. President Richard Nixon to end international convertibility of the U.S. dollar to gold on August 15, 1971 (the "Nixon Shock").

In 1934 the U.S. Nationalized all gold:

> Congress passed the Gold Reserve Act on 30 January 1934; the measure nationalized all gold by ordering Federal Reserve banks to turn over their supply to the U.S. Treasury.

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

I'm making no claims but you can see some of what the implications are (I think this site is a bit over the top, but makes some stuff clear):

https://wtfhappenedin1971.com/

Are you implying that fractional reserve banking is only as old as the federal reserve act?

When the answer is obviously... no... why ask?

Do you know what a pointed question is?

When banks simply get bailed out at taxpayers expense when their overly risky loans go bust, why bother keeping anything in reserve at all? I guess that's "desirable" if you own a bank.

Welcome to the cutting edge of finance where the money is all made up and interest doesn't matter!

The perpetual motion machine that is the world of modern finance is either blindingly stupid and short sighted or just too complex for me to properly understand, I'm not sure which.

This is a tricky subject. Take the TARP loans post-GFC. These have pretty much all been repaid (and most were by 2011). So while it still qualifies as a bailout there's a difference between extending a line of credit and just giving banks money.

So I'm curious what you're specifically referring to because most of the time people conflate loans and handouts.

Not that there aren't egregious examples here. One of the biggest (IMHO) was the LTCM bailout.

> there's a difference between extending a line of credit and just giving banks money.

Certainly. But loans have value when you want them. And most of these institutions certainly got lower loan rates than their creditworthiness deserved. And loans weren't the only thing TARP did. Lots of shinanigans in the bailouts and TARP programs. For example the US treasury bought Goldman Sachs shares 35% above market rates. That's basically $3.5 billion in free money. The execs that fueled all that overrisky behavior often left with bonuses despite their failures and being complicit in an economic disaster. This was the rule not the exception. Its quite clear to me that these things were mechanisms for the elite in these companies to take advantage of the situation to their benefit, and they used the corrupt connections in politics to get it.

Even if TARP actions didn't just give free money to the companies as a whole, the higher up people at these companies took away massive amounts of that money, at the expense of their shareholders and the taxpayers.

Part of the problem there is we allowed investment banks to switch from being unlimited liability partnerships (ie like a traditional law firm) to being a limited liability corporation.

By the way, I’m not defending backs here. The banks acted recklessly, even illegally, in the subprime era. Governments have taught them there is no downside to risky investments, which was part of the problem with several such incidents in the 1990s.

But we do need to be clear that often these are loans that are repaid and that a collapse of the financial system like we had in the 1930s doesn’t help anyone.

Hmm, I don't know too much about how investment banks being LLCs incentivizes bad behavior. I mean, sure, if bankers screw up and sink their bank, they can't be sued (unless they did something illegal), but the owners of those banks still don't want that to happen. What happened there?

> a collapse of the financial system like we had in the 1930s doesn’t help anyone

Sure, no one likes to live in a depression. But that's kind of besides the point, which is that the bailouts were massively corrupt. Its also pretty dubious that these institutions failing would have lead to anything like the 1930s. For one, bank runs played a large part in the great depression. But the FDIC didn't exist back then, and private clearing houses were put out of business by the Fed (who then for some reason refused to act as lender of last resort when it ended up being needed). The government buying corporate stock was uncontionable tho. It was pure corruption there, helping the elites escape with more money than they knew what to do with while the rest of us suffered.

That’s the reality but article tells a totally different story which is funny and also unsettling how The Guardian can do so bad reporting.

I for once agree with these council suggestion, 100% bank reserves for cripto-things. The world doesn’t need to add more instability to the FIAT system.

The world needs to toss the FIAT system....

why?

The reasons are far too numerous to list all of them here, entire books have been written outlying why Fiat currency is bad over all for humanity

however for me, I am supporter of extremely limited government, as such commodity based money is a natural limit on how much government a civilization can have, as government can only directly tax soo much before the citizens revolt, fiat currency allows them to tax by inflation and take on far more debt than a commodity currency would allow.

Also fiat currency makes War between nations far more economically possible.

"anything but this" is a compelling direction, when people don't subscribe to a least-worst model of governance. 'Anything but this' is an utopian path. There's really no justification or even rationalization, for compromise, online. 'Anything but this' is a form of 'cures whatever ails you'.

You are removing one problem with another. In FIAT govt control flow of money. In bitcoin, you give that control to some private companies who manufacture mining rigs and energy producing companies. Except, the cost of the alternative is you see increase in price of silicon tech and energy costs for regular use. I bet the supply chain issues you are seeing now a days with silicon products and high cost of crude can be attributed to increase in price of bitcoin.

> In FIAT govt control flow of money. In bitcoin, you give that control to some private companies who manufacture mining rigs and energy producing companies.

You forgot Elon Musk's tweeter account, which seems to have a lot of sway for reasons opaque to me. Then again, I think those fraudulent bitcoin-giveaway bots that pretended to be Elon primed the pump for him

Why, what did the Italian Automobiles Factory in Turin do?

> article tells a totally different story which is funny and also unsettling how The Guardian can do so bad reporting

Could you point out where you see problems?

Makes sense, an asset that has had multiple 30% dips this year alone and 5 dips of 60% in the past 10 years should probably treated as if its some what volatile:)

The good news is that the people in power are treating it as an asset class and not trying to suppress it.

https://twitter.com/staffordphilip/status/140291323539792281...

And with the news that Tether is holding alot of US commercial paper, crypto is starting to really cement itself into the existing financial community.

Though if the report that Tether is holding as much commercial paper as claimed is true they've really put themselves on the US regulators radar.

As people here are fond of pointing out, regulators jobs isn't to protect everyone, but rather to make sure markets working an orderly fashion. Anyone holding that much paper is going to be scrutinized pretty thoroughly and come done on pretty hard.

Tether is holding US commercial paper, yes, but they won't reveal WHO they've loaned to, or under what terms. Most likely, they have created new shell corporations, made sweetheart loans to them from the Tether bank account, and then had them pay out distributions to the owners. In other words, they've replaced the cash that should be backing the Tether with likely worthless IOUs. Tether is a bomb waiting to explode the crypto space.

Tether seems like a time bomb: https://crypto-anonymous-2021.medium.com/the-bit-short-insid...

It’s even worse. Tether only might be holding commercial paper. They’ve lied about everything before, no one has verified their assets, and no one in the commercial paper market has heard of them, so it’s even possible the commercial paper claim is a straight up fabrication.

https://www.ft.com/content/342966af-98dc-4b48-b997-38c008042...

I've outlined a scenario where they could be telling the truth about holding commercial paper but still have stolen all the money.

It’s certainly possible. I think it’s more likely there never was any cash and they printed Tether from thin air.

They surely got something for that Tether, and despite their denials I expect they have commercial paper form crypto exchanges if they have any at all. But they may simply be lying about even having commercial paper at all.

> "no one has verified their assets"

It's worse than that - they were audited by Friedman LLP in 2017, but chose to suppress the full outcome: https://www.coindesk.com/tether-confirms-relationship-audito...

Haha and I thought I was peak pessimist. Thanks forgot that detail.

Brings this Dilbert comic to mind: https://dilbert.com/strip/1995-03-14

30% dips in relation to what? 1bitcoin in 2018 == 1 bitcoin in 2020.

also, there is nobody forcing banks to hold crypto as an asset. nobody.

> regulators jobs isn't to protect everyone, but rather to make sure markets working an orderly fashion

That's not true. As just two examples: The SEC's job is to protect investors. The Consumer Financial Protection Bureau's job is to make "banks, lenders, and other financial companies treat you fairly".[0]

Some people may claim to prefer a libertarian marketplace, but that's not what the U.S. has decided upon.

[0] https://www.consumerfinance.gov/

It's unbelievable how many crypto crusaders jumped into the comments without reading the article.

This is not about banks asking to regulate crypto usage away. It's about reserves.

This is actually more of a crypto-friendly development than I'd expect.

If anything, it's a way for big banks to monopolize crypto banking by increasing the difficulty of starting a bank that holds crypto deposits.

However, it said looser rules could apply to stablecoins – a new form of digital asset usually pegged to the value of a traditional currency – that may require only a level of capital rules applied to traditional assets such as bonds, loans, deposits, equities or commodities.

Isn't that assuming that stablecoins are inherently lower risk than Bitcoin? Why should we take that assumption at face value? This just seems like it'd offer banks a way to launder their crypto risk by funneling it through stablecoins. Then, when a big spike or drop in the value of Bitcoin causes a stablecoin to break its peg, a bunch of banks who've put their crypto assets in the stablecoin in order to take advantage of the looser rules are suddenly caught out.

Yes, and we shouldn't. Your scenario is completely plausible. Though I don't know why a bank would want to hold any significant amount of stablecoins.

The volatility isn't the issue for the regulators. What they're worried about is the ability of countries like Iran to circumvent sanctions.

My suspicion is that they will order exchanges to de-list privacy coins.

The proposed rules require the banks to account for the credit risk of the party guaranteeing the stablecoin. So similar rules will apply to assessing a loan guaranteed by that party.

I'm guessing Tether Ltd. won't fare that well on the credit risk assessment, but other institutions could.

I'm guessing Tether Ltd. won't fare that well on the credit risk assessment, but other institutions could.

Given how the credit rating agencies were more than happy to give investment grade ratings to toxic waste in the run-up to the 2007-2008 financial crisis, I'm not sure that's a safe assumption to make.

What's even more of a joke is most peoples unawareness of how uncollaterlized/leveraged the __existing__ banking system debts are and are complaining about USDTs cash levels… like people never heard of the eurodollar markets…

~48.5% of long dated (gte 10 year maturities) of IG USD corp bonds are rated BBB (basically 1 notch above junk), and 97.4% of the same bonds are __uncollateralized__ (aka S-NT, aka Senior Unsecured…)… this is worse than the run up into 2007-2008… thousands and thousands of CUSIP's backed by nothing in the same way people rip on USDT…

The "regulations" haven't stopped the banks and corporates building up leverage in all sorts of novel ways that have yet to enter textbooks these bureaucrats will spend decades to study (and still be behind), and they sure as hell wont stop it from happening in DeFi…

We are at the "then they fight you" stage. The banks have every incentive to kill crypto because if it's successful, they are going to become irrelevant similar to newspapers that lost majority of their market shares to tech disruptors.

The biggest battles for Bitcoin are ahead in my opinion, but if it survives, which I'm convinced it will, it'll come out stronger than ever before.

That is not at all what the article is about.

The article is about bankers deciding that banks should not be able to leverage against the value of their crypto holdings - which is perfectly sensible given how volatile they are.

> Growth of crypto-assets threatens financial stability and could increase risks faced by banks, they warn

> Crypto-assets have given rise to a range of concerns including consumer protection, money laundering and terrorist financing, and their carbon footprint

Sounds to me, it's little more than just limiting borrowing.

There is no chance the US (nor China if it takes control) gives up the dominance of its currency.

Both state actors have more than enough means to squash Bitcoin or any other crypto

Which is why I say the toughest battles are ahead. Once US decides to use every tool in the toolbox to undermine Bitcoin, Elon's tweets are going to look like a joke.

They can ban on/off-ramps, they can crater it's value by making it illegal, but they can't stop the network itself, in the same way that torrents are still very much alive today.

They can also physically attack miners/users and cyber attack miners and exchanges

They can literally stop the network though by perpetrating their own attacks. Even if the bitcoin network is perfectly secure to a subtle cyber attack in the vein of stuxnet, all the US or any major power would need to do is bring the mining power low enough that it can undermine the block chain through brute force.

Honestly seems more likely to be a tactic employed in China though due to the more top down nature of that country's power structure.

Your comment seems to be unrelated to the issue in the article.

This development actually seems like it institutionalizes crypto more, not less.

Actually I would argue we're at the "recentralization" stage. Kind of like what happened to the internet. Now that the banks smell profit in the water, they have every incentive to get some concrete rules written around crypto so they can treat it like any other asset on the books. Once that happens they can easily dominate any PoS network due to their access to capital.

Even at my most optimistic I don't think the Bitcoin story is going to end differently than other applications of the internet, most of which are now highly centralized.

Which is why I'm personally anti-PoS, I think it's a fundamentally broken system which codefies "rich gets richer" down to the protocol and brings us to the old world where those with capital control everything.

PoW requires constant spending on energy and hardware.

Rephrasing an earlier comment, sorry, but - is Bitcoin really that great as a practical technology? An asset with dubious value (some bytes in a decentralized database) that's so staggeringly inefficient to run that the transaction fees are astronomical and speeds are glacial, and that nobody uses for any real purpose besides speculation - pumped by a million and one influencers and "coin news" sites parroting empty bullish propaganda in hopes the price of their portfolio keeps going up.

I was originally fascinated by crypto, but the more I've come to understand it the more I suspect the world has lost its mind.

Lightning network enables almost instant and practically free Bitcoin payments, that's what they are using in El Salvador.

Current financial system is pretty broken in my opinion, for example, I'm trying to transfer money into a business checking account I have, my options are:

- using Plaid, which will take banking credentials in clear text and store them somewhere for transactions, which is insane to me that this is what we need to enable all the FinTech stuff,

- using wire transfers which costs 20$ each,

- using check deposits (with 500$ limits), which is like the 1990s.

Current financial system has a trust problem, especially for new users, Bitcoin solves that.

what do you think money is? some bytes in a centralized database.

asset of dubious value? unless you can literally eat it, wear it of use it, all assets are of dubious value. It’s an asset of dubious value that you don’t like. Big difference.

The value of crypto comes from the decentralized trust. People don’t seem to grasp this at all, but this is a groundbreaking invention being dragged though the mud because it doesn’t serve the interests of out overlords.

> what do you think money is?

Opinions differ, mostly on context.

Currency, commodity, record of debts, measure of value.

> groundbreaking invention being dragged though the mud

Bitcoin is not the first collectable, the first escrow system.

> because it doesn’t serve the interests of out overlords

True. For now.

show me another system that does decentralized trust. and works

Middle ages had virtual currencies. Unlike butcoin, they were private.

Every generation thinks they invented sex.

> I was originally fascinated by crypto, but the more I've come to understand it the more I suspect the world has lost its mind.

I sort of agree. I have 12 Chia (XCH) so I've been learning about crypto for the last couple months. There's some neat tech alongside crypto, but all of it is completely ruined by the "currency" portion of the deal.

Here are the issues I have with it.

A lot of governments treat it as a security rather than a currency and that comes along with a ton of accounting and tax implications. In Canada, every exchange of crypto is a taxable event. In the US I've seen people claiming they're supposed to consider _mining_ a block a taxable event.

It's hard to spend and there are so many fees it's insane. I wanted to try buying a .eth domain last week, but I gave up when I realized my exchange charges $20 for a single transaction to move my ETH into a private wallet.

The fees are extremely hard to figure out if you're not a crypto veteran. I couldn't even figure out what the transaction fees for buying a .eth domain would end up being. The idea of variable rate fees for transactions is so dumb it's almost funny.

Being a security, the KYC/AML add a ton of friction for anyone trying to get into the ecosystem. I had to give crypto.com an astronomical amount of information to set up an account. Then, after all that, they don't have _all_ the currencies I'd like to buy and they'd probably charge me an arm and a leg for those transfers anyway.

For example, I wanted to try to buy a Handshake (HNS) domain, but they only accept 2 currencies; BTC and HNS. If I want to buy HNS from them I need to go though the KYC/AML verification process. Repeat this for every crypto currency where you can't buy it on your regular exchange or where you don't want to spend a fortune in withdrawal fees. I'd have to pay $14 right now to transfer BTC from crypto.com. That's ONE transaction.

Then, add in the complexity of swapping between currency which my country (Canada) considers a taxable event. If I use BTC at namebase.io to buy a Handshake domain, does that get swapped to HNS first. I assume so since the blockchain is only going to work with HNS. Who's responsible for that event? Me?

The immutable nature of the blockchains has downsides. The .eth domains are a good example of this. A ton of huge trademarked names are being squatted on, but there's no way to enforce IP laws. The crypto crowd considers this a strength, but it's not. None of the big tech companies are going to buy in to a system where their IP can be abused. IMO they'll actively fight against it's adoption. However, as soon as you take away the immutability, you have another version of ICANN, so where's the benefit?

I would have spent $200 on crypto domains last week, but it was such a pain in the ass that I spent $0. The space is 10 years old and I can't even spend my money on anything after making an effort at it (for several hours).

BTW, I've been trying to find a way to sell my XCH on a US/Canada banked exchange since they were at $1500 and I _still_ can't sell them as they dropped below $500 today. The only way to do it is to shuffle between currencies and exchanges. So I need to trigger a ton of taxable events and shift my money around in a way that looks like I'm a money launderer. No thanks. That's not for me.

End rant I guess. Lol.

Mining a block is a taxable event in Canada as well. It's just an income event, rather than a capital gains event (as it probably should be). Staking rewards aren't specifically addressed by the CRA, but it's likely those also fall under income events.

I believe energy costs towards mining can be written off as a business expense, but I'm not really interested in mining, so I haven't looked into it that much.

Anything I could find says that if it's done as a hobby it's only dispositions that count. That really hammers home my point though. It's literally unusable by the average person because the taxes are so complicated you'll need an accountant that specializes in crypto currency to do your taxes at the end of the year.

If the price drops to $100 and I'm holding $1000 I'll delete the damn things rather than dealing with the taxes on them. What a joke.

Also, to your point about getting rid of your Chia, I think 'looking like money laundering' sort of just comes with the territory right now. It's easy enough to trade it for something on Binance/Newton/Kraken and then cash out that way. In Canada, Kraken/Newton will allow you to cash out directly. Binance has more markets in case you need to trade it to something else first.

AFAIK Kraken and Newton don't trade Chia. Newton looks very, very similar to Coinberry. None of them trade Chia yet. The crazy thing is that on crypto.com I can _buy_ Chia, but I can't transfer in and sell it.

> I think 'looking like money laundering' sort of just comes with the territory right now.

Lmao. That'll be a hard pass for me then. $10k would be a lot of money for me, but I'd rather watch what I thought might be $5-10k disappear instead of ending up on the government's radar.

We are at the "Tether had to disclose it's holdings and it is effectively insolvent" stage.

"The new composition report is part of Tether’s efforts to stay in compliance with a settlement agreed to with the New York Attorney General’s office (NYAG) after the prosecutor investigated it and its sister crypto exchange Bitfinex over the cover-up of some $800 million in losses."

https://www.google.com/amp/s/www.coindesk.com/tether-first-r...

The idea is to replace banks. You can trust math better than men. Not your keys, not your coins, banks are the opposite of you being free, they take your money while you beg them to access it. Modern legacy finance is disgusting. Maximum fees, minimum choice, minimum convience. Fewer hours open and even fewer ATMS every year.

Of course they would. Everyone has to use banks now for electronic payment and crypto disrupts that.

This article has nothing to do with banks discouraging crypto use. It's just about how existing regulations related to risk are applied to banks' crypto holdings.

I think the point is that if the decentralized economies are used then there's no need for centralized entities like banks. Aka don't need to regulate the banks holdings if they don't act centrally.

Every example from history suggests that decentralization never erases middlemen.

How many people self-host crypto wallets? Why does Coinbase exist?

As long as things are being held, transferred, and sold, banks can build the expected financial abstractions on top of them and take a cut. There is nothing about crypto that will kill any big bank.

It may not kill banks, but it makes alternatives possible. I want decentralization for the same reason I try to avoid vendor lock-in. If the vendor I choose starts to go against my needs, I can choose a different vendor. If all vendors go against my needs, I can self-host. I cannot currently self-host online transactions.

I have no idea how the future of cryptocurrency will play out, but I'm interested in watching.

They are just afraid banks will be running out of business with exorbitant fees and useless charges. They will need to evolve otherwise lots of other startups will be replacing their need.

Assuming the insane scenario that Bitcoin becomes the world's one currency. 21 million Bitcoin are printed,most end up in the hands of few. How do you stimulate economic growth?

Token issuance is analogous to a loan economically (it creates new money supply) and in terms of its ability to finance economic growth. Anyone can do it, which is a massive improvement on access to finance today (or, in some countries, would be if not for outdated securities regulation).

Given that each token is traceable, it is very clear what risk one is holding if one holds a basket of tokens, much more so than for holders of bank equity or securitised loans.

Crypto allows for easy instant global money laundering and sanctions evasion, in a way that cash USD could never.

It is par for the course that government regulators do not react to these threats to the global financial system until they are glaringly obvious.

It's also likely that it'll take them a few more years to actually figure out how to implement this in any meaningful way.

My guess would be that their first step will be to ban crypto exchanges from using privacy coins.

Not sure what comes next though other than an outright ban. Bitcoin's support for atomic swaps to privacy coins might mean a forced de-listing for it as well.

A stablecoin issuer that makes claims about converting the tokens for dollars is a money transmitter (Circle), in that like a bank they receive deposits/reserves (actual dollars). A bank receives payment instructions through checks/etc to send 'electronic money' to someone else, based on real dollar deposits. A stablecoin issuer that makes claims to token holders that they can exchange the token for a dollar is doing the same thing as a bank just a different way- the way 'electronic money' is sent is through the token on a blockhain, p2p. They do not receive payment instructions, but they do custody the dollars that can be converted on presentation of tokens. But because they issued this token, that can be moved p2p, this token represents a claim on those dollars sitting at the stablecoin issuer. So the token/blockchain is moving funds electronically. Other cryptos do not work this way, since they aren't convertible to anything. I would say any issuer of any token that makes claims to exchange some type of reserve (another crypto) is also a money transmitter by the same logic. Tether says it doesn't have to exchange tokens for dollars legally, but that doesn't mean that they don't ever. If there is no legal claim on the reserves for token holders then Tether isn't responsible for money transmission when tether is sent p2p. Tether is a money transmitter though when they sell tether for dollars, because that is a business. Cirlce (USDC) issuer is a money transmitter, but they can only do KYC/AML directly on the front (who they sell to) and on the back (who presents token back for dollars). They can't do KYC/AML in the middle, where people can do p2p hops. Even though these people are not getting 'real dollars', the token itself is the technology that allows for money transmission and represents dollars held. What about cash in the bank? When you withdraw cash you give it to anyone and it can be accepted and there is no KYC/AML. The difference is there is no counterparty to cash dollars. They are real, they are money, you can hold them in your hand. They are different than your electronic account balance at the bank, because it is virtual (a representation) and because it is a liability of the bank to you. Just because USDC (the representation) can be withdrawn into your control- meaning you do not need Circle's approval to send a payment p2p (although they control the token so do have some authority), that is not the same thing as withdrawing cash dollars. USDC is representative of cash dollars, not cash dollars themselves, thus do not have the same properties as dollars. Dollars (cash) is real money with no counter-party risk. You can give it to anyone and the transaction is settled immediately. Banks hold financial assets, financial assets that are intangible always have counter-party risk. Someone who has USDC can send it to anyone too, but it hasn't been settled, because the dollars are sitting at Circle, the issuer. Because the real dollars are always sitting with the issuer, they act just like a bank where anytime you move money from your account to someone else electronically, everyone, everytime is KYC'd/AML'd. Confusion is around separating the technology employed to move real money, which can be called electronic money, and real money. Stablecoins are just an a new technology to move electronic money, not real money. In fact, all cryptos are a new technology to move representations of something, usually dollars/currency (if it is has a price), but they are not real money themselves. There is no way to kyc/aml p2p crypto hops for a central stablecoin issuer, thus violating their own money transmission requirements and this is because the tokens are mere representations of real dollars, they have counter-party risk, they are a financial asset under the issuer's control. Even with additional regulations, they can never mold this behavior of the nature of p2p tokens under existing money transmission rules. It seems to me eventually unknown p2p transactions will be banned, and all public addresses will have to be identified by Circle, or else they will just 'delete' those coins, so it can be done, and if it can be done, it will be done. Stablecoins are only beneficial if that does not happen. Tether is your best hope of keeping status quo.

But wait ... I thought Bitcoin was immune to regulators?

This is about Banks holding them as asset backing for deposits, etc. as an alternative to the traditional Bonds, Loans and Reserves.

It's not about the crypto-currency operation itself. It's whether they are worth anything in banking/accounting terms.

For now. Keep in mind, the question the status quo is wanting to answer is: "We can't simple stand still and forfeit our (fiancial) power, so how can we make this work for us?" They haven't squashed because it might be a and better opportunity for them.

It will be a nudge by nudge process. This is a start. Nothing is off the table for them.

> how can we make this work for us?

Which side of this debate do you think the City of London and Wall Street are on? Crypto has been a panacopia for finance.

What's a panacopia?

My point is, legislation and regulation is a function of control. The lack of such things currently either means:

- They already think they have the upper hand.

- Or, it's too new and they haven't sorted out which scale and how much thumb pressure to apply.

But the lack of regs atm is certainly not inductive of anyone's benevolence.

Bitcoin is immune same way as hawala is immune. Regulators can push it underground, but it will still function and provide value, albeit on different scale.

Hawala relies on trusted intermediaries to cash out. How would that happen with bitcoin? I doubt many legitimate uses would suffer back-alley transactions.

Same way, trusted cash exchange intermediaries. localbitcoins seems to be exactly this.

And for bitcoin it is much easier than for traditional systems, as trust only need to cover exchange operation.

So a competitor is trying to lobby against it's own doom/inefficiency?

Global banking regulators need to be investigated and brought to justice.

With "fractional reserve banking", banks can create money with each loan.

With bitcoin, if you want to create money, you have to work for it. Banks do not like that.

With Bitcoin, if you want make a transaction in the distributed database, you have to "work" to burn an ungodly amount of electricity doing useless busywork in giant data centers across the world.

It's a cancer.

Duh. Fiat currency (and Bitcoin is fiat) only matters insofar as you have the guns to defend it. Bitcoin has no guns, so there's no intrinsic value.

It's bleak, but the value of a currency is directly proportional to the number of lives a government is willing to kill to preserve its value.

The united states and Europe are willing to kill lots in their attempts to keep their currency afloat, as they've demonstrated through the centuries. Thus their currency is worth it to whomever values their life.

This is not a statement of how things should be, it's a description of how they are.

yes, through the centuries. where was bitcoin during the French Revolution? Nobody killed anybody for bitcoin during the French Revolution!

This is a really disingenuous take on what I said. If tomorrow bitcoin were made illegal, it's value would plummet, or those holding it under the radar would have to resort to all kinds of backroom deals and money laundering attempts to hide it. This is because bitcoin cannot defend itself against the strong arm of the state.

lol. do you know how bitcoin work? bitcoin can definitely “defend itself”. look at what happens/happened in Venezuela. Once you no longer need to convert it to fiat it’s as bulletproof as it comes

Unfortunately all governments of any importance tax in fiat.

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