The Biden administration is wrestling like that Plans To deal with the infamous controlled world of cryptocurrency, some officials are clearly pointing to it. Tightly controlled The world of banking. According to a New report The Wall Street Journal claims that some members of the administration are seeking to impose “bank-like controls” on crypto companies that issue stable coins এটি a crypto that is supposed to be linked to its value. Relatively stable assets Like the US dollar.
Stablecoins have been increasingly scrutinized by some members of the Federal Reserve over the past few months, fearing that the currency may not be as stable as its name will make you believe. In August, some officials at the reserve Note That there was the same “general lack of fragility and transparency” in the market around these coins we came to associate them with volatile crypto cousins like Bitcoin or Etherium.
As a recent New York Times article Indicates, A common concern behind Washington’s concern is that companies currently issuing stable currencies – such as tethers or circles – are not looking at them. Requirements for disclosure of values The way modern banks across the country. This means that from the outside, it is almost impossible to know what the relationship between a stable asset and a stable price is, and it means that it is almost impossible to estimate how much risk there is in crypto.
This lack of transparency has created regulatory concerns about the possibility Runs the bank This could happen if enough tether or circle investors get cold feet and rush for cash in their digital coins. Like regular banks, these companies are also at risk Exploded If a lot of customers rush to withdraw a lot of money at once.
Meanwhile, we got a taste of how realistic these risks are earlier this year. In February, iFinex – the company behind the popular stable Tether, and the equally popular crypto exchange BitFinex – was forced Close all transactions State officials in New York saw that since mid-2017, Teether has been misleading clients about his crypto dollar peg. According to the state’s attorney general, the company at the time had “no access to banking” and “no reserve to keep teachers behind”, leading to statewide bans and 18.5 million fine Being imposed against the parent company. U.S. officials have since issued a statement Extensive search On the grounds within the company that Teether initially lied to banking partners about their transactions being linked to crypto.
Sources familiar with the White House plan told the Journal that one way to avoid another teething situation is to pressure stable companies to register as banks, which is more transparent than their crypto part. By design. Obviously, this is less likely to work. Sounds like humble pressure to throw a penny at government goodwill. Another suggestion would be to create one New kind Bank charters have been issued for the business model of the crypto company.
The proposals – and possibly more – came as part of a Treasury Group session releasing a stable coin advisory report later this month. There were upcoming documents First announcement This past July, its hot on the heels A co-authored paper Federal Reserve Attorney Jeffrey Zhang and Yale University economist Gary Gorton describe how dangerous it is to run a stable coin-induced bank. According to the journal, the report is still half-baked, and its recommendations are still “being discussed” by the advisory committee. And at least at this early stage, we don’t know how these new rules will be applied.
On the bright side, at least one stable issuer seems to be on board with the whole “banking bank” concept; Spokesman for the circle Told Kondesk That the company “is already working towards becoming a full-fledged national commercial bank,” and that it “firmly [believes] A full-fledged banking model built on that digital currency technology can lead to a more efficient, fair, inclusive and resilient financial system.
Circles also as laid in one Recent regulatory filings, Becoming a bank means less reliance on third party systems. “As part of our strategy to reduce our reliance on third parties, we may consider following the charter of the National Bank of the United States in the future or evaluating the acquisition of the National Bank, Company Wrote In the August filing with the Securities and Exchange Commission. “This will allow us to have direct access to the Federal Reserve system, reducing costs and time for transaction settlement.”
So maybe if the Treasury’s polite proposals fall, the temptation to be a self-sufficient fintech provider will make a more stable coin provider stand by Big Bank.
We have reached out to the Treasury Department to comment on the journal report and will update this post when we hear.