Will the United States trade fixed profits in high-tech banks?

As of 2019, the crypto markets that have focused on global regulators are stable and their risks are affected.

Recently, these concerns have increased, particularly in the United States.

In November 2021, the US Presidential Financial Institutions Working Group (PWG) released a critical report questioning the potential for “sufficient funds” and “risk”. In December, the US Senate mitigated the risks of a stable room and held a hearing.

During the hearing, the following issues were raised:Are US regulators looking to keep coins stable in 2022? If the answer is yes, is it governed by "blanket" federal law or by more detailed financial regulation? Additionally, how will this policy affect unbanked banks and the entire crypto industry? Will this solidify businesses to become the best performing businesses in the world? for

White & Case partner Douglas Landy said:

"We are confident that the government will maintain a stable coin by 2022."

Rohan Gray, assistant professor at Willamette University School of Law, shares the same sentiment.

"In fact, stable financial management will come soon. It will have a double impact. On the one hand, it will affect federal law as a whole. On the other hand, the Bank and related government agencies will do more."

However, there is also the implication that the speed of healing will not be fast. Salman Banaei, head of policy at cryptocurrency analysis firm Chainalysis, said:

"I don't think any legislation will be possible until at least 2023. So the stable economic climate will stay with us for some time."

In other words, Salman Banaei predicts that the hearing in 2022 and the law "will prepare the profits of 2023".

Crypto assets are hot.

It is generally recognized that governance has increased. It doesn't just happen in America. Rohan Gray says:

"Other countries are presenting the same vaccine." Fuse is a Libra (now DM) project offered by Facebook in 2019. Along with the project, Facebook announced that it will establish its own global presence - which is a call to action to create rules. They made it clear that even though the crypto industry is a "small and small business" it cannot be done easily as it will not bring "risk".

Salman Banaei believes that the three most important issues are now driving the one-piece policy.

The first is the question of reserve guarantees.This issue is clearly spelled out in a report from the United States Financial Stability Review Board. According to Salman Banaei, some venture capitalists will provide unidentified information about their members in their announcements, which could quickly lead to owners of these digital assets to become aware of cost adjustments and the ability to make them. The results really depreciate.

The second problem is that stationary pieces support a certain feeling.These actions consist in particular in combating the risks of non-regulatory ecosystems such as the DeFi application, which do not meet the same requirements as other digital assets. for

The third question is "How can fixed income securities become a legitimate competitor of a shared payment model? ", Stablecoin issuers will someday seek to provide a "complete payments solution" that will impact existing payment systems and banking providers.

Regarding Salman Banaei's second statement, American University attorney Hilary Allen told the Senate last December that some believers say fixed coins are not used to pay for goods and aid services in the country. real world. The DeFi ecosystem is really a tough shadow banking system that will affect our real business. for

Rohan Gray added:

"The growth of the cryptocurrency market has made coin stabilization increasingly important, but improvement in coin stability compliance is hampered."

In fact, it was pointed out that there was a big problem with the storage of Tether (USDT), the industry leader in financial stabilization last year. It was later discovered that even well-mannered and well-behaved people could make a mistake on the property. For example, Circle, the largest publisher of USDCoin (USDC), once argued that fixed income securities are "back with a 1: 1 cash ratio." As a result, the New York Times estimates that 40% of Circle's fixed assets actually include income exceeding US Treasuries, deposits, commercial papers, corporate bonds and municipal debt.

Rohan Gray adds:

“Over the past three months, the hype has reached a new level. This includes popular advertising of crypto assets and non-fungible tokens (NFTs).

Is the United States Financial Stability Supervisory Board responsible for maintaining a stable currency?

Jai Massari, associate of Davis Polk & Wardwell LLP, stated:

“2022 is still too early to legislate or maintain a stable federal currency. On the one hand, it is election year in the United States. We are expecting a lot of requests.

If no U.S. laws are in place yet, the U.S. Treasury Department could stabilize the coin by 2022, the U.S. Securities and Exchange Commission (SEC) said. , US Commodity Futures Trading Commission and US Federal Reserve, Federal Deposit Insurance Corporation (FDIC), etc. In this case, issuers of non-bank stability coins may be subject to liquidity, customer protection and property rights requirements, which must at least comply with the market capitalization rule. for

Salman Banaei predicts that the US Treasury will actively monitor the stability of the economy by 2022. At the same time, he believes that the US Treasury Department can "buy but not necessarily intervene in stable business."

Can a stable business enterprise become a "depository enterprise" with deposit insurance?

For a stable market, allowing people to see "what happened" may be what makes Stablecoin issuers "banks" with insurance deposits, which also accepted the Presidential Task Force's Stablecoin report. on United States Financial Services. Now US lawmakers have started calling for a similar resolution on some proposals, and Rohan Gray, for example, helped draft the “2020 Stability Act,” which addresses the issue.

Jai Massari considers it inappropriate and unnecessary to impose such restrictions on investors in securities. In his testimony before the Senate Banking, Housing and Town Planning Committee, he said that the "real rooms" are in fact "narrow banks". In the era of "1930s financial strategy, Stablecoins did not apply" growth and exchange rates, for example, short-term loans for long-term loans and lending. Invest. “Thus, Stablecoins are more secure than traditional banks.

"One of the great things a bank has always had is that it can take more deposits than short-term liquid capital investments. Risk."

This is why modern businesses should assess home equity payments before purchasing insurance with the Federal Mortgage Insurance Corporation (eg, an insurance deposit). . However, if fixed funds limit their savings to cash or cash equivalents such as bank deposits and down payments on US Treasury bills, it can be said that they avoid risky “trades” and do not require insurance coverage.

However, there is no doubt that financial authorities in the United States are still concerned about financial stability. Here's what the US Security Council reiterated in its 2021 report, announced in December of last year:

"If the company's financial company does not respond to the redemption request, or the user loses confidence in the company, the company can meet the demand, completion will take place, which will expand the users and finances. "

Douglas Landy says:

“In today's financial economy, deposit problems rarely occur. This is due to issues like income, capital, and capital requirements that are not available. occurs under the supervision of the bank. All solutions, but the results are stable.

Salman Banaay dit:

“I think there are both advantages and disadvantages to having a solid money seller like the Department of Public Accounts (IDI). Working with IDIs to ensure that IDIs and regulators can be a good stable parts manager and be involved in new services. "

Rohan Gray believes insurance policies will be introduced soon. He added:

“The Biden administration seems to have this idea and it is gaining more and more attention at home and abroad. Japan and the Bank of England seem to like this point of view. These countries are not averse to risk. only money, but also risky work. Stablecoins Because of the potential. Lots of errors and computer code errors. Regulators don't want to harm consumers. "

What will happen next?

Looking to the future, Rohan Gray believes that a stable ecosystem must be diversified and asserted that the central bank (starting with some countries) has adopted the two-step model, the “retail” layer. Second, he thinks some security holders, like Circle, need to get a license from a government bank. Ultimately, these companies will switch to a sort of “high-tech bank”. The gap between modern financial firms and high-tech financial firms will become smaller and smaller.

In some cases, stablecoins and existing banks gradually merged. As modern financial institutions and crypto companies move closer together, the crypto industry will embrace some of the latest technologies and solutions, financial institution executives will no longer talk about deposits and will talk about firm commitments.

However, Douglas Landy appears to disagree with Rohan Gray.

"The ruling community hated the term Stabilitécoin. If the stable funds were administered by the US government, this name could be revoked.Why? Thus, the name does not mean anything in the fixed currency. In the eyes of regulators and policymakers, the digital coins related to fiat gains are by no means a "stable" and they believe it can mislead users. "

DeFi, stable algorithmic currency and other problems

In fact, there are many other issues in the cryptocurrency industry that need to be addressed.

Jai Massari, associate of Davis Polk & Wardwell LLP, stated:

“The way the DeFi industry uses fixed funds is still a big deal, but otherwise fixed funds don't stop DeFi from improving. On the other hand, there are also problems with the algorithm. This type of stable currency is legitimate. product, but relies on hard work to keep the price stable, so what can managers do about it?

Rohan Gray believes algorithmic stability coins are "riskier" compared to those benefiting from fiat currency, but the report on the coin is stable by the Financial Services Commission. The working group did not elaborate on this issue. The existence of such a "legacy" is a problem "may be related to the fact that the financial stability of the current algorithm is not widely accepted.

Overall, there are still many differences in managing a stable financial market. In addition, if the rules established by regulators are too strict, they can interfere and limit the development of new technologies. Salman Banaei, Director of Research Policy at Chainalysis, concludes:

“I think there is a risk of over-regulation, especially as China tries to establish a digital banking system and the digital renminbi could become a universal payment network,” he said. they do it and how they can do it. Repair parts permanently and not stress the importance of upcoming competition and innovate for new producers. Promoting innovation is our success., We must ensure to improve digital assets. "