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A bill was introduced today by U.S. house representatives that aims to put in place new regulations that would require stablecoin issuers to secure bank charters and either obtain FDIC insurance or maintain full reserves to operate in the U.S. I think it goes without saying that this bill was not a welcome sight for the crypto community.
Okay so not only is this bill not thought out at all, one of the Congresswomen who proposed it said on Twitter that one of the aims of this bill is to prevent cryptocurrency issuers from repeating the crimes against low- and moderate-income residents of color that the traditional big banks have. This makes absolutely no sense at all - stablecoins (and DeFi as a whole) have increased access to financial services for these same people. For the first time in history, anyone can go bankless with just an Ethereum wallet which allows them to have less reliance on the traditional financial system. Hell, there was even this news yesterday where Visa announced that they have opened up their network to USDC!
One of the architects of the bill even suggested that people who are running full nodes should reject certain blocks based on the bill’s criteria. Uh, what? That’s not how blockchains work - my full node can’t pick and choose which transactions and blocks it wants to validate (if it did, it would fork off of the canonical Ethereum network)! The only way to actually censor transactions/blocks on the Ethereum network is to carry out a 51% attack but if you’re successful in doing that then the Ethereum network has much bigger problems.
All of this is quite amusing to me because just a week ago I wrote this piece covering the rumored regulations around self-hosted wallet and at the end of the piece I said:
“We still have a very long way to go in building out this parallel financial system on Ethereum and I do worry at times that we may not get there before harsh regulations come for us. Governments tend to move slowly but at some point they do move and when they do, it can be either very favorable or very bloody.”
Seems like the governments have chosen the “very bloody” route when it comes to regulations and I can’t say that I am surprised. Whether it’s out of malice, misguided intentions or just simply not understanding the technology, more of these regulations are coming and we need to be ready for them. On that note, you should consider donating to Coin Center as they are on the front-lines when it comes to defending against this poor regulation (in the U.S).
All of this shows a fundamental lack of understanding from the involved parties. I bet if I asked them to describe how MakerDAO and DAI worked they wouldn’t be able to tell me. This entire bill feels like a reaction to Facebook’s Libra (now called Diem) and of course all of the other stablecoins are being caught in the crossfire. In saying that, there’s a low chance of this bill going through but if it does, the U.S. can say goodbye to pretty much everything crypto-related being located there. Let’s hope that the regulators come to their senses.
Have a great day everyone,
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All information presented above is for educational purposes only and should not be taken as investment advice.