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18 January 2021

Blockchain Bites: Bitcoin's Edge as a Hedge and Crypto's Reaction to the STABLE Act - CoinDesk

Blockchain Bites: Bitcoin's Edge as a Hedge and Crypto's Reaction to the STABLE Act - CoinDesk

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The Stablecoin Tethering and Bank Licensing Enforcement (STABLE) Act would require stablecoin issuers – like Tether, Centre or Diem (formerly Libra) – to apply for federal banking charters, hold minimum Federal Deposit Insurance Corporation reserves and register with the Federal Reserve.

In essence, the bill is applying a key component of banking regulation to the emergent stablecoin industry.

“An enormous amount of the innovation brought to the underbanked and small businesses has been driven by non-bank fintech companies, and forcing crypto, fintech and blockchain companies into the enormous regulatory burdens of Federal Reserve and FDIC regulation and supervision is inconsistent with the goals of supporting innovation in the fair and inclusive delivery of payments that comes from stablecoins,” he said in a statement emailed to CoinDesk.

The bill overlooks “two core promises of decentralized networks: the chance to put more power in the hands of individual consumers and to catalyze innovation across payments and other financial services,” Blockchain Association Executive Director Kristin Smith said in a statement.

The STABLE Act raises questions around what exactly a deposit is, what sorts of obligations issuers have towards their users and the novel regulatory challenges around an industry just getting started.

“Any entity that wants to issue something that walks and talks like money or like a deposit should be regulated like a depository institution,” Rohan Grey, an assistant professor at the Willamette University College of Law (and an adviser for the bill), told CoinDesk.

The ETP structure is a type of security with a value derived from other investment vehicles – such as currencies, commodities or, in this case, bitcoin – to which it is benchmarked.

Other countries, he said, had more favorable regulatory environments

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