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Stablecoin conflict: Cryptographic assets require tougher oversight

Stablecoin conflict: Cryptographic assets require tougher oversight


The Stablecoin market, a crucial link between cryptocurrencies and traditional currencies, requires stricter oversight, as regulations on both sides of the Atlantic are behind the rapid growth of digital assets.

Stablecoins indicates that the trading port is safe for traders to store funds, becoming a major part of cryptocurrency trading, just as money in a similar market is used by typical market investors.

Patches on disclosure standards, lack of consumer protection, and the role that money can play in a more traceable way have increased calls for more rigorous surveillance, as the market has expanded rapidly with the broader digital asset industry.

“The direction of the trip is certainly to regulate them,” said John Salmon, who leads the Hogan Lovells law firm’s blockchain and cryptocurrency practices.

Politicians in the US, UK and mainland Europe are growing plans to closely monitor stablecoins, which are “tied” to traditional currencies, commodities or other digital assets to reduce volatility. Most Stablecoin issuers say their coins are fully protected with reserves, usually traditional currencies or cryptocurrencies.

A group of U.S. members of Congress at the end of last year proposed legislation stablecoin issuers would need to obtain a bank letter, comply with banking regulations, and have the approval of the Federal Reserve and the Federal Deposit Insurance Corporation.

“Digital currencies, because their value is tied to or stabilized against a traditional currency like the dollar, create new regulatory challenges [they] they also represent a source of growth in the market, liquidity and credit risk, ”said Rashida Tlaib and Stephen Lynch of the House of Representatives.

What is a stablecoin?

Stablecoins are cryptocurrencies that are linked to another asset, theoretically reducing their volatility. This stability makes them useful for converting currencies between currencies and other cryptocurrencies.

Stablecoins can be associated with asset classes such as physical currencies, currency baskets, other cryptocurrencies and even real estate.

Tether, launched in 2014, is the largest circulation stabilizer with $ 56 billion in coins. The Facebook-sponsored stablecoin, Diem (formerly known as Libra), could be launched this year.

Rohan Gray, Professor of Law at Willamette University, assisted in the writing invoiceHe added that “there is a long history of new entrants into the financial sector using the technological advantage…

“Everything [the variations of stablecoins] they are just shadow banks that should be regulated for me. . . as part of the banking system, ”he said.

Harry Eddis, a partner in Linklaters law practice, spoke about the European Commission’s Crypto-Assets proposal and the UK Treasury on stable consultations, both of which call for greater regulation of the sector and highlight the ambiguity surrounding the status of stablecoins.

“If a stablecoin falls into the category of unregulated or electronic money, a lot of regulatory oversight and conduct rules fall,” Eddis said. “That’s why you see a lot of regulators who want to enact regulations.”

Last June, the Financial Action Task Force, which sets global standards for money laundering and terrorist financing, was released. draft report stablecoins to the G20 nations team. He noted that asset stabilization mechanisms can present ways to manipulate the market.

Regulatory debate As many investors in the cryptocurrency market are looking at Tether, it is the largest establishment in circulation of about $ 56 billion, according to CoinMarketCap.com.

Stablecoin – $ 1 is “tied” to the focus, in part because it has continued to operate in many jurisdictions and has grown rapidly even after censorship by New York’s attorney general.

The state attorney general said in February that Tether’s “lie” was that his virtual currency was fully protected by the U.S. dollar at all times. “ In a 2018 incident.

The groups were also ordered to report quarterly, what type of assets are being used to repossess Tether coins, and a ban on operating in New York was imposed.

“These companies hid from real risk investors and were managed by unlicensed and unregulated individuals and entities operating in the darkest corners of the financial system,” said New York Attorney General Letitia James at the time. The group said the issue “does not support wrongdoing.”

Line chart: $ bn in circulation Tether has grown rapidly with the cryptocurrency market

Tether says his coins are now “fully” backed by the company’s reserves, but said he has provided little details about the mix of assets he has from “traditional currency,” including “receivables from third-party loans made by the chain.” parties ”.

“They don’t have it yet [released] this [information] it’s very late in the game, but the $ 50 billion coins issued are huge, ”said Tim Swanson, founder of technology consulting firm Post Oak Labs.

Tether and some large stablecoin issuers, such as the USD Coin backer Circle, publish what third-party accountants call “credentials” on their farms to provide a level of disclosure. However, these statements may differ from the usual audits in terms of what they disclose, and there is a wide variety among companies.

“As the most reliable digital currency in the dollar in circulation, Circle remains committed to high standards of transparency and accountability with the USD Coin,” the spokesperson said.

Amy Kim, chief policy officer of the Digital Chamber of Commerce’s industry group, said that if companies took a “more unified approach” it would “create consumer confidence and help the industry grow more responsibly”. Last week, the group released a report suggesting a standard of cohesion to address “unbalanced and incoherent methods”.

Stablecoins face a long-term challenge for digital currencies in central banks, which would offer a separate digital payment system to commercial banks and payment companies.

Among the various proposals, individuals are allowed to hold digital accounts at a central bank or digital token.

“There will be a great deal of geopolitical debate over the next decade,” said Jonathan Knegtel, one of the founders and CEO of the blockchain company Blockdata Analysis. “Will regulators be comfortable in a way that is stable alongside the central bank’s digital currencies?”



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