Posted on 11/21/2021 4:30:03 AM PST by Kaslin
The Biden administration has made it clear they oppose the potential of stablecoins. But proponents view these private digital tokens, which are backed by reserve assets such as the U.S. dollar and short-term debt (e.g., commercial paper), as serving a key function to ensuring that all Americans have access to financial services.
Pervasive opposition to digital tokens in the Biden administration could terminate future opportunities for providing capital to Americans that currently lack access to financing and bank deposits. Overregulation will stifle innovative financing products that could help provide capital for the unbanked and underbanked, or individuals who lack sufficient access to financial services. According to a Morning Consult poll, 37 percent of the underbanked population own cryptocurrency compared to only 10 percent of individuals who are fully banked.
Most importantly, the unbanked or underbanked individuals in the United States tend to be minorities. Black and Hispanic households are about five times as likely to be unbanked as white households. According to a survey conducted by the Federal Deposit Insurance Corporation (FDIC), in 2019 “unbanked rates were higher among lower-income households, less-educated households, Black households, Hispanic households, American Indian or Alaska Native” households.
Rural communities are also more likely to lack access to financial services. The FDIC reported that “64.6 percent of rural households used bank credit, compared with 69.2 percent of urban households and 77.3 percent of suburban households.”
Finally, low-income households are also disconnected from banking. The FDIC found that “only 37.0 percent of households with less than $15,000 in income used bank credit, compared with 89.9 percent of households with income of $75,000 or more.”
Clearly, digital tokens have potential to offer essential services to minorities, low-income individuals, and rural communities.
In the past year, stablecoins’ market capitalization has grown over 500 percent to over $127 billion as of last month. The meteoric rise of stablecoins has garnered a lot of attention from federal officials who view stablecoins as operating in a similar fashion to money market funds. Several officials in the Biden administration have raised concerns that this growth increases the potential for runs on stablecoins which could lead to broader financial instability.
This month, the President’s Working Group on Financial Markets, the FDIC, and the Office of the Comptroller of the Currency (OCC) published a report on stablecoins that asked Congress to pass legislation that would only allow federally insured depository institutions to issue stablecoins. The report also says that the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have broad authority to regulate stablecoins.
Additionally, while waiting for legislative action, the report encourages the Financial Stability Oversight Council (FSOC) to designate stablecoins as “systemically important” to the financial ecosystem thus imposing stringent risk-management requirements on the tokens.
While these concerns are understandable, the key to ensuring that investors are protected from bad actors is by providing accurate disclosure information that details the structure of the stablecoins. The Cato Institute has outlined a detailed framework for stablecoins that will protect investors and promote innovation. The framework would amend current statute so that issuers of digital tokens are regulated as “limited purpose investment companies” and have certain collateral requirements they must meet. The proposal would also require the issuers to disclose “a detailed explanation of its reserve holdings” including the value of the assets and the percentage of each asset. For example, how much of the stablecoin is backed by the U.S. dollar versus short-term debt.
Following the publication of the Biden administration’s report on stablecoins, Acting Comptroller of the Currency, Michael Hsu, recently said that stablecoin development is “not what you want” and that the outcomes of innovation are “not going to be good.”
Given that the OCC regulates national banks, and the Comptroller of the Currency is a voting member on the FSOC, Acting Comptroller Hsu’s remarks are especially worrisome for stablecoins and private digital tokens in general. Even more concerning is the current nominee to run the OCC, Saule Omarova, a critic of digital tokens. Bloomberg reported in September that “if Omarova is confirmed by the Senate, the OCC would likely go even further in pursuing stricter oversight of digital tokens and tougher rules.”
Skepticism toward stablecoins could stymie important innovations in financial services. For example, according to a paper published by the Bank for International Settlements, Meta’s stablecoin could be used across “Facebook Pay, WhatsApp Pay and Instagram Pay, with potentially rapid access to hundreds of millions of retail customers in a very short period.” Additionally, stablecoins could soon play a key role in novel crypto products offering dividend-like yields.
Congress should think hard about how to promote the usage of stablecoins without compromising investor protections. Whatever Congress decides on should expand financial services to those who need it and encourage innovation within the industry.
Smells like a Trojan horse.
Gee, that sounds like a winning financial recipe right there. A vaporware "currency" backed by fiat paper and debt. This is something that "experts" came up with?
This is interesting given yesterday’s appearance of Dr. Naomi Wolf on Steve Bannon’s War Room.
One of the features of digital currency is the capability to shut you off and to restrict your movement.
Restrict my movement? How?
By restricting your purchases to within a certain radius of where you’ve been ordered to remain.
This is interesting given yesterday’s appearance of Dr. Naomi Wolf on Steve Bannon’s War Room.
One of the features of digital currency is the capability to shut you off and to restrict your movement.
Restrict my movement? How?
By restricting your purchases to within a certain radius of where you’ve been ordered to remain.
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Deeply ironic, in that one of the so-called sable coins is called “Tether”.
I paid my property taxes by bank transfer and used my VISA debit card to make a charitable donation.
I used to have a Paypal account but I let Paypal close it out.
Yup, libertarians trying to take over the world as usual, what could possibly go wrong? Might as well call it CartelCoin, or failed state CommieCoin
For the poor, the key is to make accounts garnishment protected.
There are millionaire Bitcoin holders that have lost their passwords.
Perhaps the IRS could help out for a share of the capital gains.
In the UK, many merchants are furious over credit card merchant fees.
It hard to cover operating costs when interest rates are low.
What this guy is advocating sounds like a recipe for a bubble, hopefully cooler heads will prevail.
They keep this stuff up and local communities will be coining their own currency. Not sure they are going to be happy with the true final cause and effect of their actions. It will become an S&H green stamp situation.
https://en.wikipedia.org/wiki/S%26H_Green_Stamps
Bankers want the money to all go through their hands. The government wants all the money to go through their hands.
A lot of people do not want and have no need for a banking account. Their weekly pay is just enough to pay the electric bill, their rent, and their phone bill when those are due.They can then buy their groceries, put enough gas in their car to get to work the next week and buy a case of beer for the weekend. They can buy a money order for the first three items and pay cash for the remainder.
A lot of these people are a happier than many I’ve seen who are paid on the first of the month per their contract, and have a half a dozen credit cards and two or three banking accounts.
This is about as backward as it can be.......
Rural persons Do have plenty of access to banking...WE JUST DRIVE FURTHER
MANY of own our own properties-—free & clear—like I do—and we do not use mortgage lending services....WE HAVE NO NEED FOR SUCH....
HOMELESS don’t use banking because they have NO papers to prove who they are & to LEGALLY open a bank account and they have NO ADDRESS to connect the bank account to.
There are SO MANY HOLES in this essay that I don’t have the time to cover them all.
HOW does a person ACCESS such currency???
WITH a CELL PHONE???
AGAIN-—how does a homeless person living on the Streets of Los Angeles or San Francisco do that?
I own my property-—I do NOT use a cell phone-—and I refuse to be pushed into doing that.
THIS is ALL another method of control by the elites over everyone they deem “NOT WORTHY”.
Time to clean & oil & load all weapons...
THESE people are out of control and they will erase you if they can.
Many of us for years have used the expression “GOING GALT”.
Time to add another phrase-—”GOING KYLE”.
—”Smells like a Trojan horse.”
Now that you mention it, there is something smelly about this article.
No money, no bank but they have an expensive cellphone?
Lose your bitcoin password and you are forever locked out.
Satoshi Nakamoto has over 70 billion dollars, untouched for years, not good for his wife and kids?
He says that and then doesn't say how.
Great observations, very well said.
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