State of Crypto: Stablecoins! Still!

Examining the intersection of cryptocurrency and government

By Nikhilesh De

Managing Editor, Global Policy & Regulation

November 30, 2021

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Hey folks,

Welcome to State of Crypto, a CoinDesk newsletter looking at the intersection of cryptocurrency and government. I’m your host, Nikhilesh De. You’re probably here because you signed up, but in case you’re not a fan, you can unsubscribe here.

We are rapidly approaching the end of 2020 2021 but policymakers are not letting up in terms of their approach to crypto. Last week’s letter to stablecoin issuers is yet another step in this ongoing story.

—Nik

When stablecoin rules?

Sen. Sherrod Brown (Anna Moneymaker/Getty Images)

The narrative

Last week, U.S. Sen. Sherrod Brown (D-Ohio) sent letters to a handful of stablecoin issuers, asking for more information about their issuances, governance, consumer protection policies and more. It’s the latest move in an escalating effort by lawmakers, particularly the Senate Banking Committee chairman, to understand and evaluate stablecoins.

Why it matters

Lawmakers are grappling with stablecoins worldwide, but we’re starting to see movement from just asking questions to the beginnings of actual policy proposals and potential laws. In that light, the questions Brown is asking stablecoin issuers could identify what issues might fall into the explicitly defined regulatory landscape.

Breaking it down

Brown sent letters to Circle, Coinbase, Gemini, Paxos, TrustToken, Binance.US, the Centre Consortium (which Coinbase and Circle jointly operate) and Tether, asking for information about the respective stablecoins they each issue.

Roughly summarized, the questions ask:

Some letters had more questions than others, such as those to Coinbase and Gemini.

“I have significant concerns with the non-standardized terms applicable to redemption of particular stablecoins, how those terms differ from traditional assets and how those terms may not be consistent across digital asset trading platforms,” Brown wrote in several of the letters.

The letters came a month after Brown, with a handful of other Democrat senators, wrote to Facebook ordering it to halt its announced Novi pilot program, as well as any work on the diem stablecoin project.

At the time, the lawmakers wrote that Facebook could not be trusted with customer data though, interestingly, this was not an issue discussed in last week’s letters.

Brown’s letter referenced the President’s Working Group on Financial Markets’ report on stablecoins, which the group published at the beginning of November.

In a similar vein, the Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation and Federal Reserve published their joint sprint team timeline last week, announcing when they plan to announce further clarity around bank interactions with crypto, including stablecoin issuance.

Given a) the PWG’s recommendation that stablecoin issuers be regulated similarly to national banks and b) the PWG’s recommendation that Congress cement this proposal through legislation, it’s very possible that last week’s letters are a first step toward this regulation.

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The Biden Bunch

Changing of the guard

Key: (nom.) = nominee, (rum.) = rumored, (act.) = acting, (inc.) = incumbent (no replacement anticipated)

Five Democrat senators have expressed their opposition to OCC nominee Saule Omarova, Axios reported last week. The already-contentious nomination has faced headwinds since being announced, and this state of affairs doesn’t look likely to change.

Elsewhere

European Council Takes One Step Closer to Ratifying Landmark Crypto Regulation: The European Council has adopted its stance on the Markets in Crypto Assets (MiCA) framework, bringing this landmark European Union-wide regulatory proposal closer to implementation. My colleague Sandali Handagama has the details.

ConsenSys Suddenly Bars Iranian Students From Ethereum Coding Class: ConsenSys Academy touted scholarships for Iranian students earlier this year. Earlier this month, the education branch of the Ethereum software incubator told about 50 Iranian students it would remove them from its rolls. My colleague Anna Baydakova dug into what happened and why.

Celsius CFO Arrested on Charges Tied to Former Job at Moshe Hogeg’s Firm: Yaron Shalem, who joined crypto lender Celsius as its chief financial officer in March of this year, was one of the individuals arrested alongside Israeli crypto entrepreneur Moshe Hogeg earlier this month (the charges appear to be unrelated to Celsius). This took some investigating by my colleague Ian Allison to report out.

A message from ForUsAll

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Consensus 2022

Consensus 2022, the must-attend crypto and blockchain experience of the year, is heading to Austin, Texas, from June 9-12, 2022. This is the only festival showcasing and celebrating all sides of the blockchain and crypto ecosystems, and their wide-reaching effect on commerce, culture and communities. Register now for the lowest price.

Beyond CoinDesk

(The New York Times) Uber allegedly had a team that watched over “competitors, opponents and disgruntled employees,” Kate Conger at the NYT reports. One of the members of this team claimed the others broke laws around wiretapping and other crimes – but it appears this might not have been the case.

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If you’ve got thoughts or questions on what I should discuss next week, or any other feedback you’d like to share, feel free to email me or find me on Twitter.

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See y’all next week!

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