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We\u2019re starting to get a sense of how the Biden administration will try to regulate stablecoins. The short version seems to be: A regulatory framework that would mandate more transparency and oversight from issuers (versus one focused on the stablecoins themselves).<\/p>\n
Side note: I\u2019m at The Trading Show Chicago<\/a> today and tomorrow. If you\u2019re also here, let\u2019s say hi.<\/p>\n
You\u2019re reading State of Crypto, a CoinDesk newsletter looking at the intersection of cryptocurrency and government. <\/i>Click here<\/i><\/a> to sign up for future editions.<\/i><\/p>\n
The Biden administration is moving beyond vague hints on how it will regulate stablecoins to more concrete descriptions. There\u2019s still a lot we don\u2019t know yet.<\/p>\n
Stablecoins have exploded in popularity over the past year or two, with some $130 billion worth of these fiat-pegged tokens in circulation as of Sunday night, according to CoinGecko<\/a>. Regulators have been eyeballing this specific sector of the broader crypto industry for nearly a year, and we\u2019re finally seeing their response. The final regulations will determine whether some issuers have to shut down or block U.S. users, as well as what sort of transparency we can expect to see from these issuers.<\/p>\n
Stablecoins! Yes we\u2019re still talking about this. The Biden administration has gotten very busy around cryptocurrencies in general. The Securities and Exchange Commission (SEC) will start approving or rejecting bitcoin exchange-traded fund (ETF) applications in the next few weeks, the Office of Foreign Assets Control just sanctioned a crypto trading firm for the first time and regulators have been talking a lot about regulating the market.<\/p>\n
Stablecoins have taken on a particular importance. The Trump administration even convened<\/a> a President\u2019s Working Group for Financial Markets<\/a> meeting to discuss the issue, so it\u2019s no surprise the current administration has been looking to enact regulations.<\/p>\n
\u201cWhat isn\u2019t clear is what sort of regulatory framework would make the most sense for stablecoins,\u201d I wrote<\/a> in July.<\/p>\n
We now have the first glimmer of how the Biden administration plans to answer this question: Treating stablecoin issuers in a similar way to banks<\/a>.<\/p>\n
Regulators have espoused the need (in their view) for any sort of regulatory oversight over stablecoins at the federal level. While some U.S.-based stablecoin issuers are regulated by state financial regulators (cough, NYDFS<\/a>) there\u2019s no one agency formally assigned at the federal level.<\/p>\n
Federal Reserve Chair Jerome Powell reiterated this view in a hearing before the House Financial Services Committee hearing last week<\/a>.<\/p>\n
Bank regulations are something else.<\/p>\n
Given the attention on DeFi though, I\u2019m sure this is an area we will see addressed.<\/p>\n
Last week, stablecoin issuer Tether announced it won a partial dismissal of a lawsuit it is fighting.<\/p>\n
The case has its origins almost two years ago to the day, when a handful of crypto investors sued Tether, Bitfinex and DigFinex<\/a>, as well as various current and former executives (and later adding<\/a> Bittrex and Poloniex) on allegations the businesses manipulated bitcoin\u2019s price; the investors claimed damages upwards of $1.4 trillion.<\/p>\n
Tether and the other defendants filed to dismiss<\/a> the case in September of last year.<\/p>\n
U.S. District Judge Katherine Polk Failla, of the Southern District of New York, dismissed<\/a> the third, eighth, ninth, tenth and twelfth counts and dismissed the sixth count for Bitfinex, Tether, DigFinex, Bittrex and Poloniex. The defendants now have until Oct. 28 to respond to the rest of the amended complaint (i.e., counts one, two, four, five, seven and 11).<\/p>\n
For its part, Tether seems pretty pleased with the current state of affairs.<\/p>\n
\u201cEven for the remaining claims, the Court\u2019s order raises substantial issues that will ultimately be fatal to the plaintiffs\u2019 case. With half their case now dismissed, their primary expert debunked, and their lead law firm embroiled in its own internecine war \u2013 with its partners and former partners trading allegations of fraud and ethics violations \u2013 this case is doomed,\u201d Tether said in a statement<\/a> posted to its website.<\/p>\n
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Rohit Chopra, Biden\u2019s nominee to run the Consumer Financial Protection Bureau, officially took office after the full Senate confirmed his appointment last week. It will be interesting to see if and how the CFPB takes on crypto businesses under Chopra\u2019s direction. A quick glance at the CFPB\u2019s consumer database shows that crypto exchange customers are filing complaints, though the numbers are small when compared to major banks like Wells Fargo. It\u2019s also worth noting that Sen. Elizabeth Warren (D-Mass.) praised Chopra\u2019s nomination<\/a> back when Biden announced it in January.<\/p>\n
\nHow it started: How it\u2019s going: pic.twitter.com\/gOhLSOBIAP<\/a><\/p>\n
— Bennett Tomlin (@BennettTomlin) October 2, 2021<\/a><\/p><\/blockquote>\n
If you\u2019ve got thoughts or questions on what I should discuss next week or any other feedback you\u2019d like to share, feel free to email me at nik@coindesk.com<\/a> or find me on Twitter @nikhileshde<\/a>.<\/p>\n
You can also join the group conversation on Telegram<\/a>.<\/p>\n