Welcome to The Node. This is Daniel Kuhn and Prachi Vashisht, here to take you through the latest in crypto news and why it matters. In today’s newsletter:
The U.S. House Financial Services Committee published a draft of a potential stablecoin bill, which would include a moratorium on all stablecoins backed by cryptocurrencies rather than safer assets like cash or U.S. Treasurys. The bill represents the first major piece of crypto legislation to move in 2023, creates definitions for stablecoin issuers and could set a foundation for the U.S. government to study central bank digital currencies (CBDC) after several notable stablecoin-related missteps in recent months. Speaking of, Terraform Labs founder Do Kwon reportedly sent $7 million to a South Korean law firm Kim & Chang just before the collapse of his algorithmic stablecoin UST. Elsewhere, Deputy Governor Jon Cunliffe said the Bank of England is mulling limits on stablecoins used for payments in a speech on Monday.
Cryptoverse
Despite ether’s (ETH) price reaching an 11-month high, withdrawals of staked ETH only crossed 1 million tokens on Sunday night, likely quashing bearish price forecasts that the recently implemented Shapella upgrade would lead to a mass sell-off. Glassnode, for one, estimated $300 million ether may be sold after the updated. Meanwhile, the Sui Foundation, an organization dedicated to the eponymous layer 1 blockchain, has appointed Panteion University economics professor Greg Siourounis as managing director to shepherd the ecosystem’s growth. In addition to helping “raise awareness” of Sui, he will help distribute developer grants ranging between $10,000 and $100,000 to projects building on Sui.
Receipts
Former basketball player and paid FTX shill Shaquille O’Neal was finally served outside his Atlanta home in a class-action lawsuit against FTX founder Sam Bankman-Fried. The Moskowitz Law Firm, which represents the plaintiffs, has accused O’Neal of ducking a subpoena for the past three months. In other news, a filing from the U.S. Office of Government Ethics reveals former U.S. President Donald Trump earned anywhere between $500,000 and $1 million from non-fungible token (NFT) sales. Finally, the Securities and Exchange Commission claims crypto exchange Bittrex, which is being sued by the agency, failed to register as an exchange, broker or clearing agency.
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The stablecoin part of the bill is largely concerned with Endogenously Collateralized Stablecoins and Qualified Payment Stablecoin Issuers – absurdly named if you ask me (apt for the government though).
On the former, if the bill becomes law “endogenously collateralized” stablecoins (aka algorithmic stables or ones backed by digital assets issued by the stablecoin issuer itself) would be unlawful to issue, create or originate for two years.
This seems like a good rule for U.S. lawmakers to pursue in the name of protecting Americans. Algorithmic stablecoins do not work, period. And they probably never will since they depend on a flywheel effect which works perfectly fine when things are going according to plan, but are quite literally designed to spiral to zero once hit by some exogenous shock.
The rest of the bill, however, might lean more toward bad than good.
The parts of the bill about Qualified Payment Stablecoin Issuers lay out a framework for who is allowed to issue stablecoins in the United States. The framework seems to boil down to banks, depository institutions and non-bank institutions that apply for regulatory clearance. This could be fine if we haven’t seen evidence of cloudy processes when it comes to crypto-adjacent banks.
Just ask fully-reserved Wyoming bank Custodia, which has had its own fair share of issues even as it appears to be following all the proper procedures. The bill is overly paternalistic when no courter can get through. Not to be cynical, but future stablecoin issuers not named “Big Bank XYZ” might have issues providing stablecoin services since they look different than what regulators are used to.
All said, where the bill definitely leans more bad than good has to do with CBDCs (which feel like stablecoins even though they’re not the same). To be clear, this bill isn’t calling for the issuance of a Federal Reserve-controlled U.S. dollar CBDC. Instead it is calling for a study on a Federal Reserve Digital Dollar to be released within one year and a briefing on CBDCs within 180 days of the bill becoming law.
Yeah, yeah – studies and briefings are just studies and briefings, but the conversation around CBDCs in Washington D.C. will be critically important. If the U.S. government does implement a CBDC one day, it should be done in a way that maintains personal privacy and doesn’t allow the government to implement draconian monetary policy on a whim.
It sounds dramatic, but a fully-surveillable, programmable and centrally-controlled CBDC would benefit almost no Americans and should generally not be adopted by the government as a genuine path forward into the “digital future.”
This bill is still in draft form, but close attention should be paid by all Americans as the discourse around stablecoins and CBDCs develop.
US court issues summons to Tron’s Justin Sun, threatens default judgment if no response (Cointelegraph)
ChipMixer creator accused of laundering $3B in bitcoin still wanted by FBI (Protos)
Bored Apes Drop 8% As Major Holder Exits (The Defiant)
The Tiny Kingdom Of Bhutan Secretly Held Millions Of Dollars In Cryptocurrency (Forbes – paywalled)
With the Virtual pass, you can tune into Consensus 2023 from anywhere in the world to hear industry leaders explore all aspects of crypto, blockchain, Web3 and the metaverse. Register by April 21 to save $100! Learn more and register.
Only in Crypto
Kudos for making it this far! On occasion, we’ll give our loyal Node readers the opportunity to claim DESK, our social token, which is a mechanism for returning the value of engagement directly to the users who create it.
