Signals: Who gets to regulate crypto?
Hey Fintech Friends,
Here's a quick state of the union on crypto:
The total market cap of cryptoassets sits at nearly $1.7 trillion dollars
Bitcoin makes up 42% of this market cap; Ethereum 20%
Crypto exchanges generated more trading revenue in 2021 than did traditional stock exchanges like the NYSE and the Nasdaq
US lawmakers think it’s about time for the crypto market to become officially regulated. This feels right given how many of us have gotten scammed, robbed in a hack, or just bought Bitcoin in the hopes of making a quick return and instead ended up strapped into the emotional roller coaster that is Owning Crypto.
The SEC, Treasury Department, and Commodity Futures Trading Commission are all pushing for regulatory authority over the cryptoassets they argue are most similar to the financial instruments that they regulate today. It isn't clear which regulatory body will get oversight of what, which begs the question... legally speaking, what is crypto?
"A pretty major f***ing risk to the US economy."
... to paraphrase a report that the Treasury published on stablecoins at the end of 2021. Stablecoins have emerged as a powerful tool for facilitating transactions by standing in for an underlying asset, usually the US dollar. Stablecoin issuers peg the value of these coins to USD by either holding an equivalent amount of fiat USD in reserves (fiat-collateralized), or creating an algorithm that ties the stablecoin's value to other coin(s), incentivizing traders to keep its value in line with USD by minting or burning stablecoin as the value of USD fluctuates (algorithmic).
The market for stablecoins is blowing up:
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