Crypto Price Check: House Committee Expected to Pass Stablecoin Bill
Cryptocurrency prices were lower on July 25, as a congressional committee looks to advance a stablecoin bill and a major bank bought a stake in a crypto custody company.
Bitcoin, the most popular cryptocurrency, fell 2.7% to $21,923.67 at last check, according to CoinGecko, while ether fell 3.5% to $1,525.14 and dogecoin fell 4.2% to $0.065145.
In regulatory news, the House Financial Services Committee plans to advance its stablecoin bill as soon as July 27.
“Payment Stablecoins”
A stablecoin is a digital currency whose value is linked to a stable reserve asset, such as the US dollar, euro or gold.
Stablecoins are meant to provide a certain level of comfort to investors. But it was crushed in May by the collapse of stablecoin UST, also called TerraUSD, and its sister token, Luna.
David Lesperance, managing partner of immigration and tax counsel at Lesperance & Associates, said current legislation would require stablecoin issuers to maintain 100% reserves and prevent them from lending stablecoins to customers.
Under the legislation, he said, stablecoins will be known as “payment stablecoins,” and bank and non-bank issuers will operate under the same regulations.
The Federal Reserve will license all non-bank stablecoin issuers and will be responsible for monitoring the financial health of these firms.
“There will also be strict rules on the types of assets that can back stablecoins and a ban on commercial companies like Walmart (WMT) – Get Walmart Inc. Report and Home Depot (HD) – Get Home Depot Inc. (The) Report to be issuers,” Lesperance said.
In addition, he said, the US Office of Government Ethics has said that all executive-employees who own blockchain-based digital collectibles known as non-fungible tokens, or NFTs, must disclose the assets they hold for investment or production income valued at more than $1000.
‘High profile cases’
Lesperance said the move comes after data in March showed that spending on crypto lobbying had quadrupled since 2018. Crypto companies had stepped up their efforts to influence cryptocurrency policy in Washington throughout the 2021 bull run.
Earlier this month, the ethics office barred US officials personally invested in cryptocurrencies from working on crypto-related policies and regulations that could move the market.
“While one could argue that if you own crypto you shouldn’t be making policy on crypto regulation, the counter argument is how do you regulate in an area where you have no personal experience?” said Lesperance.
“This would be like the SEC preventing its employees from owning securities or Congress requiring all members to divest completely from any publicly traded stock or mutual fund.”
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Winston Ma, managing partner of CloudTree Ventures, said that while Congress is considering a regulatory framework for the cryptocurrency market, agencies such as the Securities and Exchange Commission and the Internal Revenue Service can shape regulatory practices through enforcement actions in current high-profile cryptocurrency cases.
Ma, who is the author of “The Hunt for Unicorns, China’s Mobile Economy and Investing in China,” noted that last week a former Coinbase (COIN) – Get Coinbase Global Inc Report employee and two other men were arrested and charged in what authorities said was the first insider trading case related to cryptocurrency.
Accelerating the regulations
“In a separate complaint, the SEC said nine of the 25 tokens allegedly traded in the scheme were securities,” he said. “It appears that the SEC is getting closer to becoming the securities regulator for the crypto market.”
Ma said Tesla is (TSLA) – Get Tesla Inc. Report bitcoin dump highlighted accounting and tax issues related to holding and trading cryptocurrencies, for which the Financial Accounting Standards Board and the IRS may develop guidelines for disclosure requirements and tax treatment.
Tesla said the real value of its bitcoin holdings last quarter was pegged at around $220 billion after the electric carmaker dumped more than 75% of its holdings amid what CEO Elon Musk described as uncertainty related to China’s covid shutdowns.
Bitcoin has lost 68% of its value since hitting an all-time high of $69,044.77 on November 10, according to CoinGecko. Ether, the second-largest digital currency by market, has fallen 69% from its November high of $4,878.26.
“These high-profile cases could speed up crypto regulation in the United States,” Ma said.
Martin Hiesboeck, head of blockchain and crypto research at Uphold, said “a lot is happening at the intersection of traditional finance and crypto, and the overall result is good.”
“Next Logical Step”
British bank Barclays is expected to buy a stake in Copper, a cryptocurrency-focused firm that offers custody services to institutional investors, according to a Sky News report.
“Barclays adding a crypto custodian is the logical next step for institutional involvement,” Hiesboeck said. “Dealing in this sector has only grown over the last few months of turmoil, and many solid assets are now available at a discount.”
But during the recent crypto bull market, he added, “we apparently all got ahead of ourselves in thinking about a world for digital payments.”
“The current state of crypto, with daily exploits and phishing scams, massive adoption moves by major governments and banks, and project after project failing, tells us one thing,” he said.
“For a central bank to switch from controlling money flows and fiat distribution to actually getting involved in a retail digital currency is a nightmare.
“That means reorganization, hiring, cybersecurity issues, replacing entire departments, and ultimately being blamed when things go wrong,” Hiesboeck continued.
“Central bankers have a habit of not liking to be wrong – so this investment does not mean they are ready.”
