Recent contagion was ‘TradFi to crypto’ and not the other way around — Circle policy director
Caroline Hill, director of global policy and regulatory strategy for stablecoin issuer Circle, has placed some of the blame from the recent collapse of banks linked to crypto on traditional financial institutions rather than digital assets.
Speaking at a South by Southwest (SXSW) panel on cryptocurrency regulation in Austin, Texas on March 13, Hill alluded to some of the concerns surrounding the depegging of Circle-issued USD Coin (USDC) amid reports that the firm had more than $3 billion in reserves at Silicon Valley Bank. The price of the stablecoin fell about 10% on March 10th before falling to $1 on March 13th.
“What happened in the last few days was a bit of an ironic black swan situation where the contagion was not from crypto to TradFi – the contagion was TradFi to crypto,” Hill said. “That’s another reason why I think regulation is needed to bring stablecoin issuers closer to central banks. [way] to go, because at the end of the day we are a completely reserved model that relies on a fraction of the banking industry.”
US lawmakers including Senators Kirsten Gillibrand and Cynthia Lummis proposed a crypto bill in 2022 that would have stablecoins overseen by the Office of the Comptroller of the Currency. Although never passed in Congress, senators announced a few updated drafts of the legislation following events in the crypto market crash including the collapse of Terra and FTX.
Hill commented on how the recent events surrounding Silicon Valley Bank, Silvergate Bank and Signature Bank could affect such legislation going forward:
“I’m going to keep at it [federal standpoint legislation] continues to drive focus on the issue, and I think that in turn draws even more importance to the consideration of who the regulator of stablecoin issuers would be, what access they would have that traditional financial institutions have — for example, the Federal Reserve.”
Scott Bauguess, vice president of global regulatory policy at Coinbase, said the EU’s Markets in Crypto Assets, or MiCA, framework had given the US a “really nice baseline” for regulation, calling it a “very sensible approach” to crypto. after the collapse of a major exchange such as FTX. Although MiCA is still awaiting a final vote by EU decision-makers, many expect the framework to enter into force from 2024 onwards.
Related: Crypto industry may escape lasting damage from Silvergate liquidation
Senator Lummis was originally scheduled to speak on the crypto regulation panel at SXSW. Cointelegraph reached out to her staff but did not receive a response at the time of publication.
