Stablecoins are the ‘lowest hanging fruit’ of crypto regulation

Crypto regulators should focus on stablecoins, FTX founder Sam-Bankman Fried said, adding that agencies should first look for “the lowest hanging fruit” in the segment to reduce risk.

Speaking in Washington, DC on Wednesday at an event hosted by the Bipartisan Policy Center, Bankman-Fried said the crypto space has grown to the point that regulatory oversight is necessary and healthy.

The “pureest example,” he noted, of necessary regulation is to ensure that there are an equal number of dollars backing the number of stablecoins in circulation.

“Right now, the regulatory oversight is involved [stablecoins] is extremely unclear, it is extremely messy and there are many cooks floating around the kitchen, but there is no head chef, said the crypto boss. “There is basically no core regulator that clearly has the duty to ensure that, and there should be.”

The crash of algorithmic stablecoin TerraUSD (UST) earlier this year partly caused crypto prices to plummet and triggered a wave of insolvencies in the space.

The President’s Task Force on Financial Markets recommended measures to Congress and regulators to make stablecoins safer last year. A recent report published by the Financial Stability Oversight Council (FSOC) states that passing legislation to regulate stablecoins is among 10 steps to reduce the risks cryptoassets allegedly pose.

A crypto framework published by the White House last month added that the US would continue to explore whether to launch a central bank digital currency (CBDC) – a digital form of the dollar that Federal Reserve Chairman Jerome Powell said earlier this year could coexist with private. issued stablecoins.

“CBDC development is a red herring,” Georgia Quinn, general counsel at Anchorage Digital, told Blockworks.

“What the industry really needs instead is clear, consistent stablecoin regulation to strengthen and upgrade the US dollar for the digital age,” she said.

Instead of striving for perfection right now in a space that’s hard to predict, regulators should start by “putting one foot in front of the other” when considering regulation in the space, Bankman-Fried said Wednesday.

“When you start getting into DeFi, there are a lot of very interesting political issues that I don’t think there is agreement on … and we have to get to that eventually,” he added. “But let’s not nerd-snipe ourselves with it too much at first.”

Blockchain is not complete

Bankman-Fried spent part of the discussion sharing the big picture for crypto, noting that one of the biggest benefits is having a real-time transaction settlement system without relying on intermediaries that can increase risk.

Bipartisan Policy Center founder Jason Grumet, who moderated the talk, countered the benefits of the “nefarious use” of crypto, alluding to recent hacks in the space. Bankman-Fried acknowledged the complicated narrative of transparency versus privacy when addressing cases of illicit finance.

“I am optimistic about blockchain for [access and inclusion]; I don’t think it’s a fait accompli, he said. “I think we could still screw it up and end up with all the exclusion that we found in traditional finance if we’re not careful.”

While blacklisting addresses linked to blockchain-related financial crimes is important, Bankman-Fried added, requiring a whitelisted system where people can only access digital finance if they are approved would be moving away from the technology’s fundamental principles.

“Starting with the assumption of freedom and then restricting in case of bad activity, I think is super healthy,” he said. “Start with the assumption that you can only do something if it gets an explicit thumbs up, and all the marginalized groups are going to be marginalized again.”

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