Over the past months and years, we’ve made some fleeting and not-so-fleeting points about crypto regulation. Whom does it actually benefit, and isn’t it kind of antithetical to crypto in the first place? The latest bit of ruckus surrounding stablecoin regulation is giving us some answers.
To make a short story even shorter, the New York State Department of Financial Services (NYDFS) told Paxos to stop issuing BUSD. You might have been caught thinking that Binance would issue its own U.S. dollar-pegged stablecoin, but no: they actually leased it to a third-party company, that being Paxos. Either way, Paxos said “okay”, and will stop minting new tokens as of February 21.
What impact will stablecoin regulation have on the crypto market? Well, the BUSD news had a fairly predictable outcome of stimulating withdrawals from Binance. Notably, however, Monday’s $873 million of outflows are still some ways away from December’s gargantuan and similarly media-induced $3 billion figure. Some have taken to interpret this as one of the positive developments for crypto. Investors assessing the situation and all that.
There appear to be other positive developments, of the kind we’re perhaps very much in need of. Crypto firm Liquity, instead of clamoring for more regulation, has went and acknowledged the necessity for decentralized and censorship-resistant stablecoins. Perhaps a little late to the party when it comes to the second feature, but so long as the party is ongoing…
Liquity is seeing plenty of gains and bullish sentiment. These are the truly interesting times in the crypto market, bear-bull market see-sawing. Are we going to see Liquity made an example of as our society moves closer towards the much-awaited social credit system, or will there finally be some kind of pushback and a return to crypto’s core principles?
Coindesk’s George Kaloudis notes that this has been positive for Bitcoin, but for all the wrong reasons, in a way. It has nonetheless: while normally the crypto market might plummet on this news, tokens are up around 10% on the intraday session, with Bitcoin above $24,000. The Paxos saga is obviously bringing to the forefront one of the many important qualities of Bitcoin: no group with an acronym can come and tell it: “Stop it, you guys.”
What are the future prospects for stablecoins and their potential impact on the crypto market? Well, here is the thing with the Paxos event. The U.S., right now, has an inflation problem, to put it mildly. It’s well-known that stablecoins are not only seen as competition to the greenback, but a more functional one.
Paxos was only told to stop minting new tokens, so BUSD will remain in use until 2024. This is one of the reasons why there is a native quality to stablecoins compared to the U.S. dollar. Who is overseeing the latter, and who is going to tell the Federal Reserve to stop printing to avoid economic disruptions?
If the totalitarian tale of CBDCs takes off, stablecoins will probably be even more important than they are now. They will, all the more, represent a better version of what’s offered by the government: better, faster, and not violating the human being’s right to privacy.
Media has obviously jumped to the story with a kind of “more crackdowns on the crypto market” angle, not acknowledging that the falling-apart U.S. financial policy might be playing an important role here. Either way, it’s refreshing to see the aforementioned pushback on various fronts. It’s as if the crypto sector is waking up to what it should be representing.