How US Congress Can Make Stablecoins and Libra Irrelevant
It is well-known by now that U.S. lawmakers and now even members of President Trump’s cabinet are highly skeptical about Facebook’s proposed Libra stablecoin. And although regulators and governments in parts of the world have tried their best to control digital tokens, regulations may in fact be one of the reasons for the popularity of stablecoins.
In a written testimony to the US Senate Banking Committee, co-founder of the Wyoming Blockchain Coalition and 22-year Wall Street veteran Caitlin Long, explained to the lawmakers that “outdated financial regulations” have caused the development of stablecoins such as Libra.
If investors could, she said, they would use the U.S. dollar to trade in and out of digital assets. But since regulations often prevent them from doing that, the crypto industry instead came up with a cryptocurrency to represent the U.S. dollar – a stablecoin.
Caitlin Long further explained that since politicians have essentially created the need for stablecoins, they could also easily make them “irrelevant,” simply by allowing banks to deal with digital assets. In that case, traders and investors would just use real U.S. dollars to trade digital assets against, “just as they do when trading stocks or commodities back and forth with dollars.”
For example, more than USD 3 billion worth of tether, the most popular stablecoin, flowed into bitcoin in the past 24 hours, according to Coinlib.io.
“Stablecoins are one of many unintended consequences of Congressional policies that turned access to the financial system into a policy tool to solve certain problems — but, as an unintended side effect also created major barriers to lawful commerce. When you create barriers to commerce, you get less commerce. These barriers are one of the reasons why economic growth is sluggish in the United States. Why are we happy with 3% growth when we regularly hit 5% growth not so long ago?,” Long wrote.
The testimony, which was prepared for a hearing dubbed Examining Facebook’s Proposed Digital Currency and Data Privacy Considerations today, further made the case for why lawmakers should reconsider their position on digital currencies.
“[…] digital currencies cannot be uninvented,” she said, urging the members of the committee to embrace this new innovation rather than to fight it.
“[digital currencies] offer significantly more efficient payment systems relative to those of the status quo. If we fight this technological trend, the innovation will simply move offshore rather than die,” Long noted.
In a summary of her key takeaways posted to Twitter, Long reiterated how regulations in the U.S. simply force innovators in the digital currency space to move offshore rather than to work in the U.S., as best exemplified by Libra setting up its headquarter in Switzerland:
8/ Next, a reality check: #cryptocurrencies can't be uninvented. Despite attempts to kill them, they haven't died. @facebook @Libra setting up shop in #Switzerland instead of the US is a shot across the bow to the US–bad regulation sends innovators offshore rather than kills it.— Caitlin Long 🔑⚡️🟠 (@CaitlinLong_) July 15, 2019
Also, as reported, as Caitlin Long estimated even before the official Libra announcement, Facebook will face “regulatory uncertainty” as a result of its token launch, leading to scrutiny for “many outdated financial regulations.” However, Facebook’s regulatory reporting program will lead to wider public dialogue in the United States centering on data and financial privacy rules, the reporting of assets held overseas and tax regulations.
The Future of Stablecoins
Watch this panel discussion recorded at the CryptoCompare Digital Asset Summit in June 2019.