The Daily Peg: The lonely mountain
A round-up of all the essential stablecoin news.
Industry news
— Peter Thiel joins tech billionaires backing new lender Erebor to rival Silicon Valley Bank (Financial Times)
Key graf: “Cryptocurrencies known as “stablecoins”, which are pegged to real-life assets such as the dollar, are expected to be a significant part of the bank’s operations. The application states Erebor aims to be ‘the most regulated entity conducting and facilitating stablecoin transactions’.”
— Circle applies for US trust bank charter to manage its USDC reserve (CoinTelegraph) (Reg statement)
Key graf: “If approved, First National Digital Currency Bank, N.A. would be authorized to operate as a federally regulated trust institution, subject to OCC oversight, and would oversee the management of the USDC Reserve on behalf of Circle’s U.S. issuer. An approval would also further strengthen the infrastructure that supports the issuance and circulation of USDC – the world’s largest regulated payment stablecoin – and would offer digital asset custody services to institutional customers.”
— DWS venture gets German finance regulator's approval for euro stablecoin (Reuters)
Key graf: “AllUnity, a joint venture that includes Deutsche Bank’s
asset manager DWS, said on Wednesday it had received a license by the German regulator BaFin to issue a euro stablecoin.”
Comment: Might this pose fragmentation (neo Deutsche Mark) risk? Potentially. Though if it gets to any significant size, it will be held in check by MiCA rules that state up to 60 percent of deposits have to be held in eurosystem banks.
Political news
— Yanis Varoufakis argues that a “dangerous monetary transformation is underway” (Project Syndicate)
Key graf: “…stablecoins are setting the stage for the next financial meltdown. For starters, their issuers have an incentive to issue more tokens than the dollars they keep in reserve to back them. And, because stablecoin issuers keep a significant portion of their dollar reserves in banks, a bank run will cause a stablecoin run (a rush of requests to convert them into real dollars) which then triggers a cascade of bank runs.”
Further reading
— The world is going all-in on stablecoins. Is China’s digital yuan any different? (South China Morning Post)