Stablecoin CRASH Coming? You Need To See This Hearing!

A major stable coin could be about to Collapse that's because the regulatory Scrutiny of stable coins in the United States has been increasing the scary Thing is nobody has been paying Attention to what Regulators have been Saying about stable coins and the recent Stable coin hearing is one example it Was overshadowed by the hearing with SEC Chairman Gary Gensler the day before and Yet it was more important for crypto and Even for the US dollar that's why today I'm going to summarize what was said During this stablecoin hearing and tell You exactly what it could mean for Crypto and the dollar so make no mistake This is a video you cannot afford to Miss Let's start with a quick bit of Background shortly after Gary Gensler Became the chairman of the SEC in April 2021 he suggested that stable coins Could be securities This comment was initially Shrugged off As ridiculous because there's no Expectation of profit from investing in A stablecoin for context an asset is Considered a security if you invest in It using money if its price action is The same for everyone who invested if There's an expectation of profit and if This expectation of profit is coming From a third party again stable coins Failed to meet the third Criterion so

They can't possibly be securities that's Why the crypto industry was caught off Guard when the SEC served paxos with a Wells notice in February this year for Reference a World's notice signals the Sec's intent to sue an entity and gives That entity 30 days to explain why they Shouldn't be sued in 80 percent of cases The SEC sues them anyway Now this is worrying considering that Stable coins are the backbone of the Crypto Market every coin and token Trades against a stable coin if the SEC Was to start cracking down on stable Coins then it would do serious damage to The crypto Market especially to all the Defy ecosystems which rely on stable Coins Fortunately the SEC has yet to actually Sue paxos at least at the time of Shooting this video unfortunately the World's notice alone was enough to Create significant regulatory Uncertainty for stable coins issued in The United States Circle CEO jeremia Lair recently blamed Usdc's rapid decline in market cap on This uncertainty the worst part is that This regulatory uncertainty continues to Increase if you watched our recent video About Gary's hearing you'll know that he Implied usdc was a security while Gary's Exact reasoning for this is unclear he Did make it clear that it's because

Stable coins are eerily similar to money Market funds Now without getting too technical money Market funds are basically stable assets Backed by short duration U.S government Debt money market funds earn interest on This U.S debt and give a portion of this Interest to investors and money market Funds are where lots of Bank deposits Have been moving lately FYI most stable Coins in circulation are backed by U.S Government debt and hold a stable value Hence their similarity to money market Funds the difference is that stablecoin Issuers don't share the interest earned On these assets with stablecoin holders And some stable coins are used primarily For payments now the SEC has no Authority over Payment Systems that's The federal reserve's job this is why Stablecoin issuers namely Circle have Been lobbying U.S politicians to pass Regulations that designate stable coins Like usdc as payment stable coins and Thus put them under the authority of the FED obviously this would protect such Stable coins from SEC scrutiny however The FED doesn't seem to be a fan of this Proposal besides the fact that it's Rolling out its own digital payment System called fed now The New York fed recently changed a rule That could prevent circle from accessing The fed's facilities this seems to have

Been a not so subtle response to what Was said during the recent stablecoin Hearing and it could mean the SEC will Follow through on its threats I'll explain why the payments argument May not protect stable coins at the end Of the video for now though let's unpack The hearing The hearing I'll be summarizing today is Titled quote understanding stablecoin's Role in payments and the need for Legislation it was held by the house Financial Services subcommittee on Digital assets Financial technology and Inclusion on the 19th of April and it is The first hearing about stable coins in The United States The Witnesses were Adrian Harris with The New York Department of Financial Services or nydfs Dante despate Chief Strategy officer at Circle Austin Campbell a professor from the Columbia Business school Jake chavinsky from the Blockchain association and Delicia Reynolds a director at a non-profit can You guess which one is anti-crypto Anyway The hearing began with opening Statements from the top-ranking Politicians on the committee the first To speak was french hill and he said That the hearing is a continuation of The bipartisan work on stablecoin Regulations which began last September

With a stable coin bill which needs Amendments he stressed that stablecoin Regulations are required to prevent Regulatory Arbitrage and slammed the SEC And cftc for fighting over who has Authority over stable coins oddly enough Gary had said that the cftc has Authority over stable coins late last Year I wonder what changed his orders Perhaps Stephen Lynch was the second to speak And he started by saying that all the Banks which collapsed in March had Crypto connections he said that stable Coins are supposedly pegged and Supposedly used for payments but in Reality they are not stable and used for Speculation in crypto he argued that Stable coins are therefore not needed Because we have the fed's upcoming fed Now payment system He said that he doesn't want stablecoin Issuers having access to the fed's Facilities and doesn't want non-bank Entities operating without insurance Recall the New York fed's recent Decision now the third to speak was Patrick McHenry he reiterated that the Hearing is a continuation of bipartisan Discussions on stablecoin regulations With the September bill as the base he Also reiterated that amendments are Needed because a lot has happened in the Crypto Market since September then came

Maxine Waters she was shocked at her Colleagues comments and said that the September bill was not the starting Point nor the ending point she said that They are quote starting from scratch on Stablecoin regulations and that the September bill should be disregarded Altogether yikes The mic was then briefly handed back to French so he could introduce the Witnesses he said something that struck Me He pointed out that circle is a member Of the world economic forum's digital Currency governance Consortium now I Have no idea why he said that the weft Wasn't mentioned again after that more About circle's connections to the weft In the description anyways Adrian was The first witness to speak she said that The nydfs has been regulating crypto Since 2015 and that the regulator Introduced stablecoin's specific Guidance last June she said the nydfs Wants to help shape National crypto Regulation note that this regulation is The strictest of any state Austin was The second witness to speak and he said That a clear definition of stable coins Is needed he argued that the regulation Of big stable coins should happen at the Federal level and regulations of small Stable coins should happen at the state Level he said lack of Regulation is

Driving development overseas Then Austin said something striking he Said that stable coins are transparent Due to their presence on open public Blockchains and that quote we may not Always know who owns what wallet right Now but we will eventually He added quote we will be able to Enforce rules of the financial system in Crypto Austin explained that if the US Government doesn't act first then Foreign governments will shape the rules Of crypto he cited Russia's recent Intentions to use crypto for trade as an Example He then said the quiet part out loud and That's that stable coins allow the U.S Government to subsidize its spending Jake was the third witness to speak and He continued the theme he said that the U.S Dollar's dominance is being Threatened by China and that USD stable Coins can be a tool to fight the digital Yuan he called on the politicians Present to pass stablecoin regulations So the digital USD can spread around the World Dante was the fourth witness to speak And he took the theme to the extreme he Said that there are fears De-dollarization will result in payment Systems which are quote inconsistent With U.S values he cited a long list of Statistics about usdc and highlighted

Its recent partnership with the UN he Agreed that states should regulate small Stable coins because Federal Regulation Would crush competition he said that Circle has focused on quote Public-private Partnerships a page out Of the wefts Playbook He also revealed that Circle was the First recipient of the nydfs's bit License in 2015. as a fun fact Circle Was also the first to receive a money Transmitter license in the UK probably Nothing The fifth and Final witness to speak was Delicia she said that there's a lack of Crypto regulation a lack of reserve and Interoperability requirements and that There are many gaps in the stablecoin Bill proposed in September Believe it or not but she said it should Be possible to reverse crypto Transactions Two delicious credit she says there also Needs to be clearer language and Regulations around personal crypto Wallets it wasn't clear whether she was Advocating for regulation that would Protect personal crypto wallets or Oppose them but it's still an important Topic that needs to be addressed ASAP on That note you can get a juicy discount On the best crypto Hardware Wallets on The coin Bureau deals page that will be Down in the description I digress

Once all the opening statements were Finished the question period began I'll Quickly say that by this time the Hearing was already half done which Makes me wonder if the purpose of it was Just to promote payment related Stablecoin regulation Remember that Circle has been lobbying U.S politicians in any case French was The first to ask questions and he asked Dante what effects the contradictory Regulatory statements from the cftc and SEC about stable coins are having Dante said that they're causing Uncertainty and argued that usdc is Neither a security nor a commodity it is A payment stablecoin Dante proceeded to say that usdc had Processed over 10 trillion dollars of Transactions what he didn't say however Is that usdc continues to be the most Popular stable coin in defy per Reporting by coindesk This suggests that most of these usdc Transactions are therefore not related To payments Stephen was the second to ask questions Interestingly he seemed nervous and Disorganized he proceeded to criticize Cryptocurrency and stable coins and Pondered if it was prudent to apply Banking regulations to stablecoin Issuers note that Circle had once said It wanted to become a regulated bank now

Frank Lucas was the third to ask Questions and he asked Austin to Define What stable coins are Austin said there Are three kinds of stable coins Fiat-backed crypto-backed and Algorithmic Austin argued that the Second two are not stable and should Therefore not be called stable coins This reminds me of the stablecoin Regulations in the recently passed Mica Bill they include restrictions on Stablecoin issuers which effectively ban Stable coins that aren't like circles Usdc that said these regulations also Effectively ban USD stable coins in the European Union good things Circle has a Euro stable coin now Frank then asked Adrian to expand on the nydfs's crypto Regulations in her explanation she said That the nydfs can require additional Kyc and AML reporting when assets are Issued on certain blockchains this is Alarming because this could be used to Crush competing smart contract cryptos Speaking of alarming Frank also asked Dante to talk about usdc's de-pegging in March Dante explained that it was Ultimately svb's fault and that Circle Managed to fix the peg by promising to Use corporate resources to make up for Any shortfall of course Circle later Regained full access to its Reserves at Svb more about usdc's debegging in the Description moving on

Maxine was the fourth to ask questions She was surprised to find out that the State of New York had its own crypto Regulations already this seems to have Taken the wind out of her planned Anti-crypto rent so she asked Adrian Whether the banking crisis had anything To do with crypto Adrian said no Maxine Was visibly confused she said that Everyone knows it's because of crypto Because the media said so and asked Adrian how she can know for sure Adrian said that these reports were fake News and went on to cite bank deposit And withdrawal statistics imagine living In Maxine's Echo chamber anyhow Warren Davidson was the fifth to ask questions And he asked Austin how tether became The largest stablecoin issuer Austin Explained that it had primarily to do With its first mover advantage and also The fact that it's relatively Unregulated while other stablecoin Issuers are excessively regulated Warren went on to claim that tether is a Ticking Time Bomb but said that its Relocation to Hong Kong was a good start Warren then asked Jake whether Stablecoins should have the same Qualities as cash Jake said that we're Moving towards a cashless society and That the U.S can be like China or create Truly digital cash well it looks like The US and most other countries want to

Be like China when it comes to money Because they're all developing Central Bank digital currencies or cbdcs you can Get the latest updates in the Description now Bill Foster was the Sixth to ask questions and he asked Whether there was a solution in crypto That prevents crime specifically a Digital ID system Jake started by saying That such Solutions are being developed But Bill wasn't satisfied he added that Privacy coins are actively working Against this bill then asked a good Question quote If someone puts a gun to your head and Tells you to transfer all of your crypto Are you screwed or not Austin explained That this isn't a problem with Centralized stable coins because Stablecoin issuers have the power to Seize and freeze such illicit Transactions bill was confused he asked How that's possible without the consent Of the miners or validators on the Blockchain Austin said that the consent Of the miners or validators is not Required to modify the Holdings of Centralized stable coins if there is Anything you take away from this hearing Let this be it anyway William Timmons Was the sixth to ask questions and he Asked Dante why so much usdc had been Swapped for other stable coins Dante Said it's because there is a war on

Digital currency taking place and Cautioned that you do not want crypto Companies building crypto infrastructure In other countries William then asked Jake what would happen if Congress Doesn't act on the stablecoin regulation Jake repeated that stablecoins issued in Foreign countries will not adhere to U.S Principles what's crazy is that he even Said that stable coins issued in foreign Currencies like the Yen and the Euro are A threat to the USD that's a huge Eye-opener and it begs the question of How the U.S will react when stable coins In foreign currencies become more Popular we could know the answer soon Enough Now Richie Torres was the seventh to ask Questions and he started by arguing that Stablecoin issuers should not be subject To banking regulations because they hold Full reserves not fractional reserves he Then argued that the nydfs's crypto Regulations are proof that Crypto-specific regulation Works Richie Also revealed something fascinating and That that the nydfs was apparently the First entity to raise red flags about The reserves backing tethers usdt This is fascinating because it suggests That Regulators are involved in the Digital currency War Dante touched on Earlier something else to think about Anywho Aaron Houchin was the eighth to

Ask questions and she asked Dante about What crypto regulations are like in the EU Dante explained that the eu's crypto Regulations have their origins in Facebook's Libra from 2019. he also Revealed that circle is working on Getting approval in Singapore if you Watched our recent video about the Countries that will drive the next Crypto Bull Run you'll know that Singapore is one of them Hong Kong is Another and Dante said it's coming back In a quote big way He also said that the best crypto Regulations are coming from city-states Which is interesting Brad Sherman was The ninth to ask questions and he Started with one of his famous Anti-crypto rants he said that crypto Pays for lots of lobbyists and Propaganda he said that stable coins are Unnecessary and he said stablecoin Issuers just want regulations so that it Becomes easier to do illegal things Regarding the arguments that the US is Falling behind on crypto regulations Brad had this to say quote other Countries moving ahead of us in cocaine Manufacturing and organ harvesting and We have to catch up he directed this Question at Delicia who wholly agreed Revealing which side she was on Mike Flood was the 10th to ask questions and He asked Dante about why it's important

For some non-bank entities to have Access to the FED in his reply Dante Revealed that non-bank entities will not Be able to use the fed's upcoming fed Now payment system now this is extremely Significant and here's why So far the crypto Crackdown in the United States has focused on crypto Companies and projects that are Developing payment systems that could Compete with fednow if you watched our Video about silvergate bank or Signature Bank you'll know they both had 24 7 Payment systems that were analogous to Fed now stablecoin issuers need these 24 7 Payment Systems to Mint and redeem Stable coins otherwise they will lose Their pegs outside of banking hours the Bank that circle is using for this System is now also facing scrutiny if All these systems are wiped out and Circle can't use fed now usdc could Depeg again if that wasn't worrying Enough Mike sounded concerned about the Prospect of non-banks being given access To the fed's facilities he said this Could create significant risks to the Financial system this is significant Because Mike is shall we say in the Generally Pro crypto party that is the Republicans Sean Caston was the 11th to ask Questions and he revealed something Insane about the stablecoin bill from

September He revealed that a section in the Stablecoin bill would give States the Ability to print stable coins that the FED would then be obligated to back with Reserves regardless of the amount in Other words stablecoins would give States the ability to print money Without the fed this is not only insane But it also explains why States seem to Be throwing their weight behind this Stablecoin bill Sean asked the witnesses how this moral Hazard could be addressed they didn't Have an answer Now the last to ask questions was Wiley Nickel and he asked Jake how stablecoin Regulations could help stablecoin Development Jake said that it would Ensure stable coins are developed in Line with U.S values and even suggested That these regulations could require Stablecoin issuers to freeze illicit Transactions more about the importance Of decentralization using the link in The description So what does this hearing mean for Cryptocurrency and for the US dollar Well in short it's clear that none of The stable coins we have now are being Used primarily for payments in any Meaningful way and it's unlikely any Protective stable coin regulations will Be passed anytime soon the fact of the

Matter is that most stable coins are Used for trading in usdt's case it's Primarily used for leverage trading on Offshore exchanges in usdc's case it's Used primarily in D5 protocols this can Be clearly seen on chain and although U.S Regulators are biased they're not Stupid they can see this too I suspect That the Witnesses are aware of this Which is why they focus so much of their Testimony on the US government's ability To track all transactions freeze and Seize transactions it doesn't like and The geopolitical benefits USD stable Coins could bring in a world that's Trying to de-dollarize in theory the Main advantage of stable coins is that They allow the US government to Subsidize its spending since most USD Stable coins are backed by U.S Government debt newsflash this means That every time you're buying a USD Stablecoin you're technically giving Money to Uncle Sam Now in practice however having Stablecoin issuers holds so much of the US government's debt could present Financial stability risks if everyone Runs to redeem these stable coins at the Same time not only that but the US Government doesn't need stablecoin Issuers to create demand for U.S Government debt because the US dollar is Still the world's Reserve currency U.S

Government debt is considered to be the Highest form of collateral for things Like loans the demand for US Dollars and This collateral goes up when the FED Raises interest rates or when there is a Global crisis that causes a flight to Safety This is scary to consider because the FED has likely raised interest rates as Much as it can without causing entities Inside the US to default on their debts Including the US government Logically this would suggest that a Global crisis of some kind is on the Cards and it's probably a global Recession alternatively it could be Related to that critical word Dante used In his testimony War After Russia invaded Ukraine the U.S Dollar pumped and it continued to Rally As the FED raised interest rates Historically speaking when an Empire Starts to fall it tends to start wars to Try and retain its power but don't worry I'm sure this time is different Speculation aside stable coins don't Seem to appeal to the US government Right now there's no need for stable Coins domestically because of fed now And no need internationally because the Government has other ways of subsidizing Itself I don't agree with this but That's how the US government sees it This means that stable coins are likely

Sitting Ducks but it's possible that Regulators will simply starve them of Access to critical banking services Rather than shoot them down with Enforcement actions thankfully there are Other jurisdictions itching for stable Coins and all the benefits they offer in The longer term there won't be any need For stable because the Fiat currencies That back them will eventually become Worthless either that or all stable Coins will become backed by cbdc's in Which case there'll be no different Either way the eventual outcome is the Same people will adopt actual Cryptocurrencies And that's all for today's video if you Found it informative let me know by Smashing that like button take a second To subscribe to the channel and ping That notification bell too Consider sharing it as well because this Is important information every crypto Holder needs to know every crypto holder Also needs discounts on Hardware wallets To keep their crypto safe and trading Incentives that increase their profits If that sounds like a deal check out the Coin Bureau deals page using the link in The description thank you all for Watching and I'll see you next time Until then stay cool stay safe and stay Crypto Thank you