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Stablecoin News for the week ending Wednesday 12th January.

Here is our pick of the 3 most important Stablecoin news stories during the week.

This week was very much about the ongoing balancing act between regulation and innovation.

First, the major VC firm Andreesen Horowitz called for a careful “Do no harm” approach to regulation. 

“Everyone’s got a different idea of how crypto regulations should look. After watching crypto exchanges Coinbase, FTX, and Binance put forth their visions, the venture capital firm responsible for funding many of the space’s startups and unicorns has produced its own recommendations.

In a document titled “How to Build a Better Internet: 10 Principles for World Leaders Shaping the Future of Web3,” Andreessen Horowitz, or a16z, argues for a multi-stakeholder approach to regulation that includes governments, businesses, and civil society groups. It also argues for stablecoins—fiat-pegged cryptocurrencies that offer easy entry into decentralized protocols but that have been eyed warily by U.S. officials—to be “well-regulated” and then put to work improving the financial system.”

Interestingly, as someone who has been involved in developing the self regulatory  system adopted in the FX wholesale market, they are proposing a principal, rather than rule based approach.  Rules are easier to engineer around, while principals focus on intent and causation.  The 10 principles proposed are:

Andreessen Horowitz Calls For ‘Targeted’ Regulations for DeFi, Stablecoins and Web3 – Decrypt

 

Getting Regulation right is a non-trivial matter and important.  We are already seeing fear of stablecoin regulation and USDT and USDC centralization, making decentralized stablecoins like MIM, FRAX and UST attractive to DeFi investors.  This is a handy reminder that for any Regulatory/Policing system in a western democracy to be effective it must have citizen consent.   

Crypto regulation concerns make decentralized stablecoins attractive to DeFi investors (cointelegraph.com)

 

And, in our final story, PayPal, who in it’s very early days, had developed a stablecoin before pivoting to credit and debit cards, is now looking to get back in the business.  A big move that validates the stablecoin space!

PayPal Is Exploring Creating Its Own Stablecoin as Crypto Business Grows (coindesk.com)

 

So in summary, for stablecoins this week we saw an interesting contribution from the industry in how it should be regulated, a move by some investors to hedge against looming regulation and a big player starting preparations to enter the market.

While Crypto struggles to go mainstream, stablecoins are racing there!

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Alan Scott is an expert in the FX market and has been working in the domain of stablecoins for many years.  

We have a self imposed constraint of 3 news stories per week because we serve busy senior Fintech leaders who just want succinct and important information.

For context on stablecoins please read this introductory interview with Alan “How stablecoins will change our world” and read articles tagged stablecoin in our archives. 

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