Is it Libra or is it Diem, is it Facebook or is it Meta? Hard to keep up with all the name and brand changes, but whatever way you look at it, the news just in about the sale to a US based VC called Silvergate for $200m represents a significant fail.
To try and make sense of this, why it happened and what it means for the broader Crypto Industry, we asked our resident stablecoin expert, Alan Scott some questions.
Q: Why do you think Facebook gave up their ambitions to offer a private Stablecoin?
I think they saw the inevitability of stablecoin regulation and were concerned that that oversight could leak into their core business, which they have managed to keep self regulated as opposed to more traditional publishers.
Q: What do you think Silvergate will do with Diem?
Interesting, why pay USD 200m for some code and a few servers? I think there is more to the deal. A commitment to have seamless integration with the facebook platform in return for a small ongoing commission perhaps?
But the bigger picture is that Silvergate as a Bank will be able to utilise this infrastructure in a safer regulatory framework. This fits with the regulatory push that all issuers and providers of stablecoin technology should be Banks. I understand that Silvergate are an innovative Bank but do we want to restrict stablecoins to just Banks?
Q: What are the broader implications for crypto and finance?
To me the big issue is the impending US regulation. It looks like it’s going to happen this year. With Facebook out of the picture and all the political heat that they bring just by being them, it may be easier to get lighter regulation that still gives innovation plenty of room.
Q: Does move fast and break things in the valley only apply to smaller start-ups?
Absolutely! The Valley is dreaming if it thinks FAANG (Facebook, Amazon, Apple, Netflix, Google) level companies can throw stuff out there and pivot their way forward like they did in the early days. They are too systemic to our life! If they blow up, people will expect their politicians and regulators to have protected them.
Q: What does this tell us about crypto regulation?
First it’s coming and this year in the U.S.. Regulation of decentralised platforms is still nigh on impossible, but stablecoins that are pegged to a Fiat currency by their very nature are a much easier target. This is going to be an interesting year, I think on balance the removal of Facebook and the political heat they bring, lowers the likelihood of a regulatory overreach and something sensible that allows innovation and builds trust in the industry is more likely.
Alan Scott is an expert in the FX market and has been working in the domain of stablecoins for many years.
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