Here is our pick of the 3 most important Stablecoin news stories during the week.
Facebook exits the stablecoin business, or has it?
This week the news was dominated by the news that Facebook has exited the stablecoin arena. Or has it?
Certainly on the face of it (no pun intended) it looks like a clean exit. Facebook’s digital currency venture Diem is reportedly winding down and selling off its tech to California-based Silvergate Capital. The Diem Association is offloading its assets in a $200m deal with Silvergate Capital, the Wall Street Journal first reported. Meta, the company formerly known as Facebook, first unveiled plans for Diem, previously called Libra, in June 2019, as part of an effort to expand into the crypto space with the launch of a digital currency.
But to sell some software and a few servers for 200m there must be more to the deal. Maybe a promise of integration and promotion on the Facebook platform in return for a modest ongoing commission?
We are all wise in hindsight, and this article documents the many miss steps that were made with this project. “Move fast and break things” may have worked previously in the valley but this time it just gave their many enemies plenty of ammunition.
But maybe there is something bigger at play here. The US is preparing to regulate Crypto and this article postulates that while they may have trouble going after and capturing heavily decentralized projects like Bitcoin and Ethereum, stablecoins on the other hand are a much simpler target.
You may remember operation “choke point” in the Obama administration. The idea was not to outlaw unsavory businesses like porn and the sale of guns but to marginalize them, to push them to the edges, by making it hard for them to access regulated services like banking.
History doesn’t repeat but it often rhymes. Stablecoins are the logical chokepoint of Crypto. Hand them over to the Banks and then everyone will be KYC and AML through their systems. Let’s put aside how well that has worked in the fiat world at stopping white collar crime, but it does give the Regulators control and make the free and easy world of Crypto more difficult.
So in summary, maybe Facebook did not want to be regulated which subsequently could leak into their core business. Better to separate it out and earn a revenue stream while getting the benefits of improved stickiness to your web site.
The question for the Crypto industry remains, with facebook out of the way does it make the regulation of Crypto easier or more difficult? This year we will find out just what the US Government has in mind and if they will be able to successfully get it through the two houses of Parliament.
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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