Stablecoin Regulation Raises Tensions with Banks

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00:00The Genius Act creates a regulatory structure for the issuance of stable coins, a form of crypto

00:04pegged to the dollar, and it was just signed into law in July. And I think you and I talked about it

00:09shortly thereafter. You know, like we've discussed the idea that David Sachs is out there like

00:13talking. This is dollarization. This is fantastic. But we're talking about now tension between the

00:19more modern industry and traditional finance. How for your association is that tension being

00:23debated? Well, we're coming out pretty strongly against some of the proposals that the

00:29traditional banks have in front of Congress now. They'd like to roll back a lot of what the Genius

00:34Act does. They have claimed that they want to close some loopholes that truly are not loopholes. They

00:40were at the table when we negotiated this bill. So any concerns that they have now are kind of,

00:46you know, late to the game concern. At the end of the day, stable coins have the opportunity to

00:53change how we move money in this world, in this globe, in the globe. And we want to make sure that

00:58the regulations are such that we can continue to see that innovation thrive and grow.

01:05If you can't beat them, join them is the saying. So it's the idea that I've heard of just bank after

01:10bank considering launching their own stable coins. Why then fight the Genius Act, which would allow them

01:14to do that? Yeah, I mean, I believe they will start to issue their own stable coins. This is a

01:20competition question. Right now, a lot of the exchanges are able to offer a reward around 4% for

01:28stable coins. Your traditional savings account is offering less than 1% and they don't want to

01:34compete. So the idea is, let's try to stop the competition and really kind of create a regulatory

01:41moat around traditional finance and let them get out ahead. The stable coin issuers are already ahead of

01:48the banks. And I think that's probably the biggest concern they have right now.

01:53You're sending a letter to Congress. You're arguing against some of these actions taken by the big

01:59banks. Ultimately, when you're looking at the broader context of Tether out there raising funds,

02:0315 to 20 billion dollars, maybe giving it a valuation of 500 billion. Do you think those sorts of numbers

02:07are reasonable as to the market opportunity right now? Yeah, absolutely. When you think about how money

02:12moves in the world, it's slow, it's inefficient, there's a lot of friction. Stable coins take that

02:21out of the system. It's an opportunity to, again, move money quickly and efficiently. And it's something

02:28that I think the financial services sector has been waiting for. So I'm not surprised by the

02:33valuations we're seeing for these companies. I think there's just a lot of opportunity in the

02:39stable coin sector going forward. Real quick, as a point of clarification, Tether Holdings is a member

02:45of your association, somebody that you are supporting? Tether? No, they're not a member.

02:51They just, you know, we were just at their launch for Tether U.S. Certainly somebody that we would

02:57love to see in our membership circles are our membership. So we do have stable coin issuers in

03:01our membership. The reason I ask, I want to go back to the Genius Act point, which is that the banks want

03:06one thing and your association is members want something different. You basically don't agree.

03:11That being said, what is it that the banks are wrong about? Just distill that, please.

03:15Yeah. So they're calling this loophole where the exchanges are able to offer a reward for stable

03:22people putting money in stable coins. This is no different than a reward you would get if you're

03:26using a bank credit card. Right. They are claiming that that is a loophole around the yield

03:31prohibition in the bill. This is not a yield offer. This is a separate reward offered by the

03:38exchanges. This is not the stable coin issuers offering yield. Again, it's the exchanges offering

03:43a reward. It's very different. It is not a loophole. And again, if the banks want to compete,

03:48they're welcome to do so by offering similar rewards or similar interest rates on savings accounts.

03:55What's interesting is Tether, of course, makes its money by allocating the money it holds

04:00and the U.S. Treasuries it holds and farming yield from those. All of this is about regulation.

04:07Yes. You come from the CFTC. At the moment, the CFTC has one person in it. We've yet to see a new

04:15leader installed. Is there an anxiety? Is the anxiety that some have about a void of regulatory

04:21overseeing of this very nascent industry group? Is that right or wrong in your perspective right now?

04:27I think there's some concern that there's not permanent leadership at the CFTC. That probably

04:32you see that play out more with potential market structure legislation that the Capitol Hill is

04:37working on. But at the end of the day, you see very strong leadership coming out of both the SEC

04:43and the CFTC. They're holding a roundtable together today. So it's certainly, you know, even though there's

04:49only one person at the CFTC, that's not stopping the agency from moving ahead, doing what is necessary

04:55to ensure that they are allowing innovation to thrive. So I think the concern, while it, you know,

05:02probably is something to think about with market structure because they do need long-term leadership

05:07at the CFTC, right now the CFTC and the SEC is doing everything they need to be doing to make sure

05:14the innovation is going to thrive in the U.S.

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