“I really have a hard time believing that ethereum will not just seek to get a bank license as a narrow bank if this legislation were to pass.”
So says Nathan Tankus, a leftist ‘economist’ who focused on the ‘plumbings’ of the Federal Reserve Banks actions during the unprecedented printing of this year.
The act he is referring to is one proposed by Congresswoman Rashida Tlaib (MI-13), along with Congressmen Jesús “Chuy” García (IL-04) and Chairman of Task Force on Financial Technology Rep. Stephen Lynch (MA-08), and is called the Stablecoin Tethering and Bank Licensing Enforcement (STABLE) Act.
It’s a curious act due to its brazen approach in using century old laws to justify the re-instatement of total monopoly even while the banking system stands under fierce criticism and for many, has completely failed.
“It shall be unlawful for any person to issue a stablecoin other than an insured depository institution that is a member of the Federal Reserve System,” this proposed law says.
The draft law defines stablecoins in such a way that things like DAI wouldn’t be included because as part of the definition it requires the token dollar is redeemable for actual dollars.
DAI is not quite redeemable because it’s an abstract algorithmic peg, unlike Tether, but DAI is exchangeable for dollars.
The exclusion of things like dai makes this act less open to criticism, although an explicit exclusion of algorithmic stablecoins would be desirable.
The act however is open to significant criticism because of its choice of limitation. In narrowing it to members of the Federal Reserve Banks, this creates a monopoly in the most crucial matter of money and its implementation in form rather than in substance.
It is communistic, and therefore it is no wonder that another supporter of this act, Rohan Grey, is the founder of the Modern Money Network which says:
“Our symposia and learning materials promote the insight that the US Government, along with other governments with fiat currencies and floating exchange rates, cannot ‘go broke.'”
This is in effect the Modern Monetary Theory, which is being implemented by the FED, therefore that these two students – with what some would describe a radical left leaning – are being raised by the system is not too surprising.
What is surprising is how ignorant they appear to be of blockchain technology and in particular of ethereum.
The two suggest that in some way miners can be held responsible for processing stablecoin transactions or in Tankus’ case that ethereum can somehow excuse itself by becoming a member of the Federal Reserve Banks.
“As I’ve clarified, the tweet is imprecise as I was writing quickly. I wasn’t talking about the ‘network of computers’, I was talking about the foundation and a hard fork,” Tankus says.
According to Bloomberg Tankus studied “with a pair of post-Keynesian economists, Marc Lavoie and Marco Seccareccia.” He also “studied at John Jay, part of the City University of New York, with the leftist economist J.W. Mason.”
As debt has gotten out of hand, debt monetization is now the name of the game, and people like Tankus are the precise sort that give some apparent intellectual veneer to what effectively amounts to communism because the state gains total ownership of everything through deciding how much money to flood into circulation and how much money to take out.
Just a few months ago such a thing was taboo in mainstream circles, renegaded to the defeated far left which brought starvation when it gained power last century.
Hence the rise in popularity of bitcoin, and with it stablecoins as more and more across the world want to enter and exit the crypto market.
Such stablecoins are in many ways still within the banking system as the underlying fiat is kept usually in digital bank accounts. However their movement is not within the banking system and things like Tether keep some of the underlying assets in bitcoin rather than dollars, so exciting the banking system fully.
This is a problem for Modern Monetary Theory (MMT) proponents because their base assumption is the state has total control over money, the valuer of all things.
It’s quite unclear how they deal with things like gold in their framework, except they have a precedent in the banning of gold in 1933.
They have no precedent in regards to bitcoin or stablecoins which are very different things, but from their point of view it isn’t clear why these can’t just be banned too.
Well, primarily because you’re dealing with an idea and you can’t quite just ban an idea especially if such idea is fundamentally tied to freedom itself and free markets.
So if here they get the Ethereum Foundation to do something, they first have to consider the Ethereum Foundation is based in Switzerland not America. Second, on ethereum 2.0 there are four clients and as far as we are aware none is run by the Ethereum Foundation. They’re run by coders all over the world.
You could infiltrate but then you’d need to find communist boys and most likely there would be other boys within the same agency that prefer free markets, not to mention other countries would have different interests with that all becoming extremely complex.
In the end even if one succeeds the proposed code would create its own network, its own ethereum, which would suffer in the game of network effects due to this astonishing constrain of only banks being able to issue stablecoins.
So things wouldn’t go there, with these two just being quite a bit ignorant and naive, hence perhaps their support for MMT when it led to hyperinflation in Germany precisely a century ago, something that in part must have contributed to the depression in America due to lower demand from the great German economy and then eventually to the atrocities of the last century.
It is more probable if such act goes through they would just go after entities in USA, like Coinbase and Circle, requiring them to be a bank.
Both probably can be banks if they want to with a whole debate at the Office of the Comptroller of the Currency on fintech charters, making all this a far bigger issue than stablecoins as you’d have to consider the whole Fintech sector and how new laws may affect it for better or worse.
Otherwise except for the limitation to Federal Reserve Banks, it is unlikely many would care about such an act because there is here a fiduciary trust requirement from those that handle the dollars, and thus it would be nice to have some assurance in regards to custody, audits and so on.
There is little justification however for this specialized task to be limited to banks especially when banks have lost considerable trust following their libor scandal and many other scandals, including not giving pension funds profits from their deposited funds, like stocks which banks lend to shortsellers for a fee.
Instead law makers should embrace the free market based challenge to monopolistic banks because that could well be a way to address systemic risk both in too big to fail banks and too big to bail clearing houses.
Europe is considering that approach where there are proposed regulatory requirements for custodian stablecoins, as opposed to code produced stablecoins, but meeting those requirements is open to anyone for hopefully a reasonably low fee, and the requirements themself appear to be common sense.
While this Stable act betrays an ideological trojan horse by new communists who, based on their social media comments, appear more interested in finding some act to tie miners than in addressing the fairly challenging task of facilitating innovation while also imposing recourse where someone has to be taken on trust, like a custodian.