Dispatch #14: The STABLE Act Draws New Regulatory Battle Lines

In this patch of your weekly Dispatch:

• The STABLE Act sets the tone for new crypto regulatory battles
• ETH2.0 deposits continue to grow
• MicroStrategy raises $550M to buy more Bitcoin

The Big Idea

The STABLE Act Adds New Regulatory Battle Lines

As crypto moves into the mainstream, those who oppose it will fight even harder to suppress it.

This year has been relatively quiet on the regulatory front in the US, with the one exception being the Office of the Comptroller of the Currency (OCC) and its decision to allow banks to interact with crypto companies. Those moves by acting OCC Chief Brian Brooks, however, have drawn the ire of a set of Congressional officers. The group first sent Brooks a letter asking for an explanation but has now escalated its efforts with the introduction of the STABLE Act.

Theoretically, the STABLE Act is designed to protect consumers – low-income communities, in particular – from predatory stablecoin issuers by requiring them to effectively hold bank licenses. Many in the crypto community are arguing that the act will do the exact opposite, creating a new compliance regime that only the biggest existing banks and fintechs can afford to engage with, thus reinforcing the status quo and making it harder for innovators to offer new services.

On top of that, Financial Services Committee Chair Maxine Waters recommended in a letter to incoming President Biden that he reverse the OCC’s moves. While some in Congress have already signaled their opposition to the bill, what’s clear is that we’re headed into a contentious new period.

Investor Ari David Paul explains why all the bluster around regulation makes sense at the beginning of a new bull market.

You better buckle up.

The Latest In…

Ethereum

While much attention has been on Bitcoin as it hovers and fights to stay near previous all-time highs, Ethereum continues to show a huge amount of dynamism. The amount of ETH locked in the ETH2.0 deposit contract has smashed past 1M to hit 1.1% of total ETH staked. November mining revenue hit $262M, while Grayscale’s Ethereum Trust smashed through an all-time high in daily average volume.

The Latest In…

Institutions

The Bitcoin institutional onslaught continued this week. Wells Fargo devoted more than a page to BTC in their latest investor report, noting that “fads don’t last 12 years.” Bloomberg meanwhile published a piece about why JPMorgan thinks Bitcoin could make gold’s life very difficult. Oh, yeah, and BBVA and Standard Chartered are both set to begin offering crypto custody and trading.

Exhale.

The Latest In…

Stablecoins and CBDCs

China announced its latest digital yuan trial. The city of Suzhou will host a lottery giving away more than $3M worth of China’s new digital currency to 100,000 residents, doubling the size of the previous lottery trial in Shenzhen. In Europe, one of the world’s oldest banks, dating from 1754, is tapping Stellar to offer a new Euro stablecoin.

The Latest In…

Bitcoin

Michael Saylor truly just cannot stop. Last week, he announced that MicroStrategy has bought another $50M in BTC. Then this week, the company announced a convertible debt offering of $400M (later revised up to $550М) with the express intent to buy yet more Bitcoin. While crypto Twitter was thrilled, Citi analysts did not like the move, downgrading the stock. 🥺

The Week’s Most Interesting Data Story

Stablecoins See Second-largest Monthly Volume Ever in November

The STABLE Act may be seeking to reign in private stablecoin issuers, but that certainly isn't slowing the sector down. November saw the second-highest adjusted monthly stablecoin volume in history. Tether continues to represent the majority of volume at 77%, but the Centre Consortium's USDC has made large strides this year, jumping to 16.8% of volume in November. In the meantime, many eyes are on Paxos given the firm's relationship with PayPal.

Our Take

@AntoniNexo This Week

• December brought yet another Antoni - Bloomberg encounter. This time around, he and hosts Matt Miller and Anna Edwards discussed the BTC rally, rumored US legislation, and the social purpose of cryptocurrencies.
• Room for growth is what Antoni sees ahead of Bitcoin. Speaking to CoinDesk TV anchor Christine Lee, he commented: “Anything that rises by 80% in less than two months is allowed to have a correction.”
• In a far-reaching interview with CryptoSlate, Antoni talked about Nexo’s product roadmap, the importance of insurance and proper security practices in crypto lending, the industry-uniting effect of Cred’s Chapter 11, and the biggest obstacles for mainstream crypto adoption, among other topics.

What to Watch for Next Week:

• Will there be any last-minute regulatory surprises from the Office of the Treasury?
• Will the US government actually pass a new stimulus act?
• Who will appear on the largest number of end-of-year influencer lists?