Seeds of Wisdom RV and Economic Updates Monday Evening 1-6-25
Good Evening Dinar Recaps,
FDIC PUBLISHES CRYPTO ‘PAUSE’ LETTERS INCLUDING USDF CONSORTIUM
In response to freedom of information requests by Coinbase, the Federal Deposit Insurance Corporation (FDIC) published minimally redacted letters sent to banks requesting information about their crypto activities and in most cases asking them to pause activities pending feedback.
Last year, the FDIC’s Office of Inspector General objected that the FDIC had in most cases failed to provide feedback, leaving activities in limbo and impacting innovation.
On behalf of Coinbase, History Associates Inc asserted that the letters demonstrate the FDIC was part of “Operation Choke Point 2.0—a multi-agency effort to de-bank the digital-asset industry.”
With one important exception, these particular letters don’t appear to support the de-banking claim. They reinforce the position of blocking banks from engaging with crypto and public blockchains.
Amongst the 25 letters disclosed, most of the banks wanted to offer their customers the ability to buy Bitcoin via their mobile banking apps. Often times, this was an indirect service to be provided by a third party.
The FDIC objects to public blockchain for USDF payments
By far the longest letter related to a planned blockchain-based fiat payment system to be operated by a consortium of banks. Despite five pages of tightly typed questions, which undoubtedly were answered, that consortium has so far only participated in Regulated Settlement Network simulations.
While the redactions removed the identities of the bank, we can confirm that the letter relates to the USDF Consortium, which originally planned to launch a payment system using a private protocol on the Provenance public blockchain.
On first reading, we suspected the letter related to USDF, because around this time the consortium shifted to a permissioned blockchain approach in a vain attempt to get approval. The use of the term ‘digital markers’ was the final confirmation, given this terminology is specific to USDF.
The letter indicates that the FDIC was interested in the roles of the non bank participants and their involvement in validating transactions. It also had questions about the use of the Hash cryptocurrency and whether banks would need to hold it, although the name ‘Hash’ was redacted.
Given this was before the launch of Fed Now, the FDIC asked the valid question about out of hours liability risks between banks for payments.
SAB 121 – custody One of the most contentious crypto issues has been the SEC’s SAB 121 accounting rule, which prevented banks from providing cryptocurrency custody, although that certainly worked in Coinbase’s favor.
The crypto exchange has dominated custody for ETFs. While it has been claimed SAB 121 was formulated by the SEC without consulting other regulators, in many of the letters the FDIC asks for the bank’s analysis of SAB 121 and it’s applicability. This is a not-so-subtle way of saying, ‘you cannot provide custody’.
Other takeaways
Not all letters were equal. Apart from the USDF letter, there were three that stood out. One bank was being quite pushy, saying that it planned to launch crypto services on a specific date.
It had clearly provided extensive information to the FDIC already. The FDIC’s list of questions was far longer than for other banks, querying every claim the bank made, asking for evidence.
Moving on, when assessing risk, there’s the accounting concept of materiality. In other words, don’t focus on the small, irrelevant stuff. One bank spent $25,000 on an NFT. There were numerous detailed questions about this particular purchase.
Letter number 25 relates to a bank that wanted to provide deposit account services to a stablecoin but was told to wait for feedback. It is the only letter in the group that appears to block banking services. The New York-based bank first wrote to the FDIC a few days after Circle’s USDC stablecoin lost its peg in March 2023, following the collapse of Silicon Valley Bank.
@ Newshounds News™
Source: Ledger Insights
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JUSTIN TRUDEAU RESIGNS, PRO-CRYPTO SUCCESSOR EXPECTED
Canada’s Prime Minister steps aside, crypto rejoices.
Canada’s Prime Minister, Justin Trudeau, who has been historically anti-crypto, resigned today, citing "internal battles" in Canada's governing party.
What’s the Scoop?
▪️Political Fallout: Trudeau’s approval rating is at 22%, and polls suggest his Liberal Party would suffer a major defeat in a snap election, winning just 46 seats to the Conservative Party’s projected 225.
▪️Pro-Crypto Successor: Pierre Poilievre, expected to succeed Trudeau, is a vocal supporter of DeFi and crypto, championing Bitcoin as a hedge against inflation.
Bankless Take
Trudeau’s resignation not only marks the end of his divisive tenure but signals a potential shift in Canada’s crypto policy landscape. While his administration adopted a cautious, and occasionally aggressive stance toward cryptocurrencies, Pierre Poilievre’s pro-crypto outlook could bring a stark contrast.
If Poilevre does becomes his successor, Trudeau’s exit would further amplify the broader global trend of favor shifting towards forward-looking, pro-tech politicians, potentially positioning Canada for greater adoption and innovation under new leadership.
@ Newshounds News™
Source: Bankless
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FIVE CRYPTO COMPANIES GAIN MICA LICENSES ACROSS NETHERLANDS AND MALTA
▪️MoonPay, BitStaete, ZBD, and Hidden Road received MiCA licenses from the Dutch Authority, enabling EU-wide crypto operations.
▪️The Malta Financial Services Authority (MFSA) has also licensed blockchain-based sports and entertainment platform Socios.com
▪️Tether's USDT market cap dropped $2 billion under MiCA, raising concerns though analysts claims USDT will be unfazed by EU setbacks.
@ Newshounds News™
Read more: Be In Crypto
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STABLECOIN SKEPTIC MICHAEL BARR STEPS DOWN AS FEDERAL RESERVE'S VICE CHAIR FOR SUPERVISION AHEAD OF TRUMP INAUGURATION
The Federal Reserve Board has announced that Michael S. Barr is resigning from his position as Vice Chair for Supervision.
In a statement, Barr said he didn’t want a potential dispute over the position in the near future to distract from the Fed’s “mission.”
“The position of vice chair for supervision was created after the Global Financial Crisis to create greater responsibility, transparency, and accountability for the Federal Reserve’s supervision and regulation of the financial system.
The risk of a dispute over the position could be a distraction from our mission. In the current environment, I’ve determined that I would be more effective in serving the American people from my role as governor.”
Barr’s resignation comes less than two weeks before pro-crypto President-elect Donald Trump’s inauguration.
In 2023 during a speech at the Peterson Institute for International Economics, Washington, D.C., Barr warned about the “special risks associated with stablecoins,” advocating for stiffer regulations on the asset class.
Said Barr,
“Stablecoin issuers seek to have—but don’t—some of the same characteristics as federally insured bank deposits. Stablecoin issuers represent that their liabilities can be redeemed on demand at par, a dollar for a dollar. In fact, however, the assets backing the liability can fluctuate in value… The banks we regulate, in contrast, are well protected from bank runs through a robust array of supervisory requirements.
Consider the consequences if a stablecoin not subject to appropriate supervision and regulation were to be adopted as a widespread means of payment, which some stablecoin developers state as a goal. Stablecoins have the potential to scale quickly because of network effects.
An unregulated, unsupervised, deposit-like asset could create tremendous disruptions, not just for financial institutions but for people who might rely on the coin if it were to get wide adoption.
We must learn from the past to ensure that we do not allow for new forms of unregulated private money subject to classic forms of run risk, and with the associated spillovers and systemic implications for households, businesses, and the broader economy.”
@ Newshounds News™
Source: Daily Hodyl
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GEMINI AGREES TO PAY $5M CFTC FINE BEFORE DONALD TRUMP’S INAUGURATION
Gemini Trust Company reaches $5 million settlement with CFTC over Bitcoin futures case, choosing to resolve litigation before the upcoming Trump administration.
▪️The closure of the Gemini case is a huge welcome to the growth during the Trump administration.
▪️The Winklevoss brothers have been consistent in the web3 space for more than 10 years, thus growing a too-tier crypto exchange.
Gemini Trust Company, a New York-based cryptocurrency exchange founded in 2014 by the Winklevoss brothers, has agreed to pay a penalty of $5 million to the United States Commodity Futures Trading Commission (CFTC) to end a long-standing litigation.
The Winklevoss brothers agreed to pay the fine in a joint court hearing on Monday to avoid a trial set to coincide with the inauguration of pro-crypto US President-elect Donald Trump.
Gemini settled the case with the US CFTC without admitting or denying any liability in the case.
In June 2022, the US CFTC filed a complaint in the US District Court for the Southern District of New York against Gemini for issuing misleading statements of material facts regarding the Bitcoin futures product.
According to the US CFTC, Gemini failed to show how it would prevent Bitcoin price manipulation to ensure fair competition for all customers in its BTC Futures Product. However, the Gemini cryptocurrency exchange has opted to end the case ahead of the expected trial on January 21, which would have kickstarted after the much-anticipated inauguration of President-elect Donald Trump.
Furthermore, Gemini cryptocurrency exchange, among other web3 companies, is banking on the upcoming Trump administration to set clearer and better crypto regulations.
Possibly, most of the crypto companies are betting on the new leaders of the US SEC chair and CFTC to drop crypto-related cases, which were orchestrated by the Biden administration.
@ Newshounds News™
Read more: CoinSpeaker
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