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STABLECOINS NO ‘SAFE HAVEN’ FROM US MONETARY POLICY, SAYS EUROPEAN CENTRAL BANK

The ECB says that stablecoins are vulnerable to both shocks coming from within the crypto world and the decisions of U.S. central bankers.

The European Central Bank (ECB) has challenged the idea that stablecoins are a “safe haven” for investors in times of market turmoil, finding they are actually highly impacted by U.S. monetary policy.

The working paper examined the link between U.S. monetary policy, money market funds (MMFs), and stablecoins. “Monetary policy, in particular for the U.S. dollar, is the linchpin that connects crypto and traditional financial markets,” the authors concluded.

The paper argued that stablecoins—which have a fixed price and are typically pegged to a fiat currency, often the U.S. dollar—were vulnerable to shocks coming from within traditional financial markets, such as changing U.S. monetary policy, for example increasing interest rates.

Evaluating data since 2019, the ECB claimed the U.S. government raising interest rates led to a 10% drop in the market capitalization of stablecoins over the following 12 weeks.

Meanwhile, it found that traditional non-crypto assets, such as money market funds, actually received a significant influx of new capital during this same period.

A money market fund is a type of fund that invests in short-term debt securities such as U.S. Treasury bills, generally regarded as one of the most conservative, low-risk investment choices.

The paper argues that as monetary policy tightens up, investors demand fewer stablecoins for speculative purposes.

“Contractionary monetary policy shocks are thus negative for crypto: As the opportunity cost of holding unregulated non-interest bearing assets increases in a rising interest rate environment, investors move (on the margin) towards traditional investment assets,” said the paper.

The paper also examined the impact of events in the crypto world on stablecoin market capitalizations. The ECB found that market capitalizations of stablecoins—such as Tether or USDC—experienced pronounced falls during “crypto shocks,” or sudden devaluations in the overall value of Bitcoin.

On average stablecoins fell roughly 4% on average in the aftermath of “crypto shocks.” Examples of crypto shocks included Tesla’s decision to suspend payments from the Bitcoin network, China’s crackdown on cryptocurrencies, the TerraUSD/LUNA collapse, and FTX’s sudden bankruptcy.

As a result, they concluded that monetary policy had more of an impact on stablecoins than shocks to the crypto world. For example, during the “crypto winter” of 2021, major stablecoins like Tether received significant knocks to their market capitalization, although not to the same extent as non-dollar pegged currencies like Bitcoin.

In contrast, the paper concluded that big fluctuations in the crypto market don’t impact the world of traditional finance much—at least at the time of writing. It found a minimal correlation between big events in the crypto world and the inflow into money market funds, such as U.S stock market prices.

The paper didn’t take the Central Bank policies of other major economies into account.

@ Newshounds News™

Source:  Decrypt

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GARY GENSLER GRILLED BY LAW STUDENTS AND FORMER SEC COMMISSIONER OVER HIS STANCE ON REGULATING CRYPTO
▪️At a fireside chat on Wednesday with former SEC Democratic Commissioner Robert Jackson Jr. at the New York University Law Institute for Corporate Governance and Finance, asked SEC Chair Gary Gensler about the agency’s approach to digital assets.

▪️Law students also pressed Gensler about whether the SEC should be more clear in its stance on crypto.

U.S. Securities and Exchange Commission Chair Gary Gensler was pressed by law students and a former Democratic commissioner at the agency over his views on regulating cryptocurrency.

At a fireside chat on Wednesday with former SEC Democratic Commissioner Robert Jackson Jr. at the New York University Law Institute for Corporate Governance and Finance, asked Gensler about the agency's approach to digital assets.

 The SEC has often cited the Howey Test in crypto, which is a 1946 U.S. Supreme Court case used to determine if an asset qualifies as an investment contract and, therefore, a security.

"Is that the way we should oversee cryptocurrency, by trying to apply a 1940s Supreme Court decision to this technology?" Jackson asked.

Gensler stood his ground.

"Look, it's the law of the land and I took an oath of office to do it, but it also protects investors," Gensler said. "At the core of the securities laws, there is a basic concept — you all get to decide what you want to invest in."

That could be green energy or artificial intelligence, but either way, disclosures are necessary, Gensler said.

The SEC has brought a number of enforcement actions against big names in the crypto industry over the past few years, including FTX, Binance, Kraken and Coinbase. Meanwhile, Gensler has consistently warned that crypto exchanges must register with the agency and has said that most cryptocurrencies are securities.

However, crypto firms have argued it's not possible to register with the agency, in part because rules were made for more traditional entities that are different from the digital asset industry.

On Wednesday, Gensler also pointed toward fraud in the crypto industry, citing a report from the FBI last month that recorded a 45% uptick last year in losses tied to crypto since 2022.

"With all respect, the leading lights of this field in 2022 are either in jail or awaiting extradition right now," Gensler said.

Roberts also asked Gensler if it would be better to create a regulatory framework for digital assets. Gensler said that framework already exists.

"Just because people don't like the law doesn't mean there's no law," Gensler added.

A law student also asked Gensler about the SEC's term crypto asset securities and whether the agency should be more clear about its position.

The SEC said, in a recently amended complaint, that when the agency refers to crypto asset securities, it’s not referring to the crypto asset itself but the full set of contracts, expectations and understandings of the sales of such assets. The agency added that it "regrets any confusion."

Gensler said the agency has been clear over the years, including when former SEC Chair Jay Clayton headed the agency.

"Since then as well, the [SEC] have spoken clearly in a consistent voice and the courts have as well," Gensler said.

Another student asked what would happen to the utility of tokens if they were to become compliant with the SEC.

The SEC is "merit-neutral," Gensler said, and investors get to decide the utility. Gensler also noted that tokens are not likely to become a currency.

"It's unlikely this stuff is going to be a currency," Gensler said. "It's going to have to show its value through disclosure, through use."

@ Newshounds News™

Source:  The Block  

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The Financial WARS Begin

🏦 BlackRock, the world's largest asset manager, is secretly preparing for a potential US dollar collapse by launching a fund to back a new stablecoin created by Ethanol Labs, which will be backed by BlackRock's tokenized assets.

💰 Gold and silver prices have surged nearly 30% this year, outperforming equities and bonds, as inflation rises and investors seek safe haven investments.

🏠 Mortgage rates are increasing despite Fed rate cuts, with the 30-year rate spiking 25 basis points last Friday, while banks tighten lending rules and FHA delinquencies rise.

🌲 Lumber and meat processing companies are allegedly colluding to artificially inflate prices, causing builders to lose money on unsold homes, according to McDonald's lawsuit against Tyson Foods and others.

💼 The current economic situation is compared to the Great Depression, with rising unemployment and foreclosures, though during the Great Depression, three out of four people still had jobs.

@ Newshounds News™

Source: The Economic Ninja

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🌍 IOTA GAINS INSTITUTIONAL TRACTION AS FIREBLOCKS ADDS EVM SUPPORT TO ITS SECURE PLATFORM  |  Youtube

@ Newshounds News™

Source:  Seeds of Wisdom Team RV Currency Facts

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