#220—Stablecoins are still hot

Also, a bipartisan stablecoin bill just got punted

Programming note: I’ll be out the next couple of weeks. Yaka Stuff will resume on 8/22.

Welcome to Yaka Stuff, our weekly newsletter that covers news, industry perspectives, and updates from the Hard Yaka ecosystem. Check out last week’s report here.

This week:

1. Stablecoin bill gets punted

2. Vitalik on the future of Ethereum

3. Ecosystem updates

4. Stuff happens

Programming note: I’ll be out the next couple of weeks. Yaka Stuff will resume on 8/22.

1. Stablecoin bill gets punted

Photo: World Bank

A key issue is the ability for banks to issue their own stablecoins, while putting the space in general under the oversight of the Federal Reserve. Here’s Politico:

House Financial Services Committee lawmakers will delay the markup of a widely anticipated bipartisan stablecoin bill this week after Treasury Secretary Janet Yellen pushed for changes in a key provision of the legislation.

The delay will push back the timeline for when Congress could start moving stablecoin legislation until after the August recess, according to multiple sources familiar with the discussions. The move underscores Washington’s struggle to create new rules for digital asset marketplaces that have been roiled by uncertainty following the collapse of several multibillion-dollar crypto startups.

Committee Chair Maxine Waters (D-Calif.) and ranking Republican Patrick McHenry of North Carolina have been negotiating a bill that would give banks the ability to issue their own stablecoins — digital assets whose value is pegged to fiat currencies like the U.S. dollar — and put nonbank issuers under the oversight of the Federal Reserve.

The ability for banks to issue stablecoins is a good thing. Banks already issue digital dollars—they just do so on proprietary ledgers. They also put those deposits to good use through lending.

Stablecoins have become sort of a killer app for crypto and blockchain by enabling the digitization of value that’s still tied to the traditional monetary system. The issue is that the dominant form of stablecoins, today, are either fully collateralized like USDC, opaque like Tether, or algorithmic.

The Federal Reserve has published literature earlier this year pointing out that fully collateralized stablecoins represent a potential systemic risk to the modern monetary system by potentially sucking productive capital out of the economy. USDC is stable as a fully collateralized stablecoin by holding USD and Treasury bills but those deposits aren’t being put to productive use and could ultimately compete against bank deposits, where traditional money creation occurs through lending.

Meanwhile, Tether tries to put that capital to use but more or less operates as a hedge fund that isn’t run by people who are actually hedge fund managers. They’ve come under fire as of late over the transparency of their holdings, and, as a result, have also appeared to take a more conservative approach. Last week, they announced that they no longer hold any Chinese commercial paper.

But stablecoins are still hot. Aave, one of the largest DeFi protocols, just passed an over-collateralized stablecoin proposal through its governance system. TRON’s algorithmic stablecoin in the vein of LUNA/UST also continues to gain traction.

Relevant:

• House punts on stablecoin bill after Yellen raises flags over key provision

• U.S. House delays consideration of stablecoin bill

• Aave DAO Approves Creating GHO Stablecoin - Decrypt

• China’s Digital Yuan Gets Fresh Push from Beijing, But Consumers See Little Incentive to Use e-CNY

• Will Stablecoins Be Tethered to the Fed? Lawmakers Have Circled That Option

• Circle's Cautious USDC Approach Has Paid Off, Despite Missteps

• China Vows Privacy, Information Protection in Using Digital Yuan

2. Vitalik on the future of Ethereum

3. Ecosystem updates:

• Web3 Digital Identity Startup Unstoppable Domains Raises Funds at $1B Valuation

• Via /junhiraga—Unstoppable Domains Raises $65 Million at $1 Billion Valuation to Turn NFTs into your Web3 Digital Identity

• GlobaliD Meet the Team: Meaghan Decorpo

• Via /vs—Prove it All with Indicio Proven

4. Stuff happens

• Via /gregkidd—Is Selling Shares in Yourself the Way of the Future?

• Via /nkhare—“Sign in with” anything – and save it in 1Password

• Coinbase Faces SEC Probe on Crypto Listings; Shares Tumble

• CFTC Announces New Tech Innovation Office to Oversee Crypto

• US Senators Push Bill to Make Small Crypto Transactions Tax-Free

• Funding Roundup: Some $300 Million Poured into Crypto Projects Last Week

• Ex-Meta Staffers Raise $150 Million for New Crypto Venture

• Messaging App Viber Launches Payments, a New Digital Wallet for Paying Bills, Money Transfers and Buying Goods

• Xydus, Mastercard Gain Digital ID Trust Accreditations in UK, Australia

• Greece Rolls Out Digital ID Cards and Driving Licenses

• Workforce Credentials Are Going Digital. Here’s Why This Helps Everyone

• Managing Identity for Web 3.0, the Metaverse and Beyond

• Via Robert Parker—35 Business Ideas of How Web3 Could Improve or Disrupt the Most Successful Companies

• A Weird Economy May Give Way to Recession — Or Not

• Reality Crashes Down on Meta

• Gen Z Shapes New Social Media Era

• Sunset of the Social Network

• Google Delays Blocking Third-Party Cookies Again, Now Targeting Late 2024

• Tired of Instagram? Try Discord

• Anti-vax Dating Site Exposed Data for 3,500 Users Through ‘Debug Mode’ Bug