#292—We’ve got a U.S. stablecoin bill
Also, the code isn’t the law
Welcome to Yaka Stuff, our weekly newsletter that covers news, industry perspectives, and updates from the Hard Yaka ecosystem. Check out our last report here.
This week:
We’ve got a U.S. stablecoin bill
The code isn’t the law
Telegram gets serious about identity
Stuff happens
1. We’ve got a U.S. stablecoin bill
Senators Cynthia Lummis and Kirsten Gillibrand unveiled their new stablecoin bill last week. It covers what you would expect—custodian and reserve requirements, the banning of algorithmic stablecoins, as well as a definition of what stablecoins are.
Oh, and they aren’t securities.
Here’s Coindesk:
A payment stablecoin, as defined by the bill, would be any dollar-pegged digital asset "that is, or is designed to be, used as a means of payment or settlement." Issuers would be "obligated" to convert to dollars, and the asset itself won't be a security. Issuers would either have to be non-depository trust companies registered with the Federal Reserve Board of Governors or a depository institution "authorized as a national payment stablecoin issuer." Both state and federal regulators would have roles overseeing these entities.
Notably, the bill assigns the Fed some oversight over all stablecoin activities.
Here’s Lummis and Gilibrand, in an op-ed with Coindesk:
While some current proposals in Congress show promise, we have partnered to craft legislation that solves key policy challenges faced by previous proposals. Instead of drafting legislation in a vacuum, the Lummis-Gillibrand Payment Stablecoin Act of 2024 addresses the dual banking system as it exists today. It preserves states’ current authority over non-depository trust companies and ensures parity between federal and state bank charters, while acknowledging the Federal Reserve’s role as the guardian of monetary policy. The legislation creates a healthy balance of power by ensuring the Federal Reserve and states must act in concert with each other in supervising trust companies under $10 billion.
In drafting this legislation, we prioritized allowing innovation to prosper. Under this bill, stablecoins will create the ability to send a payment anywhere in the world instantly with a lower fee than the current options. Right now, financial transfer technology like wire transfers can take up to ten days, which is often too long if the money is being sent for an emergency. It will allow innovators to build new programs and apps that give consumers more control and flexibility. The possibilities for using stablecoins are numerous, and we are just starting to see how financial innovation will thrive once stablecoins become a common form of payment.
As is always the case, when or if the bill passes is another story altogether.
2. The code isn’t the law
In soccer, if you touch the ball with your hand in your own box, then the opposing team is awarded a penalty. That’s the letter of the law.
In reality, referees have some leeway to interpret that rule. Intention is key. If you didn’t intend to touch the ball with your hand, then they need to determine whether or not the player’s hand was in a natural position. If you didn’t intend to touch the ball and your arms are in a natural position, then no penalty is awarded. (If your arms are flailing all over the place, intention or not, you’ll likely be punished.)
The rule is the rule, but in a sense, it’s also a guideline—it’s both quantitative and qualitative. The goal here, no pun intended, isn’t to follow the letter of the law to a T, it’s to maintain the fair and competitive spirit of the game.
In the early days of blockchain, when smart contracts were still just a concept, there was plenty of discussion around the idea that these programmable ledgers could help automate things in a legally binding way. You didn’t have to worry about payment, because once your job was done, it happened automatically. These smart contracts would be open source so they could easily be audited.
In this world, there’s no referees. The code was the law.
It’s a neat thought experiment, but in practice, society isn’t always so black and white. Intentions matter.
And so, here’s Bloomberg:
A trader accused of exploiting Mango Markets rules to steal $110 million from the exchange was convicted of fraud in the first US trial involving criminal charges tied to cryptocurrency manipulation.
Federal jurors in New York on Thursday found Avraham Eisenberg, 28, guilty of commodities fraud, commodities manipulation and wire fraud for his actions on Oct. 11, 2022, when his trading boosted the price of futures contracts by 1,300% in 20 minutes. Sentencing was set for July 29. He faces 20 years in prison on the wire fraud count and 10 years on each of the other charges.
Eisenberg, a self-described “applied game theorist,” traded under a false identity and drove up the price of Mango’s token, MNGO, as well as contracts based on its relative value compared to a stablecoin called USDC, prosecutors said. Eisenberg then exploited a feature of the exchange that let him “borrow” against his holdings, withdrawing $110 million in cryptocurrencies that he had no intention of repaying, the US charged.
Prosecutors said Eisenberg “pumped” the price of MNGO tokens so he could pull off a fraud he planned for weeks against Mango Markets, a decentralized finance platform run by smart contracts.
“He manipulated that price so he could trick the system into giving him money,” Assistant US Attorney Thomas Burnett said in closing arguments on Wednesday. “He planned to take the money and run.”
3. Telegram gets serious about identity
They’re taking the Worldcoin approach to digital identity—although with palms instead of eyeballs.
Here’s Blockworks:
Announced earlier today at the Hong Kong Web3 Festival, the program aims to enable digital identity for 500 million Telegram users within five years. Telegram initially developed the Telegram Open Network, as it was then known, raising $1.7 billion in a private sale the same year before abandoning the project following SEC investigations. In 2022, open-source developers saved and rebranded the blockchain as The Open Network with a functional mainnet.
“Supporting Proof of Personhood protocols like Humancode is a step towards a practical reputation system that has real-life use cases for everyone entering our ecosystem,” TON Foundation Director of Growth Ekin Tuna said in a statement shared with The Block. “A scalable, private, and decentralized identity will help to onboard the first one billion users to the Web3 ecosystem in Telegram. We look forward to going further and seeing what exciting use cases it will unlock for the community and TON developers alike.”
…
The HumanCode incentives will be distributed to TON Society members who complete the palm scan and prove their personhood. Beyond the incentives, the idea is to create a new tool for combatting on-chain bots while offering users control over their online identity. The palm-scanning technology is available via any smartphone and can prove the user is human within a few seconds, the entities claim.
4. Stuff happens
Binance Converts Secure Asset Fund (SAFU) for Users to USDC - Unchained
MIT, German central bank will research CBDC privacy in new project
Solana price falls further as Ore suspends mining on the network
Forget eyeballs — new TON ecosystem initiative offers $5 million palm-scanning incentive
Breeden: BoE to consider changes in payments in CBDC decision
Germany’s Largest Federal Bank to Offer Crypto Custody Services