#295—The SEC targets Robinhood

Also, the key stablecoin perspectives

May 13, 2024

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:

The SEC targets Robinhood
Trump’s crypto pivot
What we’re reading: Five perspectives on stablecoins
Stuff happens

1. The SEC targets Robinhood

The SEC’s crypto crackdown continues. Here’s the WSJ:

Robinhood disclosed that its crypto unit received a so-called “Wells Notice” from SEC staff over the weekend, which said the staff had made a “preliminary determination” to recommend an enforcement action against the unit, called Robinhood Crypto, over alleged violations of securities laws.
…
Robinhood said it was disappointed by the notice, saying it had attempted to work with the SEC in good faith for years to ensure that its crypto business was in compliance with securities laws.
“We firmly believe that the assets listed on our platform are not securities and we look forward to engaging with the SEC to make clear just how weak any case against Robinhood Crypto would be on both the facts and the law,” Robinhood chief legal officer Dan Gallagher said in a post on the company’s official blog.

Relevant:

2. Trump’s crypto pivot

Here’s Politico:

Trump's crypto pledge — Former President Donald Trump is officially courting the crypto vote. The presumptive GOP nominee told a crowd of supporters that crypto is moving out of the U.S. because of hostility and that “we’ll stop it.”
“The Democrats are very much against it, and I say this, a lot of people are very much for it,” Trump said in a video circulating on social media in which he also called out SEC Chair Gary Gensler, who has pursued a crypto crackdown. “I’m fine with it. I want to make sure it’s good and solid and everything else with it, but I’m good with it. If you’re in favor of crypto you better vote for Trump.”

And here’s Decrypt:

Former U.S. president Donald Trump seems to soften his stance on Bitcoin during a town hall event in South Carolina this week.
Speaking to Fox News ahead of the state's Republican Primary, Trump explained that "many people are embracing" Bitcoin and he's "seeing people wanting to pay [with] Bitcoin," and that he can "live with it one way or the other."
It’s a tepid embrace, but the Republican front-runner's previous stance on cryptocurrency used to be more hardlined. Back in 2019, while still in office, Trump said he is "not a fan of Bitcoin and other cryptocurrencies" stating that they are "not money" and it's value is based on "thin air."

3. What we’re reading: Five perspectives on stablecoins

Nic Carter published a mammoth read on stablecoins last week, his take on the “state of the academic and policy discourse.”

His five perspectives:

Greyism: Stablecoins are bad because they are unregulated bank deposits
Gorton and Zhangism: Stables don’t work in theory, so they won’t work in practice
Massadism: We should engage with stablecoins, because they threaten sanctions enforcement
Wallerism: Crypto, via stablecoins, is good for the dollar
Brooksism: Stablecoins can help keep the dollar the world reserve

Who stablecoins help:

Individuals living in unstable currency regimes
Sophisticated ex-US financial hubs
Digital nomads
The US government (from a fiscal perspective)

And hurt:

Foreign governments with unstable currencies
Banks
Legacy financial gatekeepers
Law enforcement
The US national security apparatus

Here’s Carter:

Objectively speaking, therefore, it seems that stablecoins are here to stay, and will likely continue to grow untrammeled unless policymakers globally launch a coordinated campaign to destroy them.
On the normative front, my synthesis of the views summarized above is simply that each individual policymakers’ views are informed by their own political objectives and underlying views. Gorton and Zhang prefer a state monopoly on money. Many of the critics listed here tend to favor the exploitation of financial infrastructure for political ends to varying degrees. Thus, any cash-like network, especially one that’s particularly unaccountable, is hostile to this agenda. Massad (who appears to be a more moderate, Obama-style Dem) is more nuanced. He acknowledges the importance and historical significance of stablecoins, but is concerned about sanctions evasion. Brooks is a libertarian-leaning Republican, and is therefore strongly favorable towards stablecoins. Waller is a Republican-appointed Fed governor, and is able to see the conditional benefit of stablecoins for the dollar.
Normatively, I have libertarian sympathies, and strongly believe in individual liberty, a reversal of financial surveillance trends that began 50 years ago with the digitization of finance, and the right to financial self-determination. I am also skeptical of the US’ continued ability to deputize financial rails for political ends; this status quo appears to be ending (and I don’t particularly lament its departure). I am generally supportive of dollarization as a policy that promotes restraint in untrustworthy jurisdictions and therefore see the welfare benefits of spontaneous bottom-up crypto dollarization that we see happening today.
Stablecoins disintermediate banks, remitters, and in conjunction with other forms of crypto-financial infrastructure like exchanges, give billions of savers globally direct access to digital dollars that they may not have had before. In each case, disintermediation means cheaper transactions. We see this on the ground directly with remittances. Settling remittances on stables via exchanges shaves meaningful basis points off global remittance rates, which still average 6.2 percent according to the World Bank, although this varies by channel. For billions of individuals in the global south, this makes a meaningful difference.
Thus, for me, stablecoins — especially those that are truly cash-like (i.e., exhibit minimal embedded surveillance) — are an immensely powerful tool, and represent a largely unmitigated force for good globally, especially in countries with immature or unstable financial sectors. The downsides of stablecoins, such as more scalable illicit flows, can be managed as issuers become more aggressive with ‘freeze and seize’ policies, and law enforcement builds sophistication around blockchain analysis.

Relevant

Yaka Stuff

#295—The SEC targets Robinhood

Also, the key stablecoin perspectives

1. The SEC targets Robinhood

2. Trump’s crypto pivot

3. What we’re reading: Five perspectives on stablecoins

4. Stuff happens

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