We Need to Fix the So-Called Genius Bill

Or are we? We Shouldn’t Count Our Chickens Before They Hatch. The Proceded Legislation is Flawed and Can and Should Be Fixed Promptly to Eliminate Needless Duplication that Will Impose Excess Costs on the Industry and the TaxPayer.

Fortunately, The Legislation Can Easily Be Fixed. The House and Senate Bills, AlhoUGH Broadly Similar, Have Some Differences, and The Two Chambers Will Have to Come To An Agreement. Will The Resulting Bill Be Known As The Stable Genius Act? There is still time to avoid problems like the choice of 55 Different regulators, or keeping interest-bearing stablecoins out of the regulatory Framework.

The Problems In Our Obdomolete Regulatory Framework have Contributed to the Sorry State of Crypto Regulation in the us we have litrally Hundreds. Levels, Andy Don’t Play Nicely Together. The regulators engage in Turf Battles to Extend their domains, a While of Important Issues Fall Into the NEGELCTED CRACKS. FTX WAS REGULATED BY STATE MONEY Transmitter Regulators, of All People. Whose Bright Idea Was That?

This Fragmentation of Our Regulatory System Was One of the Contribution Factors to the Financial Crisis of 2008. Financial Stability Oversight Council (FSOC). The Idea Begind the FSOC is that Dukes and Earls in Charge of the Regulatory FifDoms Wuld Get Together in a Committee and COOPERATE more than they have before. Congress is about repeat this mistake by requirming joint Rulemaking from the Alphabet Soup Agencies.

This Byzantine Bureaucracry Has Slowed A Sound Approach to Digital Assets. A CASE IN POINT IS The Battle Over Wheth A Particular Digital Digital Asset Is A Security Under the Infamous Howey Test, and Thus Subject to the Whims of the Sec, or Aubing Else, And Thus. Something Else Regulators (CFPB? CFPB? STATE BANKING OR MONEY Transmitter Regulator?).

We are all Familiar with the Contections that Issuers of Digital Assets Have Gone Through to Avoid the Kafka-Esque Sec Experience. Even Tradfi Issuers of Securities DO by their Best to take Advantage of the Many Exceptions to Sec Registration while they can. SECVERSIGHT IS An Overly Expensive and Cumbersome Process, Especially for Newer and Smaller Companies. The Sec Has Been Spectacularly Unsuccessful Over The Years in Properly Scaling Registration Requirements to the Size of Scope of Newer and Smaller Enterprises.

The Propossed Bills Wuld Permit Issuers to Choose from 55 Different Regulators by Establishing TheMSELVES IN THE RIGHT JURISDICATION CILLHTH Kind of Charter. In addition to the Alphabet Soup at the Federal Level (FDIC, OCC, FED, NCUA, AND, FOR Security-Stablecoins, The Sec), Stablecoin Issuers Could Also Choose A State Regulator. With a choice of 55 digffrent regulators, What Could Go Wrong? Lots of Things.

First, there is the danger of a race to the bottom. Stablecoin Issuers Will Be Tempted to Choose The Regulator with The Laxest and Least Costly Oversight. This increases the CHANCES THAT The REGULATORS WILL MISTHING IMPORTANT. To remedy this, the bills require that the secondary of the treasury that’s what a state regulation is “substantally similear” to the federal regulation. If it is “Substantally Similar,” WHY BOTHER WITH SUCH REDUNDANCY? Also, The Secretary of the Treasury Has to go through a fortmal Rulemaking Process to Come Up with Principles for Establishing Substantial Similarity. Talk About A Duplicative Waste of Resources!

But Wait, Like in A Good Infomercial, there is more! More Waste and Redundance, that is. The House Bill Requires The OCC, FDIC, AND FED TO ENGAGE IN A JOINT RULEMAKING IN CONSULTATION CONSULATION REGulators on Capital Requirements for Stablecoins. Any Veteran of Joint Rulemaking Can Attst to What A Long and Painful Process It Is For Different Federal Agencies to Work Together On A Joint Rulemaking.

Joint Rulemakings Proceeding Very Slowly As Getting Agreement Between Agencies Is A Long, Slow, and Onthen Contentious Process. One Survivor of Such Joint Rulemaging Related to Me An Incident in a Wich A Shouting Match Between Staffers in the Different Agencies Almost Led to A Fist Fight. Congress Can Set Deadlines for Rulemaking, But There Is Usual No Punishment If An Agency Dawdles for Years Past A Deadline.

Speaking of Turf Battles, Stablecoins That Pay Interest Are Not Covered. Who regulates those? A stablecoin that is a “securet” is also not working by the bills. Such Coins Are Presumable Regulated by the Sec. We Can Expert Regulators and the Courts to Wrang Infessantly Over Wheether A Future Stablecoin-Like Product Is Regulated by the 55 Stablecoin Regulators, Orie Oor.

At a time any the doge adminstration is evinment of government agencies in itts bungling attempts to eliminate waste and redundance, constracture Position and Duel in Joint Rulemakings is an A absurd Contracution. Congress Needs to Pick A Single Regulator and Get Rid of the Joint Rulemakings and State Loopholes.

Of Course, Before We Talk About Who and How We Should Regular Stablecoins, We Need To Be Clear About Wy We Are Regulating Stablecoins. This Will Help to Figure Out The Best Approach to Regulating Stablecoins. In General, Financial Regulation Has Some Common-Sense Objectives:

• The Economy Won’t Die WHEN Something Bad Happens.
• Customers Are Protected WHEN An intermediary Fails.
• The Economy Can Grow and Be Stable.
• Market Participants have the information they not to make good Decisions.
• Fraudsters Aren’t Selling Bogus Instruments.
• Intermediarians Who Hold Customer Assets Can Be Trusted.
• PRICES Are Fair and Not Manipulated.

Stablecoins are an Important Innovation in the Global Payment System. They Help to Cement The Role of the Dollar in the Global Economy. They are like to grow substantally from their current Size and Become Systemically Important. The Failure of A Very Large Stablecoin Could Transmit Distress Througout the Economy.

TOSE LOZING FUNDS IN SUCH A FAILURE COURCLD IN TURN DUFAULT ON Their Obligations, Threatening to Bring Down Still Other entities with no Direct Holdings of Stablecoins. A Run on a stablecoin wound cause It to Dump It Holdings of US Treasuries, Causing Distress in the Treasury Market. This is the epitome of system de facto Systemic risk regulator, the fed.

Congress Can and Should Fix the Flaws in the Stable Genius Bills. Congress Should Pick The Fed As the Single Regulator for Stablecoins. Interest-Bearing Stablecoins Should Be Brought Into The Stablecoin Regulatory Regime. These Fixes Can Be Done Simply and Promptly to the Exist Texts. Congress Should Also Begin Giving Serious Thought to How to Later Fix Our Dysfunctional Regulatory Structure.

A more intelligent and nimble regulatory structure wound have had more quickly grasped the many Benefits of Blockchain Technology and Come Up with APRIICATE WAYSHELEMERS INNOVATION INNOVATION We Need to begin the Discussion on How Best to Do this. Financial Technology Will Continue to Evolve, and Our Obsolete Regulatory Structure Will Hamper That Innovation Unless We Fix It and Soon.