EU Shuts the Stable Door
“Fud, fud, glorious fud
Nothing quite like it for cooling the blood
So follow me, follow
Down to the hollow
And there let us wallow
In glorious fud”
Last week was a euphoric moment in Brussels, as a clique of bureaucrats birthed a rather self-defeating couple of pages in the form of a press release announced to much fanfare entitled “Digital finance: agreement reached on European crypto-assets regulation (MiCA)”.
…stablecoins may be used for money laundering or terrorist financing activities….
….stablecoins may impede monetary policy or propagate financial shocks and generate financial contagion…
…The European Banking Authority will supervise stablecoins with more than 10 million users or 5 billion euros in circulation…
…BIS sets limits for bank holdings of stablecoins to 1%…
…banning the issuance of any more tokens if the stablecoin surpasses a daily spending limit of 200 million euro….
Of particular interest to us, is the part about stablecoins, Let’s take a look:
“MiCA will protect consumers by requesting stablecoins issuers to build up a sufficiently liquid reserve, with a 1/1 ratio”
This outlaws algorithmic stablecoins.
“Every so-called “stablecoin” holder will be offered a claim at any time and free of charge by the issuer”
This would make every existing stablecoins business model of charging a small fee for redeeming illegal.
“asset-referenced tokens (ARTs) based on a non-European currency, as a widely used means of payment, will be constrained to preserve our monetary sovereignty”
Outlaws usage of US dollar stablecoins in Europe .
“Issuers of ARTs will need to have a registered office in the EU to ensure the proper supervision and monitoring of offers to the public of asset-referenced tokens”
Why would they want to do that considering the above mentioned conditions?
“This framework will allow innovation to flourish in the European Union.”
HA! Good punchline.
Now let’s look at the performance of the Euro after these geniuses began preserving Europe’s monetary sovereignty :
Ouch, that doesn’t look too healthy… a 4% drop since these regulations were announced? No wonder they don’t want Europeans to have access to USDT, The Euro is getting absolutely pummeled in the markets.
Stop Liking Things I Don’t Like
Europe is not alone in warning of “The dangers” of stablecoins. The CBC, the Fed and the Bank of England have all released a steady stream of “warnings” and “reports” on the supposed risk stablecoins pose to their banking systems. Even the Bank of International Settlements has weighed in, ordering banks to limit their holdings of stablecoins to less than 1% of their balance sheets.
Why are they acting like this? Surely out of all the cryptocurrencies, Stablecoins backed by fiat currencies pose the least threat to their monetary…”policy”? Is this all about preserving Europe’s monetary sovereignty? Is it?
Curb Your Enthusiasm
To understand what’s making these people panic, we have to know a little bit about how USDT and backed stablecoins function. Tether issues USDT tokens that can be redeemed for $USD cash. The company behind USDT holds enough cash reserves to back every USDT token with dollars 1–1. Tether has cash reserves of at least $65 Billion to cover all 65 Billion USDT tokens. It means, USDT has liabilities of $65 billion and reserves of $65 billion
Now let’s take a look at a European bank like Deutsche Bank. Deutsche Bank has €66.98B in Equity Capital and Reserves (Not cash, “equity and capital”) OK that’s not great but fine. And what about their liabilities? Well the number is about 1.4 Trillion.
Which of these institutions do you think poses the greater threat to the stability of the Eurozone? The one who’s liabilities match their reserves 1–1 or the one who’s liabilities are 21 times greater than their cash reserves.
Yes, that’s right, the banks of the EU, and many other places, have been running a ponzi far greater than anything yet seen in cryptocurrency.
Money is Power?
Bankers have been quietly accumulating crypto for almost a decade. Now that crypto is accumulating large reserves of fiat they cry foul. Most bank managers would give their right arm to have the balance sheet of Tether. Could it be that the banks have pressured the EU to curtail the cash reserves of stablecoins and limit their usage to cut out the competition? That doesn’t sound like something that would happen in the EU…
A Shameful Display
Let’s draw the curtain on this ugly scene and move on,
A stablecoin can’t grow to be the largest and most widely used without being transparent and open with the wider world about their finances. USDT is the oldest, the largest and most widely adopted stablecoin in the world. It has proven its cash reserves multiple times, Tether has provided regular attestations of its reserves. USDTs smart contract is thoroughly audited. In recent months it has taken timely steps to wind down its holdings of commercial debt. And it has gained the confidence of millions of holders by its prudent financial management. If you’re interested in Tether, I really recommend reading their blog, it has lots of great info.
Any holders can redeem USDT for $USD through Tethers online portal after passing KYC. USDT is issued on multiple blockchains and is adopted by hundreds of crypto exchanges worldwide..
So after all is said and done, it comes down to who do you trust to look out for your interests?
- Central banks including the Bank of England, the Federal reserve and the BIS
- Unelected EU bureaucrats
- The financial times and other legacy media
- Bots on r/buttcoin and anonymous twitter accounts
- Janet Yellen
- Scumbag hedge funds
Or
- Millions of cryptocurrency users worldwide
In Closing
Stablecoins have existed for nearly a decade. There’s no sign of their adoption decreasing for any reason. In fact new stablecoins are being created every week, just last week SHIBA announced the creation of SHI, a stablecoin to be used in their metaverse project. More about that here. There are now about 40 significant stablecoins being used by thousands of DeFi apps and their users.
The total market cap of stablecoins is $152 Billion dollars.
The annual budget for the EU in 2023 is $185 Billion dollars
