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The Managed Stablecoins are Securities Act of 2019 H.R. 5197

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The Managed Stablecoins are Securities Act of 2019 H.R. 5197

A new bill aimed at adding clarification to the budding stablecoin market could see some serious opposition from the cryptocommunity. The bill dubbed the “Managed Stablecoins are Securities Act of 2019 H.R. 5197″ was introduced to regulators last week. The goal of the new legislation is to amend the statutory definitions of the term security to include managed stablecoins.

Issues with Managed Stablecoins

Almost immediately, crypto analysts spotted issues with the wording of the new bill. For example, the new legislation states that digital assets, known as managed sta­ble­coins, are investment contracts and therefore are securities within the meaning given the term in section 2(a) of the Securities Act of 1933.” In this scenario, every stablecoin would fall under the new regulations.

The problem with such a blanket statement is that it has the potential to halt one of the most innovative sectors in the cryptocurrency market. The new legislation would be a death sentence for most of the stablecoins currently in existence. These negative effects would occur because this would require these tokens to trade exclusively on securities exchanges versus crypto exchanges.

G7 Report on Concerns of Managed Stablecoins

G7 Report on Concerns of Managed Stablecoins

Congress Drops the Ball

The new legislation was put forth in the wake of major tech firms such as Facebook seeking to launch stablecoins in the very near future. Regulators now believe that it will be easier to provide oversight to these projects if they fall under the securities laws.  Unfortunately, the bill fails to accurately describe what is a “managed stablecoin.”

Managed Stablecoins

In essence, managed stablecoins are less about the token and more about the issuers’ actions. Only when a stablecoins issuer plays an active managerial role in adjusting the composition of assets that back the coin should the token fall under current securities regulations. This ruling would make sense as the company’s actions guarantee the token’s stability.

Hurt the Many to Regulate the Few

The problem with a broad categorization of stablecoins is the fact that most don’t have this active management as part of their strategy. In most instances, the digital asset represents a right in a trust. Basically, a company would peg the token to a real-world asset that represents a 1-to-1 exchange rate. Usually, this asset is some form of fiat currency.

Tether

Tether is the best example of a non-managed stablecoin. The firm holds dollars as a state-regulated trust company. This company adheres to trust regulations. Basically, the company can’t utilize these funds in any way which could detract from their 1-to-1 backing ratio. In this manner, Tether provides much-needed stability to the cryptospace without actively managing the value of the tokens.

You Can’t Douse the Stablecoin Fire

As regulators continue to explore ways to tackle the emergence of mega tech firm tokens, its interesting to see what concepts actually make it into regulations. The current Managed Stablecoins are Securities Act of 2019 H.R. 5197 lacks much of the clarification lawmakers sought to provide. As such, there is a good chance that this bill is only the start of a long regulatory battle to determine the future of these much-needed coins.

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David Hamilton is a full-time journalist and a long-time bitcoinist. He specializes in writing articles on the blockchain. His articles have been published in multiple bitcoin publications including Bitcoinlightning.com

Stablecoins

Circle Attempts to Sell SeedInvest, Doubling Down on StableCoin

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circle

Circle has long been a name intimately associated with the world of blockchain.  Between the vocal nature of their leaders, touting the potential of the technology, and their high profile acquisitions over the past few years, they have often been a guiding light.

The company, however, appears to be in a state of flux, in recent months Circle has sold their interest in crypto exchange Poloniex, key personnel has left, and now, the potential sale of equity crowdfunding platform SeedInvest.

These are significant moves. The changes beg the question, do these developments represent the demise of Circle? Or a strategic restructuring paving the way for a brighter future?

SeedInvest No More?

There are rumblings that Circle intends to pivot their efforts away from crowdfunding.  This pivot will reportedly involve the sale of recently acquired equity crowdfunding platform, SeedInvest.

While this has not been confirmed, it is being reported by the popular news outlet ‘The Block’.

It was not long ago that we first reported on the initial acquisition of SeedInvest.  This was a move that caught the attention of many, as SeedInvest was one of the leading equity platforms at the time of acquisition.  After being acquired by Circle, expectations were sky-high for what the company would achieve in the burgeoning sector.

Ousting Talent

Until recently, the brain trust at Circle was spearheaded by its pair of founders, which acted as ‘Co-CEOs’.  This structure served the company well, since its founding in 2013, so it came as somewhat of a surprise in December 2019 when it was announced that Sean Neville, one of the Co-CEOs would be stepping down from his post.

It is believed that with the company reimagining their path forward, the time was ripe for changes in personnel as well.  Neville recognized this, and took the opportunity to pursue new endeavours.

On-load / Off-load

Possibly, the downsizing event that garnered the most attention is the sale of Poloniex.  This is primarily due to the fact that Circle acquired the exchange for a staggering sum, totalling over $400 million.

While the Poloniex dramatically improved during its time as a part of the Circle family, there was clearly more promise being shown in Circle’s other endeavours.

For more details surrounding the sale of the popular cryptocurrency exchange, make sure to peruse the following article.

Poloniex Branches out from Circle as ‘Polo Digital Assets’

Circling Back

In early 2019 Circle released a retrospective report of 2018, which noted two primary trends they felt would shape blockchain, moving forward – stablecoins and digital securities.

Circle Identifies Stablecoins and Digital Securities as Emerging Trends

We have seen Circle, in the months since, attempt to capitalize on each of these.  While its investment in SeedInvest may (or may not) be coming to an end, its work in developing USDC stablecoin over the same time period has clearly paid dividends.

The company states in a recently released paper detailing stablecoins, “global stablecoins offer the potential for a dramatic opening up of participation in global economic activity”.

We took a closer look at Circle’s USDC stablecoin, its competitors, and how this asset class stands to reshape finance in the following article.

Downsizing Summary

The following is a brief breakdown of the various strategic moves made by Circle in recent months.

Sale of crowdfunding platform ‘SeedInvest’ to …?

  • Pending

Sale of trading platform ‘Circle Invest’ to Voyager

  • 2019

Co-CEO Sean Neville steps down

  • 2019

Sale of OTC Desk to Kraken

  • 2019

Sale of cryptocurrency exchange ‘Poloniex’ to Asian investment group

  • 2019

Hope Remains

While the various events discussed above may come across as steps backwards, there is still hope that Circle knows exactly what they are doing.  These moves are, after all, based on the potential shown by USDC, and what it can offer not only Circle, but the overall world of blockchain.

It was not that long ago that most were praising the decision to purchase both, SeedInvest and Poloniex.  We trusted Circle’s judgment then, despite how events unfolded, maybe we should trust them now?  Time will tell.

Circle

Founded in 2013, Circle is a well backed, financial services, company, which maintains operations in Boston, Massachusetts.  Above all, the team at Circle is focused on ensuring the success of their stablecoin offering ‘USDC’.

CEO, Jeremy Allaire, currently oversees company operations.

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The Rise of Stablecoins Sees Canadian Stablecorp Jump into the Fray

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A Growing Stable

Stablecoins have, thus far, proven to be very useful, and popular, digital assets within the world of blockchain.  They provide a reprieve from market volatility, while facilitating easy transfer of value.

This trend has not gone unnoticed, as a pair of Canadian companies – 3iQ & Mavennet – have formed a new venture known as Canada Stablecorp.  Their first product release, is a Canadian dollar (CDN) backed digital asset/stablecoin under the ticker ‘QCAD’.

While the blockchain industry has seen an influx of various stablecoins over the past two years, the vast majority have been structured around either USD or assets, such as gold.  The entrance of a CDN backed stablecoin, by reputable companies, is a luxury to interested traders, as the ‘stable’ of offerings just became even more diverse.

The Details

As previously indicated, this venture was undertaken by a pair of companies, which when working together, are known as Canada Stablecorp.

The team behind this venture has clearly been hard at work, leading up to the stablecoins recent launch, as the stablecoin is immediately supported through various avenues.

Canada Stablecorp indicates that interested parties can begin using the stablecoin by purchasing through the following outlets.

Naturally, with this venture being undertaken by a pairing of Canadian companies, with the asset being backed by the Canadian dollar, each of these exchanges are targeted, primarily, towards those residing in the Great White North.

Canadian Dollars CDN

Many may wonder why there is a need for a CDN backed stablecoin.  There most likely is no one single reason as to why the blockchain industry would demand such an asset.  The following are a few varying rationalities behind the move, however.

  • Support Local
    • Regardless of location, people tend to support local if they can. With blockchain rapidly rising in popularity throughout Canada, an attachment to ‘home’ may give QCAD the edge when Canadian traders decide which stablecoin to use.
  • Historically stable
    • CDN remains one of the world’s most stable currencies. While it may not retain the clout that USD does, it is widely accepted on a world stage.  With the nation often remaining politically removed from divisive world events, the Canadian dollar may be viewed as a safe haven in times of turmoil.

Commentary

Upon announcing the launch of this new asset, only days ago, representatives from each of the responsible parties took the time to share their thoughts.  The following is what each had to say on the matter.

Jean Desgagne, CEO of Canada Stablecorp, states,

“We are excited to be creating an important piece of financial market infrastructure for Canada that will serve the digitization of capital markets and provide a robust payment and settlement solution. QCAD represents a significant opportunity to set a new standard of transparency and auditability in digital currencies and will help drive trust and mass adoption of stablecoins.”

Kesem Frank, President of Mavennet Systems, states,

“QCAD is a significant stepping stone for the Canadian financial market, establishing an imperative link to the world of digital assets.”

Fred Pye, CEO of 3iQ, states,

“We believe the future of equity and bond trading in this country will move towards digital rails. QCAD is in a position to act as the settlement mechanism for these next generation solutions.”

A Past Look

Beyond the development discussed here today, we have previously taken a closer look at the various stablecoin offerings on the market.  Make sure to peruse the following article to learn more about these assets, and how they hold the potential to underpin the developing digital securities sector.

Stablecoins within Digital Securities

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Tether Gold (XAU₮) – Digital Asset Pegged to Physical Gold

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Tether Gold (XAU₮) - Digital Asset Pegged to Physical Gold

This week, the crypto market saw a major development after the world’s largest stablecoin provider, Tether Ltd announced the launch of its highly-anticipated Tether Gold (XAU₮) token. Tether currently dominates the stablecoin market with a market cap of over $4.6 billion. Now, the firm seeks to transform the gold-backed token arena in much the same way.

News first broke via a post from Tether’s management team. In the post, the firm spoke on Tether’s proven track record for product innovation in the sector. Also, developers discussed the new XAU₮ token and its functionality. Specifically, the post clarified that XAU₮ represents ownership of one troy fine ounce of physical gold on a specific gold bar.

Tether Gold (XAU₮)

As part of the Tether Gold strategy, executives decided it was better to maintain direct control over the physical gold storage. As such, the gold represented by XAU₮ resides in a high-security vault in the country of Switzerland. The post explains that users don’t have to fear the loss of their physically-tethered gold because the vault incorporates best in class security systems coupled with advanced anti-threat measures. In order to make this monumental task a reality, Tether chose to partner with a long-time precious metals trader. For their part, this UK-licensed firm provided the gold for tokenization.

Tether Gold via Company Website

Tether Gold via Company Website

Tether Gold (XAU₮) Tokens

Interestingly, Tether decided to go with a multi-blockchain approach to the market. Currently, XAU₮ tokens are to release in two different coding formats. XAU₮  is available in both ERC-20 tokens on the Ethereum (ETH) blockchain and TRC-20 tokens that live on the TRON network. Importantly, both types of XAU₮ are compatible with the current batch of Tether (USDT) wallets. In this way, XAU₮ tokens can transfer to any supported on-chain address without issues.

Tether Gold (XAU₮) Strategy

As part of Tethers XAU₮ unveiling, the firm made a couple of other important announcements regarding the token. Firstly, XAU₮ is to be the only gold-backed token to not charge custody fees. Notably, this decision improves the profitability of the token. Also, XAU₮ investors get access to a 24-hour dedicated customer support team. As it stands today, developers have not listed what exchanges will support XAU₮. However, developers did invite any interested exchanges to reach out for more details on how to list the token in the future.

Tether Gets Golden

Tether once changed the cryptomarkets forever, and now, it looks as if the firm is ready to do it again. It will be interesting to see exactly how Tether manages and audit this latest venture. In the past, the firm has run into issues regarding its Tether stablecoin accounting practices. Hopefully, the firm learned from those mistakes. For now, the entire cryptocommunity awaits the launch of this unique gold-backed stablecoin.

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