Does the Stablecoin Guidelines issued by the US SEC indicate that the US recognizes the value of digital currencies?

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Today’s news is a bit interesting. On September 22, the U.S. Office of the Comptroller of the Currency (OCC) and the U.S. Securities and Exchange Commission (SEC) issued the first stable currency guidelines, providing the first details on how to handle cryptocurrencies backed by fiat currencies in accordance with the law Guidelines for regulations. OCC clearly pointed out that the stablecoins it refers to are stablecoins supported by legal tenders one-to-one, excluding algorithmic stablecoins. In addition, the US Securities and Exchange Commission (SEC) stated that under federal law, certain stablecoin assets may not be securities, but it is recommended that the issuer cooperate with the SEC and legal counsel for a second confirmation.

Text | FOX

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Through this news, we can see the attitude of the United States towards digital currency,

A good understanding of one-to-one supported stablecoins is that stablecoins must be exchanged 1:1 with digital currencies. The USDT (Tether) as we know it is a stable currency with legal assets pledged. Behind every USDT token, there is a real world dollar in the bank.

What is an algorithmic stablecoin?

Algorithmic stablecoins do not have any assets as collateral, and their stability relies on smart contracts to increase or decrease tokens based on market prices, so as to control the total amount of tokens in circulation, thereby affecting prices.

For example, AMPL coin is an algorithmic stable coin. Specifically, when the price of AMPL coin rises by more than 1 U.S. dollar, additional tokens are issued to increase supply and the price drops to 1 U.S. dollar. When the currency price drops below 1 U.S. dollar, the supply is reduced by burning the tokens, and the price rises back to 1 U.S. dollar.

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Although the design concept of algorithmic stablecoin is very good, it is easy to be hoarded by large households due to lack of collateral, resulting in unstable currency. In addition, algorithmic stablecoins are very much like a national currency linked to the U.S. dollar. No government will recognize that companies have the right to coinage, so it makes sense not to include algorithmic stablecoins.

In fact, two kinds of stablecoins are rarely mentioned in the news, one is the commodity stablecoin and the other is the cryptocurrency stablecoin.

Commodity stablecoins are easy to understand, that is, stablecoins are directly linked to commodities. Stablecoins may attract individuals seeking exposure to physical assets in a way that is easier to obtain and provide greater liquidity. For commodity-based stablecoins, a coin is usually equivalent to a predetermined unit of the referenced commodity (for example, an ounce of gold or a barrel of oil).

Digital currency stable currency is directly linked to cryptocurrency, and the collateral can be Bitcoin or Ethereum.

The US government did not mention these two stable currencies. I think it may consider two factors.

One is whether it is commodity stablecoins or digital currency stablecoins. Will face price fluctuations, so this so-called stable currency is actually not stable for the US dollar. On the other hand, the US government may have recognized the value of Bitcoin, Ethereum or other digital currencies. Although they are not securities, they recognize their existence value.

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In fact, the development of digital currency stablecoins is accelerating around the world. For example, in Europe, many central bank executives have also raised the issue of central bank digital currencies, and believe that central bank digital currencies do not need blockchain technology support.

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Thomas Moser, Alternate Member of the Swiss National Bank Board of Directors, and Martin Diehl, Head of Deutsche Bundesbank’s Payment System Analysis Department, discussed the central bank’s digital currency issue at the European Blockchain 2020 Virtual Conference held on September 21. They all seem to think that the People’s Bank of China will issue Central bank digital currencies including “digital RMB” do not need to use blockchain technology.

Moser said that when the project has no centralized participants, the blockchain can play the role of a “trusting party”, which is also the main use case of blockchain technology. The executive said: “For example, Bitcoin, I think it is a good use case for blockchain technology.” But in the case of central bank digital currency, the central bank provides “trust”, so when the central bank intervenes, there is no need to use blockchain technology.

It can be seen that the current attitude of the European Central Bank towards digital currencies is similar to that of the United States. From a national perspective, it will not give up the right to issue currency, but the efficient circulation of digital currencies can indeed stimulate the economy.

The attitude of various countries towards digital currency should be said to be based on the functionality of its use, but they are afraid of subverting the government’s right to issue currency. At present, it seems that the digital currency will eventually become a 1:1 stable currency at the national level. After a while, we may see more national digital currencies. Will the foreign exchange market become foreign exchange digital currency transactions at that time Where is the market?

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