The crucial crypto market infrastructure legislation remains in limbo. Following the declaration that Coinbase (NASDAQ:COIN) was pulling its support of the bill, the fallout was immediate as other crypto insiders expressed their chagrin and the Senate Banking Committee canceled its markup hearing without scheduling a future date.
CI received some perspective on the fiasco from Ryne Saxe, co-founder and CEO of ECO. His company offers a protocol for the programming of money unchain. Eco aims to power real time money and applications for every significant stablecoin across all major blockchains. The approval and specifics of the crypto market infrastructure bill is thus critical to the success of Eco.
Saxe said the delay was emblematic of a critical gap in the understanding between lawmakers and advocates of DeFi. Mainstream financial services (IE banks) risk undermine and harming the sector’s prospects.
“The next version should preserve investor protections and market integrity without imposing broker-dealer or surveillance obligations on protocols that do not custody assets or exercise control,” said Saxe. “Clarity should reduce uncertainty, not expand regulatory discretion in ways that can be used unpredictably. If done right, a revised bill could give builders confidence to operate in the US rather than pushing innovation offshore.”
He believes that more critical implications of the bill are passing without due attention, including:
- Why the real regulatory battle will be the shift from the protocols to the “frontends” and apps that interface with retail users.
- Why restricting stablecoin interest fails to address the underlying technological shift in how money moves.
- Whether this compromise accelerates institutional trust while inadvertently creating new barriers for everyday users.
A key hurdle is whether, or not, holders of stablecoins should earn yield. As every stablecoin issued must be backed one to one with low risk reserves, like US Treasuries, issuers will earn interest on stablecoins. These same issuers would like to share this yield with its users. So what is not to like? Banks use deposits to fund loans. Typically, these deposits generate little to no interest and hence stablecoins represent an existential threat to their business model.
Unfortunately it appears that legislators are siding with traditional banks not consumers. While banks may choose to issue stablecoins and compete with other issuers on a level playing field, the banking community would rather create a regulatory moat to protect the business and not risk a decline in revenue.
Saxe believes this is bad for consumers.
“I think this notion that enabling yield in a separate account or instrument, reflective of the zero sum decision between checking and savings, need to go away. I understand much of our current financial regulatory regime makes that distinction, but it’s an unnecessary handicap on the technology that makes stablecoins better and an impediment to financial innovation that’s in consumer’s best interest.”