Stable Coins Vs Sec Crypto Regulation

Here are alternative for the SEC War between the Stable Coins Vs Sec Crypto Regulation.

Stable coins have been in the spotlight over the past few months and for all the wrong reasons.

Disruptions in the value of a stable coin may not only have damaged the broader crypto market but also the real financial world unless regulators step in.

The main question is: what kind of regulatory oversight would work best without harming innovation?

Regulators are starting to get nervous about the impact they could have on the financial and crypto markets due to the recent evaluation of the total market cap of all stable coins to be above 100 billion dollars. 

Stable Coins Vs Sec Crypto Regulation

The major concern lies with the fact that the issuers of these fiat-backed stable coins have not been completely honest about the assets that back their dollar-pegged tokens.

And if a bank run should happen for any reason, not everyone would be able to convert their digital dollars to physical ones.

Recently some of the biggest stable coin issuers have revealed the assets that back their stable coins in circulation although most of these assets are cash equivalents (debts).

It’s easy to see why regulators are concerned as risks associated can bring the stock market crashing down. 

A completely new and robust algorithmic stable coin would be a solution to this as it would completely remove the need for collaterals on other types of stable coins.

Although fiat-backed stable coins are not likely to be banned anytime soon as they and the corporate bodies they bow to need someone to buy off their debt, regulators are definitely coming for crypto.

Stable Coins Vs Sec Crypto Regulation is a big war, hence we get to find alternative and provide for you here.

Stable Coins Vs. Sec Crypto Regulation

SEC’s Argument

Gary Gensler, SEC chairman, recent comment has turned on the heat in the USA.

Investor protection is the guise the SEC is using to target the most stable coins and DeFi (decentralized finance) protocols. 

Securities and Exchange Commission (SEC) is a United State government agency created in response to the wall street crash and caused the Great depression.

They are aimed to protect investors, maintain fair, orderly, and efficient markets; and facilitate capital formation.

This is done by the creation and enforcement of laws relating to securities (stocks and bonds) to ensure public trust.

The Howey test must be met by security.

The 4 criteria of the Howey test are

  1. An investment of money
  2. In a common enterprise
  3. With the expectation of profits
  4. Coming from the efforts of a third party

The SEC argues that cryptocurrencies probably meet the four criteria of the  Howey test.

Although almost all cryptocurrencies meet the first 3, the expectation of profits from cryptocurrency investments does not always come from a third party; at least no one can be singled out. 

Bitcoin, unlike XRP, doesn’t meet the fourth criterion. This is why the SEC filed a massive lawsuit against Ripple Labs in DEC 2020, arguing that XRP is a security that isn’t registered duly as one.

Ripple Lab’s defense was that XRP is decentralized enough to not meet the 4th criterion of the Howey test. 

SEC does not currently have the rights or resources for any overreaching enforcement actions to clamp down too hard on cryptocurrency.

It is most likely that Congress will grant the SEC the power they are looking for.

The SEC’s Argument got to see room to regulate stablecoins through bank ‘lens’.

However, here are the available alternative for the Stable Coins Vs Sec Crypto Regulation.

The Alternative  

Gold and cryptocurrency are viewed as safe-haven assets and are speculated to save one against the uncertainties of the financial market.

But they are vastly different, one is physical, as old as the earth itself and shiny while one is digital, barely 10 years old and binary.

Amidst these major differences, they tend to have these similarities 

  1. being unable to inflate away unlike fiat money you just can’t mine crypto or make gold out of thin air.
  2. prices are not directly tied down to an economic activity 
  3. exchanged with relative ease anywhere in the world
  4. fungible

There are commodity-based stable coins which means they are stable coins that are backed by commodity assets, like precious metals, gold, silver, real estate, or oil.

This indicates to investors that these stablecoins have the potential to appreciate in value in parallel with the increase in value of their underlying assets, thereby providing an increased incentive to hold and use these coins.

One example of these stable coins is PAX Gold (PAXG) that relies on a gold reserve.

 

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PAXOS GOLD (PAX G)

Paxos Standard is a New York-based trust company that has issued a highly sustainable PAX stable coin. This coin is currently pegged on the US dollar.

In 2020 PAX issued their PAXOS GOLD unlike the PAX stable coin, each PAX G is backed by one fine troy ounce of  400oz physical gold stored in the Brinks vault in London. 

PAX G has the following features; 

  1. Highly accessible: It is built as an ERC-20 token on Ethereum blockchain, can be easily moved, 24/7 anywhere in the world. 
  2. Redeemable: It is the only gold token that can be redeemed for LBMA- accredited Good delivery gold bullion bars or a network of gold retailers.
  3. Flexible: It is easy to convert or redeem it for fiat, physical or unallocated gold via the Paxos platform. 
  4. Trusted: Paxos is a trusted company and custodian regulated and approved by the NY government.
  5. Low Fees: It has an extremely low competitive fee structure for the creation and redemption of PAXG tokens.

PAX Gold is an allocated gold; this means every single token has rights to a specific gold bar held in storage, each gold bar has a corresponding PAX G token that applies to it.

Lookup their handy allocation tool here.

Why PAX G?

It is built as an ERC-20 token on the Ethereum blockchain which means you can easily store it in any Ethereum compatible wallet and it exchanges pretty quickly in PAX Gold trading.

PAXG is best bought from Paxos itself given that it is a fully regulated trust company, they will also perform KYC on you using net verifying software.

You may also want to compare the fees (0.02 PAXG) when purchasing a token to buying the equivalent physical gold.

Paxos generally settle purchase orders on the same business day.

Because PAXG is already regulated (by SEC and the equivalents), the probable looming war and unbearable lawsuits can lead to loss of fiat currency for investors of fiat stable coins who would have no business with PAXG.

 

Also Read: Sephora Gift Card Vs. JCPenney Sephora Gift Card

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