US officials are discussing launching a formal review into whether Tether and other stablecoins threaten financial stability, scrutiny that could lead to dramatically ramped-up oversight for a fast-growing corner of the crypto market.
After weeks of deliberations, the Treasury Department and other federal agencies are nearing a decision on whether to launch an examination by the Financial Stability Oversight Council (FSOC), according to sources. FSOC has the power to deem companies or activities a systemic threat to the financial system – a label that typically sets off tough rules and aggressive monitoring by regulators.
Such a designation would probably be a gamechanger for stablecoins, which are considered crucial to the crypto market because traders widely use them to buy Bitcoin and other virtual currencies.
Stablecoins have thrived in the unregulated shadows, with tokens in circulation now worth more than $120 billion, according to CoinMarketCap.com. And they are increasingly being used for transactions that resemble traditional financial products – like bank savings accounts – without offering anywhere near the same level of consumer protections.
A hallmark of stablecoins is that they are pegged to fiat currencies, meaning they are supposed to be immune to the wild price swings that have plagued Bitcoin. Tether and other firms achieve that by backing their tokens with assets like US dollars and corporate debt.
The President’s Working Group on Financial Markets, which is led by Treasury Secretary Janet Yellen, has been particularly focused on Tether’s claims that it holds massive amounts of commercial paper – debt issued by companies to meet their short-term funding needs. In a private meeting US officials held in July, they likened the situation to an unregulated money-market mutual fund that could be susceptible to chaotic investor runs if cryptocurrencies plunge.
The President’s Working Group plans to issue stablecoin recommendations by December and a consensus is building among regulators involved that an FSOC review is warranted, sources said. The groups overlap, as Ms Yellen, Federal Reserve chairman Jerome Powell and Securities and Exchange Commission chairman Gary Gensler are members of both the PWG and oversight council.
A Treasury spokesman declined to comment.
The FSOC process includes a lengthy study and an assessment of which federal agencies should respond and how. In the end, the council could direct those agencies to intervene in the market and reduce the dangers posed by stablecoin transactions.
While Tether is the most popular stablecoin, there are multiple rivals, including Coinbase Global’s USDC token and a dollar-linked offering from Binance Holdings.
Scrutiny has been ratcheting up as stablecoins proliferate. Coinbase made headlines this week by disclosing the SEC had threatened to sue if the crypto exchange launched a product that would allow customers to earn 4 per cent yields for lending out their USDCs to other traders. The SEC believes the Coinbase proposal is an investment contract that should be registered with the agency, a view the company aggressively contested in a blog post and a series of tweets.
Watchdogs have also privately expressed worries about Diem, a stablecoin being developed by an association that includes Facebook. A top concern is that the token’s market impact could be massive because of its potential for widespread adoption – Facebook’s social media network has almost three billion active users.
Treasury held meetings this week with industry representatives to ask them about the potential dangers associated with stablecoins. As it and other agencies consider taking action, they’re facing intense pressure from Capitol Hill.
“I urge FSOC to act with urgency and use its statutory authority to address cryptocurrencies’ risks,” Senator Elizabeth Warren wrote in a July 26 letter to Ms Yellen that flagged the stablecoin market’s interconnectedness and its susceptibility to investor runs. “The longer that the US waits to adapt the proper regulatory regime for these assets, the more likely they will become so intertwined in our financial system that there could be potentially serious consequences.”
Stablecoins already face another threat from the US government, as the Fed is discussing whether to launch its own digital currency. Powell told lawmakers in July that a central bank token would make stablecoins obsolete.
Analysis
Members of Syria's Alawite minority community face threat in their heartland after one of the deadliest days in country’s recent history. Read more
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Specs
Engine: 51.5kW electric motor
Range: 400km
Power: 134bhp
Torque: 175Nm
Price: From Dh98,800
Available: Now
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How the UAE gratuity payment is calculated now
Employees leaving an organisation are entitled to an end-of-service gratuity after completing at least one year of service.
The tenure is calculated on the number of days worked and does not include lengthy leave periods, such as a sabbatical. If you have worked for a company between one and five years, you are paid 21 days of pay based on your final basic salary. After five years, however, you are entitled to 30 days of pay. The total lump sum you receive is based on the duration of your employment.
1. For those who have worked between one and five years, on a basic salary of Dh10,000 (calculation based on 30 days):
a. Dh10,000 ÷ 30 = Dh333.33. Your daily wage is Dh333.33
b. Dh333.33 x 21 = Dh7,000. So 21 days salary equates to Dh7,000 in gratuity entitlement for each year of service. Multiply this figure for every year of service up to five years.
2. For those who have worked more than five years
c. 333.33 x 30 = Dh10,000. So 30 days’ salary is Dh10,000 in gratuity entitlement for each year of service.
Note: The maximum figure cannot exceed two years total salary figure.
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The years Ramadan fell in May
WOMAN AND CHILD
Director: Saeed Roustaee
Starring: Parinaz Izadyar, Payman Maadi
Rating: 4/5
Need to know
The flights: Flydubai flies from Dubai to Kilimanjaro airport via Dar es Salaam from Dh1,619 return including taxes. The trip takes 8 hours.
The trek: Make sure that whatever tour company you select to climb Kilimanjaro, that it is a reputable one. The way to climb successfully would be with experienced guides and porters, from a company committed to quality, safety and an ethical approach to the mountain and its staff. Sonia Nazareth booked a VIP package through Safari Africa. The tour works out to $4,775 (Dh17,538) per person, based on a 4-person booking scheme, for 9 nights on the mountain (including one night before and after the trek at Arusha). The price includes all meals, a head guide, an assistant guide for every 2 trekkers, porters to carry the luggage, a cook and kitchen staff, a dining and mess tent, a sleeping tent set up for 2 persons, a chemical toilet and park entrance fees. The tiny ration of heated water provided for our bath in our makeshift private bathroom stall was the greatest luxury. A standard package, also based on a 4-person booking, works out to $3,050 (Dh11,202) per person.
When to go: You can climb Kili at any time of year, but the best months to ascend are January-February and September-October. Also good are July and August, if you’re tolerant of the colder weather that winter brings.
Do not underestimate the importance of kit. Even if you’re travelling at a relatively pleasant time, be geared up for the cold and the rain.
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Start-up hopes to end Japan's love affair with cash
Across most of Asia, people pay for taxi rides, restaurant meals and merchandise with smartphone-readable barcodes — except in Japan, where cash still rules. Now, as the country’s biggest web companies race to dominate the payments market, one Tokyo-based startup says it has a fighting chance to win with its QR app.
Origami had a head start when it introduced a QR-code payment service in late 2015 and has since signed up fast-food chain KFC, Tokyo’s largest cab company Nihon Kotsu and convenience store operator Lawson. The company raised $66 million in September to expand nationwide and plans to more than double its staff of about 100 employees, says founder Yoshiki Yasui.
Origami is betting that stores, which until now relied on direct mail and email newsletters, will pay for the ability to reach customers on their smartphones. For example, a hair salon using Origami’s payment app would be able to send a message to past customers with a coupon for their next haircut.
Quick Response codes, the dotted squares that can be read by smartphone cameras, were invented in the 1990s by a unit of Toyota Motor to track automotive parts. But when the Japanese pioneered digital payments almost two decades ago with contactless cards for train fares, they chose the so-called near-field communications technology. The high cost of rolling out NFC payments, convenient ATMs and a culture where lost wallets are often returned have all been cited as reasons why cash remains king in the archipelago. In China, however, QR codes dominate.
Cashless payments, which includes credit cards, accounted for just 20 per cent of total consumer spending in Japan during 2016, compared with 60 per cent in China and 89 per cent in South Korea, according to a report by the Bank of Japan.