The U.S. Treasury Department says cryptocurrencies “urgently” need regulations like those overseeing banks and other financial institutions. Axios chief financial correspondent Felix Salmon joins CBSN to discuss the digital currency loophole.
≫>> the u.s. treasury department released a report this month urging regulation of cryptocurrencies linked to the these are called stable coins. a recent article explains the role they play in the crypto world and how regulation can only come through legislation and the author of the piece, felix, joins us down to break it down . this is going to be a super
Informative discussion 4 felix, explain what stable coins are and how they work. >> we know the normal big cryptocurrencies, bit coin, they are highly volatile and tend to be very bad stores of value because they go up and down more than you expect them to appear stable coins are exact opposite . stable coins , are always worth exactly 1 a big oncalled heather,
A couple of small ones, but the idea is that if you want to be in the crypto universe, and cryptocurrency and trading and defying and — and ft, all the stuff that people love to do with crypto, but you don’t want the volatile currency, then you keep your money, in stable coins and those are worth a dollar each and you don’t need >> okay, that sounds good. what is
The u.s. treasury proposal to regulate these >> that is the problem. they are be much unregulated and this one called heather that no one really knows what they will tell you that there is one dollar of real-world asset backing ever! but no one has found that that be true. so the first thing the treasury wants to do is regulate all of the stable coin issuers to their
Banks because issuing — stable coin is like a bank no. if you are going to basically have a depository instrument, which behaves like a checking account, then you have to be regulated like a bank that has >> what has been the response from crypto companies when it comes to regulation? >> the general response from cryptocurrencies, is that we think regulation is
Great, and we want the kind of regulation that is brand-new and designed for us because we are special the regulators meanwhile have been like, you do this, your security issuers, the banks, the institutions regulate you according to the existing regulatory infrastructure and we are going to sort of plug you into the existing bank regulation or security regulation, so forth
. That is kind of the tension. certainly, circle which is the second biggest issuer would be love to be a bank and love to be regulated like a bank. it is not clear whether they would really actually reach the criteria necessary to be able to be regulated because that is very difficult to get. >> it seems to be a little bit, and that understand you have options if
You want to venture into the world, that regulation is a little bit taking the fun out of cryptocurrency, because isn’t it sort of part of the appeal, it is volatile, that you know, you can invest, and who knows, it can go up 1000% next year and you are rolling >> or it can go down and you are rolling in something else pick >> you are a negative nancy. >>
Yeah, the volatility is not going to go away and the regulation is not going to get rid of the volatility pick the one place no one wants that is one of the reasons that is the area that the treasury is really concentrating on if you invest in and does coin, you know what you are doing. you are not going to run to the government and be upset if you are doge quangos down.
If you invest in usd which is — then maybe you would be upset if that money goes down one it is meant to be –. >> what needs to happen in congress to make this plan to come to fruition and wh says it will happen at all? but that is the really big question . the crypto current bid companies say pass legislation for us which will and the treasury is saying, we
Need certain legislation to ask and ranking regulation. but because of that tension, it is going to be hard to get congress to really agree on a single way forward. so the most likely but also most disappointing to everybody outcome here, is that legislation does not get drafted , it does not pass, the crypto remain sort of unregulated, or class i unregulated and you get
Criminal prosecutions and everybody is miserable. you know how hard it is to get anything through congress right now and it’s very difficult to find a majority of congress in favor of any one view of crypto so i think that is the big >> stable coins seem to offer at least the possibility of cryptocurrency replacing the dollar, or being viable alongside the dollar,
Because what is the likelihood of that do we see us moving that >> am i allowed to bring something you have called the central bank digital currency, this is the great dream of many all currency will be digital and a will be issued by the central banks pick the chinese central bank has started doing this. if you others have started doing this and they are if and
When the u.s. treasury and federal reserve issue dollars in a digital form, then that will be the perfect digital it will be issued by the government of america and at that point, it’s really hard to imagine why anyone would want anyone else’s stable coin, at >> that says a lot . so the treasury department though, is warning digital currency could pose a threat
To america’s sanctions programs. explain for our viewers what that is and how it is possible. >> okay, the u.s. treasury department has this unbelievable amount of soft power, which is that every country in the world is connected to the dollar, every bank in the world has a grudge in new york or account of the federal reserve or a connection to the united states,
Because the dollar is a global reserve and whenever they do transactions in dollars which every major bank does transactions in dollars every day, those dollars touch america, they touch new york, t system . as such, if the u.s. government puts sanctions on any individual or currency, or company, or country in the world, those sanctions are incredibly effective because any
Time anyone in that country or anyone in that company wants to do business with the rest of the world, they are presumably doing business in dollars and with a bank that does business in dollars and that bank will refuse to deal with them because of sanctions . so what you have is unique that the treasury department, is able to impose strong and effective sanctions because
They have this power of the global reserve currency behind none. what they are worried about is that if the stable coins take off, then what all of these sanctioned individuals and companies can do is simply use stable coins instead of dollars and that way, circumvent the >> that is fascinating. which would explain perhaps a lack of enthusiasm to kind of make the
Stable coins more legitimate spirit felix, — >> it would explain by the way my most of these could cryptocurrencies an american >>> no one knows where these are even based derek i don’t have geographical headquarters, and it makes them harder to regulate, as well . >> i was going to say that entering the conversation after reading your article, like
I kind of understand this but not i’m not surprised congress isn’t jumping at it. are they going to understand i understand 5 to 10% more after i have talked to you. >> that is all i hope for pick >> there are a bunch of problems i need to ponder.
Transcribed from video
Treasury Department urges Congress to regulate cryptocurrencies like financial institutions By CBS News