Tag: Stablecoins

First Digital Group Launches New Stablecoin FDUSD to Revolutionize Global Finance

by Blockchain News

Asia’s leading trust company and qualified custodian, First Digital, is making waves in the global financial ecosystem with the announcement of its new stablecoin, First Digital USD (FDUSD). Launched by FD121 Limited under the brand “First Digital Labs,” this novel stablecoin pledges to bring stability, diversification, and innovation to the existing financial landscape.

Stablecoins, digital currencies pegged to stable assets like the U.S. dollar, provide a hedge against volatility, a means of remittance, and a cost-effective gateway to financial services. With FDUSD, First Digital Group aims to enhance these benefits by offering a programmable stablecoin backed 1:1 by U.S. dollar reserves held in regulated Asian financial institutions.

First Digital Trust Limited, the custodian and trust company, will maintain FDUSD reserves in segregated accounts, ensuring a secure and robust financial framework for the stablecoin. Notably, the redeemable nature of FDUSD adds to its appeal, as users can exchange their tokens for equivalent U.S. dollar value, strengthening the trust in the 1:1 backing.

Vincent Chok, CEO of First Digital, underscored the significance of this development, “The launch of this stablecoin marks a significant milestone in our mission to provide a secure, efficient digital currency seamlessly integrated into everyday transactions. Especially in these uncertain times, we see a growing demand for predictability. This was a driving factor in conceptualizing FDUSD.”

First Digital remains committed to transparency, pledging open scrutiny for every aspect of FDUSD. In collaboration with local and overseas regulatory authorities, First Digital Labs aims to ensure comprehensive compliance with all applicable laws, both present and future. Their objective is to set new standards of trust and stability in digital currency, guided by regulatory compliance.

In a world increasingly moving towards digital currencies, First Digital’s FDUSD brings a novel, secure, and reliable alternative to the table, marking a significant stride forward in digital asset innovation. For detailed information, prospective users are advised to review the FDUSD Stablecoin Whitepaper, the FD121 Account User Agreement, the FDD Terms, the Privacy Policy, and the FDD Risk Factors.

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US House Committee to Discuss Stablecoin Regulation

by Blockchain News

The US House of Representatives Committee on Financial Services will hold a hearing on stablecoin regulation on April 19th, according to an announcement made by the committee. The hearing comes in response to a new draft bill introduced in the House to provide a regulatory framework for stablecoins. The bill aims to protect consumers and maintain the integrity of the US financial system while promoting innovation in the use of stablecoins.

The hearing will include testimonies from experts in the field of cryptocurrency and stablecoins, including Austin Campbell, a managing partner at Zero Knowledge Consulting and adjunct professor at Columbia Business School. In a transcript of his planned testimony, Campbell notes that stablecoins are “mundane” and “look a lot like pretty basic cash instruments”. He believes that stablecoins will increase the reach of the US dollar and enhance financial inclusion, as they provide access to the global financial system to those who are currently excluded from traditional banking.

Campbell’s testimony suggests that the regulatory framework for stablecoins should not be overly burdensome, as stablecoins are similar to traditional cash instruments. He notes that regulations should focus on ensuring that stablecoins are fully backed by reserves and are not used for illicit purposes, such as money laundering or terrorist financing.

The hearing will provide an opportunity for members of the committee to learn more about the benefits and risks associated with stablecoins, as well as to gather feedback on the draft bill. The regulatory framework proposed in the draft bill is expected to be a starting point for discussion and may be amended following the hearing.

Stablecoins are digital currencies that are designed to maintain a stable value relative to a fiat currency, such as the US dollar. They are used in a variety of applications, including remittances, peer-to-peer payments, and international trade. Stablecoins have gained popularity in recent years as a way to access the benefits of cryptocurrency, such as fast and low-cost transactions, without the volatility associated with other cryptocurrencies like Bitcoin.

However, stablecoins have also raised concerns among regulators and policymakers, particularly regarding their potential impact on financial stability and the risks associated with their use. The regulatory framework proposed in the draft bill aims to address these concerns by providing a clear and consistent framework for the regulation of stablecoins.

In conclusion, the upcoming hearing on stablecoin regulation in the US House of Representatives will provide an opportunity for experts to provide testimony on the benefits and risks associated with stablecoins. It will also allow members of the committee to gather feedback on the draft bill proposed to regulate stablecoins. As stablecoins continue to gain popularity, it is important for regulators to establish a clear and consistent framework for their use to ensure that they are used safely and effectively.

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Cryptocurrency Soars in Q1 2023

by Blockchain News

The cryptocurrency market has started off 2023 with a bang, as shown in CoinGecko’s Q1 2023 Crypto Industry Report. The report highlights the surge in market capitalization of Bitcoin (BTC) and decentralized finance (DeFi) protocols, making them the key takeaways of the first quarter.

BTC emerged as the best-performing asset of Q1 2023, with gains of 72.4%, outperforming other assets such as the NASDAQ index and Gold, which marked gains of 15.7% and 8.4%, respectively. The report notes that all major asset classes, except crude oil, saw gains through the first quarter of the year. Crude oil dropped by 6.1%, which was attributed to United States inflation data that cited a reduction in oil demand and the ill effects of the U.S. banking crisis.

The overall cryptocurrency market capitalization reached $1.2 trillion at the end of Q1, with a gain of $406 billion from the market cap of $829 billion at the end of 2022. The DeFi space was another standout performer, rising by $29.6 billion in value through the first quarter. Liquid staking governance tokens saw a 210% increase in market cap since the start of 2023, making it the third-largest category in the DeFi sector.

Ethereum’s Shapella upgrade played a major role in driving the increase of capital flows into liquid staking pools. The upgrade finally unlocked ETH staking reward withdrawals, which helped the network gain more attention.

While Bitcoin and DeFi have been major movers thus far this year, the top 15 stablecoins saw their market cap drop by $6.2 billion. CoinGecko attributes this 4.5% drop in market cap to the shutdown of Binance USD by Paxos and the momentary depeg of USD Coin (USDC) during the collapse of Silicon Valley Bank in March 2023.

Tether (USDT) strengthened its position as the largest stablecoin by market cap in 2023, adding $13.6 billion since the start of the year, while USDC and BUSD recorded market cap losses of 26.9% and 54.5%, respectively.

Nonfungible token (NFT) trading volume has also surged again in 2023, marking a 68% rise from Q4 2022 to $4.5 billion during the first quarter of 2023. NFT marketplace newcomer Blur accounted for the majority of NFT trading volume since its launch in October 2022, accounting for 71.8% of the NFT market share in March 2023.

The cryptocurrency market is still relatively new and volatile, but the Q1 2023 report shows that it is gaining momentum and acceptance from investors. Despite some drops in stablecoin market cap and the decline in crude oil, the overall cryptocurrency market has been performing exceptionally well. This growth could lead to more mainstream adoption and could open doors for new developments and opportunities in the future.

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US Draft Bill Proposes Framework for Stablecoins

by Blockchain News

A new draft bill published in the United States aims to provide a regulatory framework for stablecoins. The bill proposes that the Federal Reserve oversee non-bank stablecoin issuers such as Tether and Circle, which respectively issue USDT and USDC. Insured depository institutions seeking to issue stablecoins would fall under federal banking agency supervision.

The bill also establishes criteria for approval of stablecoin issuers, including the ability to maintain reserves backing the stablecoins with U.S. dollars or Federal Reserve notes, Treasury bills with a maturity of 90 days or less, repurchase agreements with a maturity of seven days or less backed by Treasury bills with a maturity of 90 days or less, and central bank reserve deposits. Issuers must also demonstrate technical expertise and established governance, as well as the benefits of offering financial inclusion and innovation through stablecoins.

Additionally, the bill proposes a two-year ban on issuing, creating or originating stablecoins not backed by tangible assets. It also mandates that the U.S. Department of the Treasury conduct a study on “endogenously collateralized stablecoins.” These are stablecoins that rely solely on the value of another digital asset created or maintained by the same originator to maintain the fixed price.

The bill also allows the U.S. government to establish standards for interoperability between stablecoins. It further determines that Congress and the White House would support a Federal Reserve study on issuing a digital dollar.

Stablecoins are a class of cryptocurrencies that attempt to offer investors price stability by being backed by specific assets or using algorithms to adjust their supply based on demand. The draft bill defines stablecoins and proposes a regulatory framework that could potentially provide greater stability and protection for investors. It also aims to prevent the use of stablecoins for illegal activities, such as money laundering and terrorist financing. If enacted, the bill would require stablecoin issuers to register and could result in up to five years in prison and a fine of $1 million for failure to do so.

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US House Committee to Discuss Stablecoins Regulation

by Blockchain News

The US House Committee on Financial Services will conduct a hearing on April 19 to evaluate the role of stablecoins as a means of payment and determine whether the payment ecosystem needs supporting legislation. The hearing, titled “Understanding Stablecoins’ Role in Payments and the Need for Legislation,” will focus on various stablecoins and their use in the payments landscape. The committee will explore the need for stablecoin legislation based on their underlying collateral structures.

The hearing will include information collected by various federal government agencies over the last year. Participants testifying at the hearing include Circle’s chief strategy officer and head of global policy, Dante Disparte. Circle’s in-house stablecoin offering, USD Coin (USDC), will likely be discussed, as it recently depegged from the US dollar after it revealed it had $3.3 billion of funds stuck at the collapsed Silicon Valley Bank (SVB). However, following a bailout of SVB depositors by the US government, USDC repegged its value to the US dollar.

During the period when USDC depegged, hackers managed to gain access to Disparte’s Twitter account and started promoting fake loyalty rewards to long-time users of USDC. This situation highlights the potential risks of stablecoins and underscores the importance of legislation to ensure digital dollars on the internet are safely issued, backed, and operated.

Just days before the upcoming hearing, a draft bill providing a framework for stablecoins in the United States was published in the House of Representatives document repository. Speaking about the draft bill, Circle’s CEO Jeremy Allaire said, “There is clearly the need for deep, bi-partisan support for laws that ensure that digital dollars on the internet are safely issued, backed and operated.“

The draft bill proposes that stablecoin issuers must obtain a banking charter and comply with all applicable banking regulations. The bill also seeks to define what constitutes a stablecoin and outlines the requirements for maintaining a stablecoin’s peg to an underlying asset. If passed, this bill could provide regulatory clarity and stability for the stablecoin industry.

In conclusion, the upcoming hearing on stablecoins is an essential step toward ensuring the safety and stability of the payment ecosystem. The hearing will provide lawmakers with the necessary information to make informed decisions about the need for stablecoin legislation. The recent draft bill provides a framework for stablecoins in the United States and could provide regulatory clarity for the stablecoin industry if passed. As the use of stablecoins continues to grow, it is crucial to have clear regulations to ensure the protection of consumers and the stability of the financial system.

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Paxos Identifies Key Opportunities During Crypto Winter

by Blockchain News

Blockchain infrastructure provider Paxos has published a report aimed at helping the cryptocurrency community navigate the current market conditions during the crypto winter. The Paxos Crypto Winter Report 2023 identifies several key opportunities for crypto projects, including seeking solutions and partnerships.

According to the report, those who view the crypto winter as a “season for bridge-building” will come out ahead of the others. This means partnering with businesses that implement technologies that aim to meet the “real-world needs of the financial sector.” By doing so, projects can position themselves for success once the market recovers.

The report also emphasizes the usefulness of stablecoins, one of the crypto use cases that have “consistently proven itself over time.” Clara Medalie, the director of research at the digital asset data provider Kaiko, explains that stablecoins have been very useful for the entire industry. However, there is still room for improvement in terms of transparency over the reserves of these stablecoins.

Medalie believes that greater transparency is coming: “We need more transparency over the reserves of these stablecoins, which I think we’re going to see.” This will help to ensure that stablecoins remain a viable option for the industry moving forward.

While stablecoins may be an important tool for the industry, there are differing opinions on their regulation. The CEO and executive director of the Stellar Development Foundation, Denelle Dixon, believes that regulating stablecoins may be necessary to maintain a strong dollar globally. Dixon argues that a USD stablecoin is the “way to see that happen.”

On the other hand, the Bank of International Settlements (BIS) recently published a working paper that deems stablecoins a less preferable form of tokenized money. The report likens stablecoins to bearer instruments that were prevalent during the era of “free banking” in the United States. While the BIS recognizes the potential benefits of stablecoins, it ultimately concludes that they pose significant risks to financial stability.

Despite differing opinions on stablecoins, the Paxos Crypto Winter Report 2023 emphasizes the importance of seeking solutions and partnerships during the current market conditions. By doing so, projects can position themselves for success once the market recovers.

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DeFi Hackers Mint $11.6M in Stablecoins

by Blockchain News

A recent hack in the decentralized finance (DeFi) space allowed an attacker to mint over 1 quadrillion Yearn Tether (yUSDT) from a mere $10,000, according to blockchain security firm PeckShield. The attacker then exchanged the yUSDT for other stablecoins, taking hold of $11.6 million in the process. The stablecoins included 61,000 Pax Dollar (USDP), 1.5 million TrueUSD (TUSD), 1.79 million Binance USD (BUSD), 1.2 million Tether (USDT), 2.58 million USD Coin (USDC), and 3 million Dai (DAI).

PeckShield reported that the hacker has already transferred 1,000 Ether (ETH) to Tornado Cash, a sanctioned cryptocurrency mixer. The blockchain security firm also informed DeFi protocols Aave and Yearn.finance of the situation.

Yearn.finance released a statement after conducting an initial investigation, stating that the issue was limited to iearn, an outdated contract before vaults v1 and v2. The DeFi protocol assured its users that its current contracts and protocols are not affected by the exploit.

Similarly, Aave also confirmed that it is aware of the transaction. The liquidity protocol clarified that the hack did not impact Aave v1, v2 or v3.

While hacks still plague the DeFi space in 2023, the amount of money lost to these incidents has decreased compared with previous years. According to a quarterly report by blockchain security firm CertiK, over $320 million were lost to hacks in the first quarter of 2023. Although this amount is still substantial, it is much lower compared to the first quarter of 2022 when $1.3 billion was lost, and the fourth quarter of 2022 when $950 million was lost to hacks.

Despite the decrease in the amount lost to DeFi hacks, these incidents still serve as a reminder of the importance of security measures in the space. PeckShield’s quick detection of the recent hack and Aave and Yearn.finance’s prompt action in addressing the issue demonstrate that the DeFi space is continuously improving its security measures.

As the DeFi space grows, it is likely that there will be more attempts to exploit vulnerabilities in the system. However, with increased awareness and investment in security measures, the space can continue to thrive and offer innovative solutions to traditional finance.

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Stablecoin Depeg Event Reveals Risks to DeFi and Traditional Finance

by Blockchain News

The recent depegging event of Circle’s USD coin (USDC) has shed light on the potential risks to both decentralized finance (DeFi) and traditional finance. Traditionally, regulators have expressed concerns that DeFi could pose risks to the traditional financial services sector. However, the recent failures of established financial institutions, such as Silicon Valley Bank and Signature Bank, have shown that distress can also spread to the DeFi sector.

The depegging of stablecoins, such as USDC, BUSD, and DAI, has highlighted governance risks related to the custody of reserve assets. Stablecoin issuers’ reliance on a relatively small set of off-chain financial institutions limits their stability, and the reduction in the available pool of financial institution partners could make it even more difficult for fiat-backed stablecoins to maintain stable exchange rates.

The USDC depegging event caused the fiat-backed stablecoin to fall below $.90 following the announcement that Circle had up to $3.3 billion in exposure to Silicon Valley Bank, which had suffered a deposit run. Other smaller-circulation stablecoins also lost their pegs. Only USDT seemed to benefit from the turmoil, briefly exceeding $1, most likely because of investors shifting out of the depegged stablecoins.

While the depeg event was relatively short-lived, it has laid bare the risks associated with stablecoins. Moody’s anticipates that regulators could increase their scrutiny of stablecoins and require greater counterparty diversification. Last year, the Terra/LUNA collapse raised concerns about stablecoins’ reserves, leading regulators to recommend additional liquidity and transparency requirements. The EU cryptoasset regulation (MiCA) briefly touches on this, but leaves precise regulatory standards to be determined by European banking authorities.

As traditional finance and DeFi become more intertwined, the risk of systemic failure increases, emphasizing the need for effective regulation, transparency, and risk management. Regulators could potentially trigger additional regulatory requirements, notably on counterparty diversification, in light of the Silicon Valley Bank and Signature Bank failures.

In response to the shortcomings of stablecoins, there is growing interest in exploring alternative solutions, such as tokenized bank deposits. Tokenized bank deposits would allow users to hold digital tokens that represent ownership of underlying bank deposits, subject to the regulatory standards of banking. This would provide greater confidence in the underlying assets’ safety, although credit risks associated with traditional banking would still remain.

In conclusion, the depegging of stablecoins has brought to light the potential risks associated with both DeFi and traditional finance. The event has highlighted the need for effective regulation, transparency, and risk management, and has sparked interest in exploring alternative solutions to address the shortcomings of stablecoins.

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Australian Senator Proposes Digital Asset Regulation Bill

by Blockchain News

Australia has been known for its progressive stance on cryptocurrency regulation. Recently, Senator Andrew Bragg submitted a private senators’ bill titled Digital Assets (Market Regulation) Bill 2023 to the Australian Parliament. The bill proposes regulatory recommendations for stablecoins, licensing of exchanges, and custody requirements to protect consumers and promote investment in the country’s cryptocurrency market.

The proposed regulatory changes aim to provide a regulatory framework for cryptocurrency exchanges, custody services, and stablecoin issuers in Australia. The bill is intended to protect consumers and promote investment while providing guidelines for reporting information by authorized deposit-taking institutions for the issuance and control of a central bank digital currency.

Senator Bragg provided further information for the submission of the private bill, criticizing the current Labor government for not following through on 12 recommendations relating to cryptocurrency regulation introduced by the Senate Select Committee on Australia as a Technology and Financial Centre in October 2021. Bragg highlighted that the Australian consumers had been left exposed to industry-wide events like the collapse of FTX by the inaction of the Australian government to provide regulatory clarity to the sector.

The proposed act also sets out various obligations and requirements for exchanges, custody services, and stablecoin issuers. These range from capital or minimum reserve requirements, segregation of customer funds, reporting on customer holdings, auditing, assurance, and disclosure arrangements.

The bill would require a person or business to hold a license granted by the Australian Securities and Investments Commission or a foreign license to operate a cryptocurrency exchange. This would also apply to cryptocurrency custody services and stablecoin issuers in Australia.

In contrast to the typical introduction of regulatory changes by Australian ministers, members of parliament can introduce private members’ or private senators’ bills, which can take months or years to pass through parliament. As a result, it may take some time before the Digital Assets (Market Regulation) Bill 2023 is passed into law.

Public consultation is currently ongoing in Australia over the classification of cryptocurrencies and various digital asset tokens, services, and platforms. The “token mapping” consultation paper was released in February, outlining basic definitions for the cryptocurrency sector.

The proposed bill by Senator Bragg is a significant step towards regulating the cryptocurrency sector in Australia, ensuring the protection of consumers and promoting investment in the country’s growing digital assets market. If passed, the bill would provide a clear regulatory framework for cryptocurrency exchanges, custody services, and stablecoin issuers to operate in Australia.

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White House Report Casts Doubt on Cryptocurrencies

by Blockchain News

The White House’s recently released Economic Report of the President includes a chapter questioning the benefits of cryptocurrencies. This is the first time the White House has included a section on digital assets since it began issuing the annual economic policy report in 1950. The report includes 35 pages dedicated to debunking the “Perceived Appeal of Crypto Assets,” along with a short section on the FedNow payment system and central bank digital currencies.

The report argues that crypto assets fail to deliver on their touted benefits, such as improving payment systems, financial inclusion, and creating mechanisms to transfer value and intellectual property. It also argues that cryptocurrencies fail to perform the functions of sovereign money, as their prices fluctuate too wildly to be a stable store of value, nor can they function as a unit of account or medium of exchange. Stablecoins are also criticized, as they are subject to run risks and are therefore too risky to satisfy their role as a “fast payment” instrument.

Crypto executives have expressed frustration over the report, with the co-founder of digital asset investment firm Paradigm, Fred Ehrsam, remarking that 15% of the Economic Report was dedicated to “crypto FUD.” Kristin Smith, CEO of the Blockchain Association, called the report “disappointing,” stating that it shows some in the government appear “increasingly allergic” to the burgeoning crypto industry.

The report also takes aim at decentralization, arguing that blockchain-based applications are in practice neither decentralized nor trustless. Users access crypto assets by going to a limited set of crypto asset platforms, while a small group of miners performs the majority of mining in most crypto assets, it argues.

The latest annual economic policy report was published shortly after the collapses of Silvergate, Silicon Valley, and Signature banks, all of which had served aspects of the crypto industry. Dan Reecer, chief growth officer at decentralized finance platform Acala Network, claims that the report comes “just days” after Operation Chokepoint 2.0 was executed on crypto-friendly banks. He also noted an “obvious early warning” of an upcoming United States central bank digital currency, referencing a section of the report that seemingly touts the benefits of a U.S. central bank-controlled currency.

Despite the criticism, it is worth noting that the report is not a policy statement, and it remains to be seen how the Biden administration will approach the regulation of cryptocurrencies and digital assets in the coming months.

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