Paxos To Launch USD Stablecoin In UAE; Treasury Worried About Offshore Stablecoins

another offshore USD stablecoin

Stablecoin issuer Paxos took another step with its global stablecoin strategy backed by US dollars and cash equivalents. The New York City-based company  said yesterday it had received “In-Principle Approval” (IPA) for US dollar and other currency-backed stablecoins from the United Arab Emirate’s Financial Services Regulatory Authority (FSRA). The next step will be “full approval” – no timetable was given. Walter Hessert, Paxos Head of Strategy, said in a press release, “Our IPAs from the FSRA, on the heels of our IPA from the Monetary Authority of Singapore, solidify our commitment to pursuing international growth through regulated frameworks.”

what you should know: Pressure is building on U.S. Treasury and the Biden Administration – whether they like it or not – to address the growing offshore stablecoin market and bring that business onshore. In spite of the dispute between the White House and lawmakers around parallel (states) versus pre-emptive (federal) rights, this news lurches the U.S. another step closer to stablecoin law.

Treasury – stablecoins

In his opening remarks at Blockchain Association’s Policy Summit, Deputy Secretary of the Treasury Wally Adeyemo summarized three ways Treasury is looking to address digital assets and the challenges which it says exists with illicit financing: better sanctioning tools, illicit finance “authorities” and an updated regulatory approach for the international Financial Action Task Force (FATF). Treasury wants Congress’ help in all this.

Notably, Treasury is seeing a threat with the offshore movement of stablecoins, too, as Adeyemo said,  “We cannot allow dollar-backed stablecoin providers outside the United States to have the privilege of using our currency without the responsibility of putting in place procedures to prevent terrorists from abusing their platform.” Read the remarks.

what you should know: Keep in mind, Paxos is based in New York State – the center of the storm when it come to the states rights versus federal pre-emption debate in stablecoins.

Treasury – fig leaf

After his prepared remarks at the Policy Summit, Deputy Secretary Adeyemo participated in a Q&A with Bain Capital’s TuongVy Le in which Adeyemo’s answers largely echoed the Biden Administration’s views to-date and framed the digital asset space as an area of ongoing malfeasance compared to traditional markets.

For example, Adeyemo said, “We think that people should be able to enjoy their privacy. But that does not mean that terrorists and criminals should also be able to use the guise of privacy as a means to move their money. We’ve been able to find that balance when it comes to traditional financial institutions. I think that’s possible also in the digital asset space.”

Ultimately, Adeyemo’s presence at the Blockchain Association event was the only fig leaf offered to the industry.

NDAA and digital assets

Appearing on CNBC’s Squawk Box yesterday, Rep. French Hill (R, AR), vice chair of House Financial Services (HFS), provided the latest update on digital asset bills in Congress saying, “…there was an effort made in the Senate to add some banking bill topics to the National Defense Authorization bill (NDAA) that didn’t really go anywhere. That was a potential opening for, perhaps, the stablecoin legislation. But, we want to go to the Floor with both the stablecoin bill and the [market structure] framework bill early in 2024. There’ll be both the House Ag Committee and the House Financial Services (HFS) Committee working on it. They’ll be bipartisan and I expect us to be successful early in 2024.” See excerpt of the interview.

what you should know: Did NDAA amendment negotiations fail over digital assets or is this statement a ploy by House Republicans in their negotiations with the Senate over the NDAA? We’ll know soon enough: 2024 is a month away.

was Gruenberg, now Hsu

Members of Congress Plan to Grill OCC Over Fintech Regulator Who Faked His Resume – The Information

Brown miffed

Senator Sherrod Brown (D, OH), Chair of the Senate Banking Committee, added himself to the list of Democratic Senators – like Sen. Chuck Schumer (NY) – who believe that HFS Chair Patrick McHenry is slowing progress on the NDAA.  Brown told Politico’s Eleanor Mueller on Tuesday, “There are many things, apparently, in this bill he’s holding up.” Read more in Politico.

Punchbowl News also made note of the NDAA drama and quoted House Foreign Affairs Committee Chair Michael McCaul (R, TX), who is co-sponsor of the fentanyl package, who said about McHenry, “We came in together. We’re good friends. [McHenry] basically said, ‘If I don’t get my crypto [bill] in here, I’m not going to agree to this fentanyl bill.’” McCaul didn’t seem too concerned and said he’d get his package done with “regular order” if the NDAA didn’t work out. Read that one.

what you should know: Given Wednesday morning’s statement on CNBC by Rep. French Hill, perhaps the banking-related “things” (like the FEND Off Fentanyl amendment) are now dead. Or is it?

mixer nixed

US Seizes Sinbad Crypto Mixer Used By North Korean Lazarus Hackers – Bleeping Computer

DeSantis pro-crypto agenda

The Washington Examiner featured U.S. presidential candidate and Florida governor Ron DeSantis (R) and his pro-crypto agenda in an article yesterday. “Under President Joe Biden, the [Securities and Exchange Commission (SEC)] has gone after crypto companies through several lawsuits,” writes the Examiner which says DeSantis would “reverse course” on a digital assets agenda compared to Biden. DeSantis added, “Biden’s SEC thinks it’s judge, jury, and executioner on crypto while the Fed continues to press ahead on CBDC.” – i.e. a CBDC would have no future in a DeSantis Administration.  Read more.

what you should know: DeSantis sounds like Majority Leader Tom Emmer (R, MN). Does Emmer remain a key Congressional facilitator or is he a Cabinet member in a DeSantis administration?

still more tips

Crypto Firms That Act Like Banks Should Be Regulated Like Them, ECB Official Says – CoinDesk

Philippines’ SEC to block access to world’s largest crypto exchange Binance – Reuters

SoFi Is Exiting Crypto With Banking Regulators Stepping Up Scrutiny – Bloomberg