CBDCs and Stablecoin Laws are Coming to the US Sooner than You Think | Weekly Digest

August 14, 2023

Welcome to another Crypto Weekly Digest brought to you by VirtualBacon.

In this week's newsletter, we delve into the world of Central Bank Digital Currencies (CBDCs) and explore whether they represent a groundbreaking future for crypto or a potential dystopian nightmare. We'll also analyze the three historic crypto bills that have recently passed and discuss their potential impact on Bitcoin. On the corporate front, the spotlight is on PayPal's major announcement of releasing a stablecoin and what it means for the market. Wrapping up, we'll provide a sharp overview of the current market sentiment, highlighting both the standout and underperforming coins of the week, and a concise analysis of key cryptocurrencies and the forces shaping their trajectories.

Three Historic Crypto Bills Passed in US House

In a landmark move that signifies progress towards clear crypto regulation, three pivotal crypto bills have been passed. These legislative acts aim to provide legal clarity, consumer protection, and a conducive environment for innovation within the crypto industry. They reflect a mature understanding of the evolving technology and its applications. Here's a closer look at these bills:

  1. The Fit for 21st Century Act (Financial Innovation and Technology Act):This long-awaited legislation creates a comprehensive framework for the issuance and trading of digital assets at the SEC and CFTC. It defines classifications for investment contracts and commodities, such as Bitcoin, Ethereum, and possibly XRP. The act aims to eliminate the confusion between securities and non-securities, ensuring regulatory clarity. By establishing guidelines for the registration of crypto firms and coin offerings, it provides the industry with a clear direction, ending the previous practice of impromptu legal action against crypto projects.
  2. The Blockchain Regulatory Certainty Act:A straightforward and much-needed piece of legislation, this act offers protection to non-custodial crypto services like miners, validators, and wallet providers. It ensures that they don't have to register as money transmitters, fostering innovation in blockchain development without the fear of regulatory intervention. However, the bill does not encompass laws around centralized exchanges, and the question of its application to decentralized finance (DeFi) platforms remains open.
  3. The Clarity for Stablecoins Act:Targeting USD stablecoins, this bill sets out a clear regulatory framework for the issuance and backing of payment stablecoins. The act requires stablecoins to be backed one-to-one by ultra-safe cash or cash equivalents and ensures transparency, regular audits, and strict requirements around stablecoin reserves to guard against potential runs. It also prohibits certain practices such as rehypothecation of reserves. While well-designed to remove risks and bolster consumer confidence, some aspects of the bill might pose challenges for existing stablecoin designs and operations.

The introduction of three pro-crypto bills to the U.S. House signifies a bullish stance for the crypto industry. Moving past prior skepticism, legislators are working to frame regulations for areas such as securities, stable coins, miners, and validators. Though this is a great first step and shows positive momentum, especially with elections approaching, these bills are still in the early stages of the legislative process. Not all may become law, but the discussion itself is a significant and positive development for the industry.

CBDCs: The Future of Financial Security or a Gateway to a Dystopian Nightmare?

In the first section, we discussed the emergence of stablecoins and the recent 3rd crypto bill, marking significant developments in digital finance. This next section delves into CBDCs, examining whether they are a progressive step toward crypto adoption or the beginning of a concerning era. The question here resonates with citizens and governments alike, as CBDCs become a tangible reality.

CBDCs, digital versions of a country's official currency, are stirring controversy. They're issued and controlled by central banks, treated like paper money, and regarded as legal tender. The introduction of CBDCs has fueled debates, comparing them with online banking apps and cryptocurrencies.

CBDC vs Online Banking

CBDCs and online banking both enable digital transactions, but they differ fundamentally. Online banking involves digital access to conventional bank accounts, operating within the existing banking system. CBDCs, on the other hand, represent a digital form of a country's fiat currency, issued and regulated by the central bank.

  1. Authority: Online banking is managed by commercial banks, while CBDCs are under the direct control of central banks.
  2. Accessibility: Both are generally accessible through digital means, but CBDCs could be designed to function offline in some cases.
  3. Security and Trust: CBDCs might offer higher security due to central bank backing, while online banking relies on commercial bank security measures.

CBDC vs Cryptocurrencies

CBDCs and cryptocurrencies like Bitcoin both exist digitally but have significant differences.

  1. Control: Cryptocurrencies operate on decentralized networks, free from government control. CBDCs are government-issued and regulated.
  2. Value Stability: Cryptocurrencies can be highly volatile, while CBDCs are likely to be stable as they represent fiat currencies.
  3. Legal Framework: CBDCs function within the legal framework of the issuing country, providing a clear legal status. Cryptocurrencies often lack such clear regulation.
  4. Technology: Many cryptocurrencies rely on blockchain technology, providing transparency and security. CBDCs might employ similar technology but under a centralized system.

Benefits and Drawbacks of CBDCs

CBDCs promise some benefits, including cheap, instant payments and simplified financial benefit distributions. However, these benefits come with substantial concerns. The government's ability to track purchases and control funds directly could lead to issues around privacy and autonomy. Furthermore, the potential to freeze or withdraw funds at the government's discretion could lead to a chilling effect on political dissidence and personal freedoms.

The emergence of CBDCs marks a critical junction in the financial landscape. As they bridge the gap between traditional finance and the crypto world, their centralization and government control raise questions. The potential benefits of efficiency and modernization are weighed against concerns about surveillance and the erosion of individual freedoms. The future of CBDCs remains uncertain, reflecting broader tensions in the ongoing evolution of digital finance.

PayPal's New Stablecoin PYUSD

Switching gears in the financial technology landscape, PayPal has ventured into the cryptocurrency space with its new US dollar-backed stablecoin, PYUSD. As a major move by one of the most widespread fintech companies., PYUSD provides a new method for purchasing products, transferring funds, and converting to and from other cryptocurrencies.


What is PYUSD?

PYUSD is PayPal's stablecoin, representing a digital token pegged to the US dollar. It brings instant payments into the PayPal ecosystem, potentially speeding up transactions.


Customers can use PYUSD to purchase products, send payments person-to-person, transfer to other wallets, and convert to other cryptocurrencies.


PYUSD offers a way to access instant payments, which is especially valuable for those living paycheck to paycheck. Its backing by PayPal lends legitimacy to the stablecoin space.


However, PYUSD faces challenges in widespread adoption.


Many vendors do not accept stablecoins, and the currency may need to be frequently converted back to fiat. Additionally, governmental instant payment systems like the Federal Reserve's FedNow may diminish demand for private solutions like PYUSD.

Best Performing Coins of The Week

Worst Performing Coins of The Week

Altcoin Events

Shiba Inu ($SHIB)

We begin our overview with Shiba Inu, a coin that has experienced an impressive 20% rally over the past week.

Investor enthusiasm appears to be soaring in response to a series of promising developments within the Shiba Inu ecosystem, including the anticipated announcement of Shibarium SSI (Self-Sovereign Identity) and the public testing of the Shibarium beta bridge.

Shytoshi Kusama, the lead developer of Shiba Inu, has been dropping hints about the launch of Shibarium, which is expected sometime this month.


Rollbit Coin ($RLB)

The second coin we will look at is Rollbit Coin. Rollbit has experienced a huge 99.4% rally over the past week.

Crypto casino and exchange Rollbit's announcement of daily RLB token buy-and-burn operations, based on platform revenue, has ignited excitement among traders, propelling the token's price. This significant move could establish ongoing buying pressure on RLB, contingent on continued platform growth, enhancing the investment outlook.

Worldcoin ($WLD)

The third and final coin we will look at is Worldcoin, a coin that experienced a 18.5% drop over the past week.

Worldcoin, facing stringent regulatory scrutiny in several countries including Kenya, Britain, France, and Germany, is under investigation for its handling of private data. Amid concerns over its reliance on biometric data for identity verification, the project's WLD token has declined, reflecting broader uncertainties around its operations and compliance.


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