Behind closed doors, the Treasury Department is devising new crypto rules.Credit…Stefani Reynolds for The New York Times Making the case for stablecoins Financial regulators are racing to regulate stablecoins. These digital currencies pegged to a stable asset like the dollar are used in crypto trading , banking and decentralized finance , addressing the problem of price volatility that plagues Bitcoin and others. Stablecoins have become an important bridge between digital currencies and the traditional financial system. But despite their name, stablecoins may be shaky. The urgency among regulators to rein in the industry has, in turn, generated a flurry of crypto industry lobbying all over Washington, Eric Lipton, Jeanna Smialek and DealBook’s Ephrat Livni report . From boom to bank run? In their short history, lightly regulated stablecoin issuers have shown that they don’t always have the cash reserves they claim. Tether, the company behind the most popular stablecoin, settled an investigation by the New York attorney general this year that alleged that it had obscured what it held in reserve. Officials fear a digital-era bank run may loom if new rules aren’t created soon for the booming stablecoin sector. “Regulators really start to care more when risks get greater for society,” said Jeremy Allaire, the C.E.O. of Circle, a payments and digital currency company that helped create the fast-growing stablecoin USD Coin with the crypto exchange Coinbase. Collectively, dollar-tied stablecoins have jumped from $30 billion in circulation in January to about $125 billion as of mid-September . Executives are pushing their perspectives. Ahead of a Treasury Department report on stablecoins expected this fall, crypto businesses have in recent weeks held dozens of meetings with cabinet members, White House staff members, federal lawmakers and financial regulators. Tight regulations could drive innovation abroad, hamper financial inclusion, risk the dollar’s primacy and kill the promise of digital finance, the industry argues. And each company is advancing a view on regulation that, if embraced, would put them ahead of the competition. “If we think back on the 20th century, first you had key innovations like aviation or automobiles,” said Tomicah Tillemann, a onetime aide to Joe Biden when Mr. Biden was a senator but who now works for Andreessen Horowitz, the venture capital firm that’s a major crypto investor . “And then you have investments in regulatory frameworks that helped to bring the benefits of those technologies to larger numbers of people.” In other crypto news, government agencies in China today reiterated that all cryptocurrency-related activities are illegal in the country, vowing harsher crackdowns. Prices are falling . HERE’S WHAT’S HAPPENING A government cash crunch is weeks away. In a report today , the Bipartisan Policy Center said that the U.S. government could run out of cash and start missing payments on things like Social Security checks as soon as Oct. 15, but no later than Nov. 4. The White House has started to advise federal agencies to prepare for the first government shutdown since 2019. Workers in risky jobs can also get a coronavirus booster shot, the C.D.C. director says. Dr. Rochelle Walensky overruled her agency’s advice by recommending an additional Pfizer vaccine dose for health care workers, teachers and others whose jobs put them at increased risk. The agency had recommended boosters only for people over 65 and those with underlying medical conditions. New York City sets new rules for delivery workers. The first-of-its-kind legislation requires app-based delivery companies like Grubhub to disclose their tipping policies, gives delivery workers more control over where they work and requires restaurant owners to make bathrooms available to delivery workers. The S.E.C. flexes its muscles on market abuse. The commission in the past week has charged 14 individuals, across eight different cases, of multimillion-dollar frauds. Yesterday, a former Oppenheimer Funds trader was charged with placing more than 3,000 illegal trades , generating $8.5 million in gains, in a “front running” scheme. Delta Air Lines calls for a national “no fly” list of unruly passengers. The company said in a memo to other airlines that it had banned 1,600 people, and it called for carriers to combine their internal lists. A congressional panel yesterday heard that the F.A.A. had logged 4,284 “unruly passenger reports” since January, with about three-quarters related to mask wearing. What’s going on at Evergrande? Evergrande, the beleaguered Chinese property developer, left investors wondering yesterday about the fate of an $83 million interest payment due on a dollar-denominated bond. One bondholder told DealBook they had not been paid, but the covenants provide […]
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