Original title: "The Kill Bill: What the Future Holds for Stablecoins"
introduction
Original compilation: Kxp, BlockBeats
introduction
Regulatory bills for digital assets are no strangers to Crypto. Today, the House of Representatives released a draft bill aimed at regulating Stablecoins, which will have an impact on the issuance and mortgage of Stablecoins. As the third largest Crypto asset, the market value of Stablecoin can even be on par with Ethereum, reaching as high as $152.8 billion.
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details
The act establishes an institutional framework for Stablecoin, and stipulates the personnel qualifications and methods for Stablecoin issuance. The bill also mentions that Stablecoin will need to be “entirely collateralized by cash or highly liquid assets.” Although the specific scope of “highly liquid assets” is not specified in the draft, it is certain that U.S. Treasury bonds must be included. Banks and non-banks can issue stablecoins only after obtaining approval, and violators will be sentenced to up to 5 years in prison and a $1 million fine.
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passing time
Generally speaking, the passage of a bill will go through five stages: 1) introduction of the draft; 2) approval by the Senate; 3) approval by the House of Representatives; 4) approval by the President; 5) becoming law. The bill hasn't even reached the first stage, though, and hasn't been formally introduced yet. As the bill is just taking shape, it will go through several revisions before entering the first phase.
In order to let everyone understand the progress of the bill more intuitively, we have to mention the sensationalLummis-GillibrandThe Responsible Financial Innovation Act, which was first introduced in June this year, has yet to pass the Senate after several months. Lawmakers hold multiple hearings before casting their first vote. Since January 3, 2021, only about 4% of bills have successfully passed into law. Judging from the current situation, the possibility of passing the Stablecoin Act is quite low.
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Centralized Stablecoins
The three largest Stablecoins currently on the market are all centralized, accounting for 91% of the Stablecoin market. They are: USDT ($67.97 billion), USDC ($49.52 billion) and BUSD ($21.03 billion). Not only are they an inherent property of DeFi, but most of the Stablecoins held by users are measured in them. Therefore, even if the bill can be finally passed, it will not pose a threat to these major stablecoins.
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FRAX
Why is FRAX so special that it needs to be discussed separately? Because they are the largest decentralized and non-overcollateralized Stablecoins. With a market cap of $1.36 billion, FRAX is the fifth largest Stablecoin (and also the largest algorithmic Stablecoin).
FRAX can be partially collateralized by USDC and FXS, and FXS is its functional token. The mortgage ratio between USDC and FXS will be adjusted according to the price (demand) of FRAX through an algorithm. Currently, FRAX's mortgage rate is 92.5%, which means that 92.5% of FRAX's collateral is USDC.
If the bill passes, FRAX is bound to come under scrutiny because it relies on an "endogenous" asset as its collateral, namely FXS. However, FXS only accounts for 7.5% of FRAX, and their founder Sam Kazemian once said, "We should increase the collateralization ratio of USDC to 100%, so that we can reduce the risk of censorship to 0."
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Overcollateralized Stablecoins (DAI, LUSD, MIM)
Overcollateralized Stablecoins are one of the most common types of Stablecoins in decentralized protocols, and the fourth largest StablecoinDAIJust using this model, there are many others such asLUSD(14th largest) andMIM(12th largest) as well. So how risky are they? I think it all depends on the definition of "highly liquid assets".
DAI is mainly collateralized by USDC, ETH, WBTC, and RWA (Real World Assets). If ETH and BTC are classified as "highly liquid assets", then DAI will basically have no problems, and the only thing that may cause some trouble is RWA. passCentrifuge, MakerDAO has lent about 40 million DAI, and its RWA collateral includes real estate, real estate loans, and shipping invoices. Although these may not be classified as "highly liquid assets", DAI will not have any risk, because RWA only accounts for a small proportion of DAI collateral.
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Stablecoin adjustments required
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The Innovative Future of Stablecoins
Once the bill is passed, the innovation of the Stablecoin model will be limited, and the new algorithm Stablecoin development team will be more cautious. However, this does not mean that Stablecoin has no possibility of innovation.GHOSuch a protocol-level Stablecoin andUXDepilogue
epilogue
The main points are summarized as follows:
The Stablecoin Act requires issuers of stablecoins in the United States to be approved and fully collateralized by "highly liquid assets."
The bill is still at an extremely early stage and there could be many changes before it is finalized.
Centralized stablecoins already largely meet the requirements of this new act.
FRAX will have to make some minor adjustments to comply with the bill.
Over-collateralized Stablecoins will not be too problematic, but it depends on the definition of "highly liquid assets".
The future of stablecoins may be similar to the current situation, but the bill does restrict innovation, but not completely curb it.
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