Sam Bankman-Fried: Stablecoins Are ‘Lowest-hanging Fruit’ for Crypto Regulation

One regulator should have the duty to ensure all stablecoins are backed by dollars, FTX founder says

article-image

Blockworks Exclusive Art by Axel Rangel

share

key takeaways

  • Regulators should start by “putting one foot in front of the other” when considering guidelines in space, Bankman-Fried says
  • Preserving inclusion while protecting against bad actors is crucial for the segment, according to the FTX founder

Crypto regulators should focus on stablecoins, FTX founder Sam-Bankman Fried said, adding that agencies should first look to address “the lowest-hanging fruit” within the segment to reduce risks.

Speaking in Washington, DC Wednesday at an event hosted by the Bipartisan Policy Center, Bankman-Fried said the crypto space has grown to the point that regulatory oversight is needed and healthy. 

The “cleanest example,” he noted, of necessary regulation is ensuring that there are as many dollars backing the number of stablecoins in circulation. 

“Right now, the regulatory oversight of [stablecoins] is extremely unclear, it’s extremely messy and there are a lot of cooks hovering around the kitchen, but there’s no head chef,” the crypto executive said. “There basically isn’t any core regulator who clearly has the duty to ensure that, and there should be.”

The crash of algorithmic stablecoin TerraUSD (UST) earlier this year in part caused crypto prices to nosedive and sparked a wave of insolvencies in the space.

The President’s Working Group on Financial Markets recommended steps for Congress and regulators to make stablecoins safer last year. A recent report published by the Financial Stability Oversight Council (FSOC) states that passing legislation to regulate stablecoins is among 10 steps to lessen the risk cryptoassets purportedly pose.

A crypto framework published by the White House last month added that the US would continue research around whether to launch a central bank digital currency (CBDC) — a digital form of the dollar that Federal Reserve Chair Jerome Powell said earlier this year could coexist with privately issued stablecoins.

“CBDC development is a red herring,” Georgia Quinn, general counsel at Anchorage Digital, told Blockworks.

“What the industry really needs instead is clear, consistent stablecoin regulation to bolster and upgrade the US dollar for the digital age,” she said.

Rather than striving for perfection right now in a space that is hard to predict, regulators should start by “putting one foot in front of the other” when considering regulation in the space, Bankman-Fried said Wednesday.

“When you start to get into DeFi, there’s a lot of very interesting policy questions which I don’t think there’s a consensus on…and we will have to get to that eventually,” he added. “But let’s not nerd-snipe ourselves with that too much at the beginning.”     

Blockchain not fait accompli

Bankman-Fried spent a portion of the discussion sharing the big picture for crypto, noting one of the biggest advantages is having a real-time transaction settlement system without relying on intermediaries that could add risk.   

Bipartisan Policy Center founder Jason Grumet, who moderated the talk, countered the advantages with the “nefarious uses” of crypto, alluding to recent hacks in the space. Bankman-Fried acknowledged the complicated narrative of transparency versus privacy when addressing cases of illicit finance.

“I’m optimistic about blockchain for [access and inclusion]; I don’t think it’s fait accompli,” he said. “I think we could still screw it up and end up with all the exclusion that we found in traditional finance if we’re not careful.”

While blacklisting addresses associated with blockchain-related financial crimes is important, Bankman-Fried added, requiring a whitelisted system where people can only access digital finance if they are approved would be moving away from the technology’s founding principles.  

“Starting with the presumption of freedom and then restricting in the case of bad activity, I think is super healthy,” he said. “Start with the presumption that you can only do anything if it gets an explicit thumbs up, and all the marginalized groups are going to be marginalized once again.”


Don’t miss the next big story – join our free daily newsletter.

Tags

Upcoming Events

Hilton Metropole | 225 Edgware Rd, London

Mon - Wed, March 18 - 20, 2024

Crypto’s premier institutional conference returns to London in March 2024. The DAS: London Experience: Attend expert-led panel discussions and fireside chats Hear the latest developments regarding the crypto and digital asset regulatory environment directly from policymakers and experts.

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Top Icon.png

Research

Osmosis thrived in H2 2023 on the back of increased DeFi activity deriving from recently launched Cosmos-related projects and better market conditions. With new value accrual mechanisms for the native token, Osmosis is well-positioned to continue its strong performance in 2024.

/

article-image

Do Kwon may miss the start of the March 25 trial in the SEC’s case against the former executive and Terraform Labs

article-image

Riot Platforms bought 31,500 more mining machines while CleanSpark has begun operating in Mississippi

article-image

Dencun was activated on all testnets, a blog post Tuesday said

article-image

Hut 8 also announced it broke ground on a Texas mining site

article-image

Uniswap aims to become a “complete platform for swapping” following its latest product releases

article-image

Continued demand for bitcoin ETFs coupled with greater demand for bitcoin from exchanges is contributing to price moves, analysts say