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Regulation

Your crypto is not outside government reach, VC firm partner says

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Morgan Housel, partner at venture capital firm Collaborative Fund, said the government actually can control people’s digital assets.

In a recent podcast episode with Morgan Creek Digital co-founder Anthony Pompliano, Housel mentioned that some arguments in favor of crypto are illogical. 

“The idea that the government cannot touch your crypto […], of course they can,” he explained as an example, noting the industry views the assets as “hands-off,” out of reach by the long arm of the law. 

Housel referred to the confiscation of gold almost 100 years ago as backing for his point. In 1933, while staring down the barrel of the Great Depression, President Franklin D. Roosevelt, or FDR, demanded that citizens trade in their gold for cash after giving the U.S. government the power to confiscate the precious metal from the people, according to an article from the Mises Institute. 

“They did that to control the money supply during the depression,” Housel said. “I don’t think this is going to happen, but could something happen with crypto?”

“If the government put out a regulation tomorrow that said, ‘If you own crypto, you will go to jail,’ […] of course that would have an impact on the price,” he added, noting his statement as a hypothetical, not a prediction.

“The government has handcuffs and guns — they can do whatever they want with it,” he added jokingly. 

Housel, however, is not anti-crypto. He remains intrigued by it, although he admittedly does not own any, and holds few opinions on the asset class. “It is of course fascinating,” he said of crypto. “Something that obviously looked like a bubble in 2010 has gone on to something that is mainstream,” he added.

Crypto has become even more mainstream in 2020, in light of the COVID-19-induced economic downturn, with traditional financial players such as Paul Tudor Jones entering the asset class. 



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Regulation

New York authorizes first Yen stablecoin operator in the US

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New York has given the first authorization to a stablecoin backed by the Japanese Yen to operate in the U.S.

Per a Dec. 29 announcement, the New York Department of Financial Services has granted Japanese firm GMO-Z.com a charter to handle U.S.D. and Yen-backed stablecoins in New York. 

Given New York’s status as a global center, the NYDFS is the most prominent state financial regulator in the U.S. It is also one of the most aggressive. A pass to operate in New York often opens up the rest of the country. 

GMO’s charter is as a limited liability trust company rather than a full bank, the principle difference being in authorization to handle deposits. While a stablecoin operator typically needs the ability to hold reserves of the pegged asset, GMO’s charter limits its rights to hold other kinds of deposits not central to its ability “to issue, administer, and redeem” its stablecoins. 

The right to issue such non-depository charters has been a bone of contention between state regulators like the NYDFS and national banking regulators in the U.S. 

GMO president and CEO Ken Nakamura said: “We’re breaking ground with our move to issue the first regulated JPY-pegged stablecoin, which many see as a safe haven asset.” 

The NYDFS recently made changes to its famous BitLicense, including a conditional format that buddies up newly licensed firms with existing licensees. The first conditional BitLicense went to PayPal, facilitating the launch of its new crypto services earlier this fall with the help of longstanding licensee Paxos.