We spend a fair bit of time discussing the Hive Backed Dollar (HBD) and how important it is going forward. This is something that truly should get to the top of the list for improvements on Hive. The timing is lining up for an alternative to the existing market and HBD can take advantage of it.
Stablecoins became a huge industry. It is estimated to be $155 billion. Of course, this does not rival the money market world which is in the $5 trillion range. However, considering this relatively new, it is a giant step forward.
The announcement by Facebook that it was going to bring out a stablecoin was a moment which woke the establishment up. After changing the name to the DIEM, the project since is abandoned by the company, opting to sell it off. Nevertheless, the impact is still being felt.
While governments around the world wrestle with cryptocurrency, it seems the Biden Administration is intent on handing the stablecoin market over to the bankers. This is a move that is designed to hinder the progress of cryptocurrency and bring it under control.
Here is where the opportunity is opening up for coins that are like the Hive Backed Dollar.
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Issuers Fall Under Banking Regulation
Make no mistake, this is going to happen. The government is already looking at how to address the stablecoin issue. It is a hot topic in Washington, one based upon faulty premise.
They want to use the idea that somehow stablecoins are a threat to the stability of the financial system. As stated, this is roughly a $155 billion market. To believe that it could de-stablize the financial system that is in tens of trillions is absurd. Nevertheless, that is what they are using.
The issue was the hot topic in a report put together seeking a pathway to follow.
Far more significant was a report published in November by the President’s Working Group, an inter-agency group of the country’s most senior financial regulators, including Yellen. Titled “Report on Stablecoins,” the document called on Congress to pass laws requiring stablecoin issuers to operate as banks and to restrict their “affiliation with commercial entities.”
What this means is that companies that issue stablecoins, such as Circle, will have to be registered as banks. This puts them right in the scope of someone like Jamie Dimon and JPMorgan. It is easy to acquire another bank since that is within the regulations.
It is no secret that the Biden Administration has been very aggressive with cryptocurrency. The Securities and Exchange Commission takes a hard stance anytime it can. We see the same approach by the Fed. For this reason, people in cryptocurrency have no reason but to conclude that attack is immanent.
According to one individual who advised regulators, this is a well-thought out strategy.
“It’s a very thought-through doctrine about how to stop the crypto industry from growing too fast and too much,” says Maya Zehavi, a crypto entrepreneur and investor who has advised regulators.
Who exactly is behind the strategy? While many view the ambitious SEC Chair Gary Gensler as the architect of the Biden Administration’s anti-crypto policies, his influence has been overstated. It is instead Treasury Secretary Janet Yellen, Senator Elizabeth Warren, and a clique of Federal Reserve veterans who appear to be calling the shots.
According to Zehavi and others, the Biden Administration doesn't want to kill stablecoins altogether. Instead, the aim is to cull what these lawmakers perceive as "shadowy" operations like Tether while bringing "regulator-friendly" ones like Circle and Paxos under the umbrella of the U.S. banking system.
This has nothing to do with the stabilization of the financial system or protecting average individuals. It is simply a quest to retain power and hand innovation over to the banking system.
The question is whether the industry is going to stand for it or not. Obviously, it will be fought. However, let us be clear, the size and power of cryptocurrency versus the establishment is laughable. It is nothing more than a flea on the hind-end of a dog.
Therefore, the attack has to operate on a different level.
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Develop Out Of Reach
The reason why the Eurodollar system flourished for decades is because it was outside the reach of any central bank or government. For the first 20 years or so, few were even aware it existed. This was the international banks creating their own money in an effort to make more money. Ironic, it was a ledger-based system that was not regulated at all. Any agreements were between the two parties, who bore the full risk of anything going wrong.
While there were naturally some issues, this system grew into hundreds of trillions of dollars. The expansion was amazing, most likely playing a large hand in fueling major economic growth post WW2. It was only in the last few decades that things started to falter are the system was starved of USD. This caused a massive contraction which is creating problems in ways most are not aware.
Cryptocurrency is following a similar pattern. This time, instead of international banks, it is individuals who can establish "money". People are free to enter into whatever agreements they desire. For this reason, we see how quickly the industry is expanding. Bitcoin started a bit more than a decade ago. Within the last 5 years, we see a ton of projects that are all creating financial instruments that can be traded, bought, sold, or collateralized. It actually has a chance to provide the global liquidity that is needed.
Here is why stablecoins are such a threat. By putting them back in the hands of the bankers, the USD creation is controlled. It is the commercial banks who dictate when the money supply expands or contracts. The is the basis for a credit-based money supply. It is easy to see how, under this scenario, the stablecoins will only be expanded when banks make loans, similar to the USD.
This is, of course, not what the intention is. We are feeling the impact of a world where commercial banks control the money supply. It is starving people as economies get wrecked.
For this reason, the solution is to develop out of the reach of these institutions and the governments. They can regulate all they want, if something is truly decentralized and not under the control of any individual entity, there is little that can be done.
Hive Backed Dollars (HBD) are that. It is an algorithmic-based stablecoin. This means the elasticity of the money supply is in the hands of the community. Nobody is determining when to expand or contract the number of HBD available. If the demand increases, monetary equilibrium can be met as the community generates more of it. When the reverse is in play, the amount of HBD will contract.
For the moment, this is a token that cannot be regulated. Since no person or entity is behind it, as opposed to a Circle, regulation is useless. It is like trying to regulate open-source software. Simply, it cannot be done.
Time To Circle The Wagons
This is an old American saying that dates back to the early settler days. When people were embarking into new territory, they would circle their wagons as a defense against attack. Those of us in cryptocurrency are facing a similar threat.
It is very clear where the US Government and the current administration stands on this matter. They are going to do everything they can to reign in cryptocurrency and put it under their control. This means handing a large chunk of it over to the banking industry. We all know how that will work out.
For this reason, a coin like HBD is essential to the path forward. By improving upon this, we can start the process of building an assortment of products on top to further cement the power of the token. Just like the Eurodollar system to deposits of USD in foreign banks and build an entire platform, we can do the same. Over time, expansion will head is so many directions that it cannot be stopped. Projects such as UST are doing the same thing, showing that this is not a one-horse battle.
Essentially, the idea is to make an ecosystem like Hive a derivative machine. Since HBD is at the base layer, all the construction can take place on top of it. This will service as the foundation for an assortment of innovations. Some of them can be tied to the base-layer, to provide further stability by having "code is law" serve as the primary driver. This also serves as a defense against the attacks which are coming from the establishment.
It will also provide a mechanism that offers pristine collateral. When there is transparency with an asset along with liquidity, then collateralization is strengthened. We are seeing a world suffering from a lack of quality collateral. Here is another instance where cryptocurrency can solve a global financial problem.
With each move, the government and its associated entities are showing the need for a token such as the Hive Backed Dollar. If we want to retain and promote the freedom that comes with control over money, this is a vital step forward.
If now, we will see more funneled into the banking system which will only benefit those few who are already running things.
This is not what cryptocurrency is all about.
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