ICYMI: WSJ E-Board: "Clarity for Crypto, Sort of"
ICYMI: In a new editorial about the Clarity Act, the Wall Street Journal Editorial Board warned that, while the framework is worth pursuing, the bill as written "includes regulatory loopholes that could cause problems in the financial system."
Here are the highlights:
Under the bill, stablecoin rewards could function like yield, creating a "particular risk" for small banks.
- "One provision would undermine the Genius Act’s prohibition on stablecoin issuers paying interest by letting crypto exchanges offer 'rewards' for what are essentially banking services. This is a particular risk for small banks that use interest payments to attract deposits."
The Clarity Act would consequently reduce lending to small businesses by hurting small banks.
- "Letting exchanges provide pecuniary incentives to stablecoin users could draw deposits out of small banks and thus reduce lending to small businesses."
The bill would also exempt some crypto networks from anti-money laundering laws, empowering criminals.
- "The bill would also exempt so-called decentralized crypto networks from anti-money laundering and know-your-customer rules. These networks operate like eBay with users transacting directly and the operator taking a cut of transactions. Criminals could exploit this exemption to route illicit payments through these networks."
A follow-up article by the Editorial Board later that week reiterated this concern, pushing back on misleading claims by crypto advocates.
- "The crypto industry and its friends in Washington portray themselves as defenders of free markets. What they really want is to be quasi-banks without abiding by the same regulations."
The WSJ Editorial Board is right: getting the framework right now will help ensure innovation strengthens the entire financial system, while protecting small businesses and preventing criminals from benefiting.
Read the full Wall Street Journal piece here.
For more updates like this, sign up for The Ledger Project’s emails here.