After Terra’s fall to Earth, get ready for the #stablecoin era

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thedinarian@thedinarian

July 10, 2022

After Terra’s fall to Earth, get ready for the stablecoin era

Did May’s algorithmic stablecoin crashes kill the concept, or is there still a role for fiat-pegged cryptocurrencies?

⚈Stablecoins were supposed to be the boring uncle of the crypto world — safe, sensible and dull. They’re probably not what Satoshi Nakamoto had in mind, but they’re supposed to be a reassuring haven of calm and utility away from the turbulence of pure-play cryptocurrencies.

⚈With values pegged to fiat currencies, stablecoins were intended to be useful rather than to offer get-rich-quick schemes. They play an important role in the cryptocurrency ecosystem by providing a safer place to store capital without having to cash out entirely, and allowing assets to be denominated in fiat currencies rather than volatile tokens.

⚈However, events in May demonstrated that crypto stability is still elusive. With governments slow to react, Terra’s LUNA token — which has since been renamed Luna Classic (LUNC) — dropped to close to zero in value, wiping out $60 billion along the way. The obvious conclusion would be that the stablecoin experiment has failed. But I believe Terra’s fall to Earth is the precursor to a new era where stablecoins will become established, accepted and beneficial components of the global economic system. And the regulation that is only now dropping into place already looks well past its sell-by date.

Not all stablecoins were born equal:

⚈If that seems unlikely right now, the failure of a few stablecoins does not write off the entire concept. Other stablecoins have been constructed on solid ground and are performing as expected.

⚈What’s happening is a clearout of the algorithmic stablecoins. These are coins that were never fit for purpose because they were built on insecure foundations. There were always critics: Some called out Terra as a Ponzi scheme and argued that it, and other algorithmics, would only hold value if more and more people bought them.

⚈Algorithmic stablecoins are unregulated and not backed by equivalent amounts of the underlying fiat currency — or by anything, for that matter. Instead, they deploy smart contracts to create or destroy the available supply of tokens to adjust the price. It’s a system that worked, backed up by an artificially high interest-paying mechanism called Anchor, while enough people believed in it. Once that trust started to evaporate in early May, the flood gates opened in a classic, old-world bank run.

⚈But there are other classes of stablecoin that are backed by assets, including fiat currencies. Tether (USDT), the world’s biggest stablecoin by market capitalization, has published its asset register to demonstrate that its token is fully backed by assets held in a reserve. Tether’s value against the dollar has remained consistent, including through the current turmoil, with only a relatively minor blip on May 12 when it declined in value to $0.97.

Circle CEO Jeremy Allaire wrote in his Twitter account that USD Coin (USDC), the second-largest stablecoin by value, is entirely backed with different assets.

USDC has performed even better than Tether at its primary task: tracking the U.S. dollar.

Regulators were slow to react…

⚈Regulators were stepping up their focus on stablecoins before the Terra meltdown, though perhaps a little late, given what has happened. In the United States, President Joe Biden signed his Executive Order on Ensuring Responsible Development of Digital Assets on March 9 — to an unexpected chorus of approval from the broader crypto industry.

⚈In early April, the United Kingdom announced its intentions to regulate as-of-yet-unspecified stablecoins. The same month, a leading member of the U.S. Senate Banking Committee, Senator Patrick Toomey, introduced the “Stablecoin Transparency of Reserves and Uniform Safe Transactions Act of 2022,” dubbed the Stablecoin TRUST Act for short, addressing cryptocurrencies whose prices are pegged to the U.S. dollar or other assets.

⚈Ironically, in an interview with the Financial Times published on May 6, as Terra began its descent toward zero value, Senator Toomey called on regulators to do more to regulate stablecoins “before some bad thing happens.” However, even he seems not to have predicted how quickly things were going to unfold:

“He pushed back against some of the stricter measures being promoted by Democrats, who believe stablecoins are now worth so much money that their operators should be regulated like banks.”

⚈Since then, things have started to move more quickly. Once the Terra route began, from about May 5, regulators quickly stepped up their level of vigilance. In a report issued on May 9, the U.S. Federal Reserve said stablecoins were “vulnerable to runs” and lacked transparency about their assets. And Treasury Secretary Janet Yellen recently commented on the urgent need for guardrails, saying it would be “highly appropriate” for lawmakers to enact legislation as soon as this year.

⚈Elsewhere, in June, Japan became one of the first countries — and by far the largest economy — to regulate a form of non-fiat digital money when its parliament approved the regulation of yen-linked stablecoins. This was not Terra-collapse related but based on a regime first proposed by Japan’s Financial Services Agency in March 2021. The new law guarantees face-value redemption, restricts stablecoin creation to regulated institutions, and requires stricter Anti-Money Laundering measures.

…and are missing the point

⚈Despite these warnings and emerging policy steps, what seems to be missing is a clear distinction between algorithmic and asset-backed stablecoins. In my view, asset-backed fiat stablecoins should be regulated by governments and have capital adequacy rules and restrictions on what can be done with reserves.

⚈Algo stablecoins, if they survive as a class, should come with extensive health warnings about the risks that remain on consumers’ shoulders. Algos are the latest in a long line of innovations — the next won’t be long in coming, and regulators won’t be ready for it either. The reality is that people need to take care of their own assets and wealth. Any fully decentralized environment always requires that people protect their own assets closely and with vigilance.

⚈And compounding the sense that reality is outstripping regulators’ ability to keep up, the existence of fully backed coins, such as USDC, seems to remove any need for the U.S. government to develop its own central bank digital currency, or what some call the “digital dollar.”

Darkest before the dawn:

⚈At the time of writing, we are only a few weeks past the Terra collapse. As a result, stablecoins are under a cloud, and the long-term impact on the broader ecosystem of blockchain tokens, which remain under pressure since prices peaked in September 2021, is still unclear.

⚈Many commentators are reveling in the crypto gloom, stoking the latent skepticism many people feel about the entire crypto project unleashed by Satoshi Nakamoto.

⚈In my opinion, as far as stablecoins are concerned, it’s a case of being “darkest before the dawn.” Most people did not — and still do not — understand that all stablecoins were not born equal. Algorithmic stablecoins, as is now obvious, were a disaster waiting to happen. Fully backed stablecoins — ideally within the regulatory environment being planned or adopted in the U.S., U.K. and Japan, among others — are a perfectly sensible option with important roles to play in the hybrid crypto-fiat economies of the future.

Their time has come.

https://cointelegraph.com/news/after-terra-s-fall-to-earth-get-ready-for-the-stablecoin-era

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thedinarian@thedinarian

June 22, 2025

Musk Turns On Starlink to Save Iranians from Regime’s Internet Crackdown

Elon Musk, the world’s richest man and a visionary behind SpaceX, has flipped the switch on Starlink, delivering internet to Iranians amid a brutal regime crackdown.

This move comes on the heels of Israeli strikes targeting Iran’s nuclear facilities, as the Islamic Republic cuts off online access.

The former Department of Government Efficiency chief activated Starlink satellite internet service for Iranians on Saturday following the Islamic Republic's decision to impose nationwide internet restrictions.

As the Jerusalem Post reports, that the Islamic Republic’s Communications Ministry announced the move, stating, "In view of the special conditions of the country, temporary restrictions have been imposed on the country’s internet."

This action followed a series of Israeli attacks on Iranian targets.

Starlink, a SpaceX-developed satellite constellation, provides high-speed internet to regions with limited connectivity, such as remote areas or conflict zones.

Elizabeth MacDonald, a Fox News contributor, highlighted its impact, noting, "Elon Musk turning on Starlink for Iran in 2022 was a game changer. Starlink connects directly to SpaceX satellites, bypassing Iran’s ground infrastructure. That means even during government-imposed shutdowns or censorship, users can still get online, and reportedly more than 100,000 inside Iran are doing that."

During the 2022 "Woman, Life, Freedom" protests, Starlink enabled Iranians to communicate and share footage globally despite network blackouts," she added.

MacDonald also mentioned ongoing tests of "direct-to-cell" capabilities, which could allow smartphone connections without a dish, potentially expanding access and supporting free expression and protest coordination.

Musk confirmed the activation, noting on Saturday, "The beams are on."

This follows the regime’s internet shutdowns, which were triggered by Israeli military actions.

Adding to the tension, Israeli Prime Minister Benjamin Netanyahu addressed the Iranian people on Friday, urging resistance against the regime.

"Israel's fight is not against the Iranian people. Our fight is against the murderous Islamic regime that oppresses and impoverishes you,” he said.

Meanwhile, Reza Pahlavi, the exiled son of Iran’s last monarch, called on military and security forces to abandon the regime, accusing Supreme Leader Ayatollah Ali Khamenei in a Persian-language social media post of forcing Iranians into an unwanted war.

Starlink has been a beacon in other crises. Beyond Iran, Musk has leveraged Starlink to assist people during natural disasters and conflicts.

In the wake of hurricanes and earthquakes, Starlink has provided critical internet access to affected communities, enabling emergency communications and coordination.

Similarly, during the Ukraine-Russia conflict, Musk activated Starlink to support Ukrainian forces and civilians, ensuring they could maintain contact and access vital information under dire circumstances.

The genius entrepreneur, is throwing a lifeline to the oppressed in Iran, and the libs can’t stand it.

Conservative talk show host Mark Levin praised Musk’s action, reposting a message stating that Starlink would "reconnect the Iranian people with the internet and put the final nail in the coffin of the Iranian regime."

"God bless you, Elon. The Starlink beams are on in Iran!" Levin wrote.

Musk, who recently stepped down from leading the DOGE in the Trump administration, has apologized to President Trump for past criticisms, including his stance on the One Big Beautiful Bill.

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thedinarian@thedinarian

June 22, 2025

GENIUS Act lets State banks conduct some business nationwide. Regulators object

The Senate passed the GENIUS Act for stablecoins last week, but significant work remains before it becomes law. The House has a different bill, the STABLE Act, with notable differences that must be reconciled. State banking regulators have raised strong objections to a provision in the GENIUS Act that would allow state banks to operate nationwide without authorization from host states or a federal regulator.

The controversial clause permits a state bank with a regulated stablecoin subsidiary to provide money transmitter and custodial services in any other state. While host states can impose consumer protection laws, they cannot require the usual authorization and oversight typically needed for out-of-state banking operations.

The Conference of State Bank Supervisors welcomed some changes in the GENIUS Act but remains adamantly opposed to this particular provision. In a statement, CSBS said:

“Critical changes must be made during House consideration of the legislation to prevent unintended consequences and further mitigate financial stability risks. CSBS remains concerned with the dramatic and unsupported expansion of the authority of uninsured banks to conduct money transmission or custody activities nationwide without the approval or oversight of host state supervisors (Sec. 16(d)).”

The National Conference of State Legislatures expressed similar concerns in early June, stating:

“We urge you to oppose Section 16(d) and support state authority to regulate financial services in a manner that reflects local conditions, priorities and risk tolerances. Preserving the dual banking system and respecting state autonomy is essential to the safety, soundness and diversity of our nation’s financial sector.”

Evolution of nationwide authorization

Section 16 addresses several issues beyond stablecoins, including preventing a recurrence of the SEC’s SAB 121, which forced crypto assets held in custody onto balance sheets. However, the nationwide authorization subsection was added after the legislation cleared the Senate Banking Committee, with two significant modifications since then.

Originally, the provision applied only to special bank charters like Wyoming’s Special Purpose Depository Institutions or Connecticut’s Innovation Banks. Examples include crypto-focused Custodia Bank and crypto exchange Kraken in Wyoming, plus traditional finance player Fnality US in Connecticut. Recently the scope was expanded to cover most state chartered banks with stablecoin subsidiaries, possibly due to concerns about competitive advantages.

Simultaneously, the clause was substantially tightened. The initial version allowed state chartered banks to provide money transmission and custody services nationwide for any type of asset, which would include cryptocurrencies. Now these activities can only be conducted by the stablecoin subsidiary, and while Section 16(d) doesn’t explicitly limit services to stablecoins, the GENIUS Act currently restricts issuers to stablecoin related activities.

However, the House STABLE Act takes a more permissive approach, allowing regulators to decide which non-stablecoin activities are permitted. If the House version prevails in reconciliation, it could result in a significant expansion of allowed nationwide banking activities beyond stablecoins.

Is it that bad?

As originally drafted, the clause seemed overly permissive.

The amended clause makes sense for stablecoin issuers. They want to have a single regulator and be able to provide the stablecoin services throughout the United States. But it also leans into the perception outside of crypto that this is just another form of regulatory arbitrage.

The controversy over Section 16(d) reflects concerns about creating a regulatory gap that allows banks to operate interstate without the oversight typically required from either federal or state authorities. As the two Congressional chambers work toward reconciliation, lawmakers must decide whether stablecoin legislation should include provisions that effectively reduce traditional banking oversight requirements.

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If you find value in my content, consider showing your support via:

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thedinarian@thedinarian

June 21, 2025

Dubai regulator VARA classifies RWA issuance as licensed activity

Virtual Asset Regulatory Authority (VARA) leads global regulatory framework - makes RWA issuance licensed activity in Dubai.

Real-world assets (RWAs) issuance is now licensed activity in Dubai.

~ Actual law.
~ Not a legal gray zone.
~ Not a whitepaper fantasy.

RWA issuance and listing on secondary markets is defined under binding crypto regulation.

It’s execution by Dubai.

Irina Heaver explained:

“RWA issuance is no longer theoretical. It’s now a regulatory reality.”

VARA defined:

- RWAs are classified as Asset-Referenced Virtual Assets (ARVAs)

- Secondary market trading is permitted under VARA license

- Issuers need capital, audits, and legal disclosures

- Regulated broker-dealers and exchanges can now onboard and trade them

This closes the gap that killed STOs in 2018.

No more tokenization without venues.
No more assets without liquidity.

UAE is doing what Switzerland, Singapore, and Europe still haven’t:

Creating enforceable frameworks for RWA tokenization that actually work.

Matthew White, CEO of VARA, said it perfectly:

“Tokenization will redefine global finance in 2025.”

He’s not exaggerating.

$500B+ market predicted next year.

And the UAE just gave it legal rails.

~Real estate.
~Private credit.
~Shariah-compliant products.

Everything is in play.

This is how you turn hype into infrastructure.

What Dubai is doing now is 3 years ahead of everyone else.

Founders, investors, ecosystem builders:

You want to build real-world assets onchain.

Don’t waste another year waiting for clarity.

Come to Dubai.

It’s already here.

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If you find value in my content, consider showing your support via:

💳 PayPal:
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Your generosity keeps this mission alive, for all! Namasté 🙏 Crypto Michael ⚡ The Dinarian

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