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😨 NESARA/GESARA – The Progress Report –QFS, Dinar & Zimbabwe RV. 😨

NESARA (National Economic Security and Recovery Act) and GESARA (Global Economic Security and Recovery Act) are concepts originating from a set of economic reforms proposed in the United States in the 1990s. The original NESARA proposal included measures to abolish income taxes, cancel out debt, and return to a commodity-based currency system (such as gold), among other financial reforms. However, this proposal never became law.

Over time, NESARA and GESARA have become associated with a variety of conspiracy theories. These theories suggest that these acts have secretly passed and will lead to massive positive changes globally such as debt forgiveness, the abolishment of income tax, a new form of government, and even the distribution of vast sums of wealth from hidden sources. The theories often tie in other elements, such as secret societies, alien interventions, and the imminent arrest of powerful political personalities. The linguistics of these theories are focused to attach to Christian ethos mind patterns. In the language associated with NESARA/GESARA as conspiracy theories, the targets are clearly a specific subset of the Evangelical sects within Christianity. There is no penetration of the NESARA/GESARA language within the Islam, or Buddhist, or other religious communities. There is no penetration of this language into Leftist, or atheist, or other, non Christian communities.

Within the conspiracy theories attached to NESARA are statements that the act was signed into Law by President Bush, and then, immediately ‘hidden’ from the public while the Federal government supposedly is ‘blocked’ from implementing it by nefarious actors within the [deep state].

It's important to note that there is no credible evidence to support the existence of GESARA. While NESARA was an actual legislative proposal, it was never enacted. GESARA language first shows up eight months after the failure of NESARA to be advanced in the legislature. GESARA was a deliberate strategy to expand the scam to non USA citizens. It failed in this effort of expansion. There is evidence of funding behind a push for GESARA into specific Islamic groups in 2005 that failed to obtain traction. The details often cited in these theories do not correspond to anything in our common shared reality and are widely considered to be absolute bullshit by people who work within legitimate political or economic analysis areas.

This attitude of rejection, and disbelief, is also elicited by the ‘QFS’. The "Quantum Financial System" (QFS) is another concept frequently mentioned in conjunction with various conspiracy theories, particularly those surrounding NESARA/GESARA. It is described by proponents as a highly advanced technology system that would completely replace the current banking and financial systems around the world. The QFS is often depicted as being based on quantum computing technology, which proponents claim can provide heightened security through quantum cryptography and create a transparent, fraud-proof system. Aspects of the QFS include the idea that ALL resources within the Earth’s biosphere would be ‘placed on blockchain’ for an absolute accounting, and tracking, of the use of such resources. Note that many of the claims for the QFS actually mirror the goals, and function of the CCP Social Credit System.

Advocates of this theory suggest that the QFS will enable the seamless and instant transfer of currencies and that it would be immune to corruption, hacking, or manipulation. It is also said to be capable of ensuring complete privacy and anonymity of transactions, while simultaneously being fully transparent in terms of authorities’ ability to prevent illegal activities.

It’s important to clarify that, as of now, there is no verified existence of such a system in development or in use by any government or financial institution recognized by any financial entities or technology experts. The descriptions of the QFS often contain a mixture of some factual elements of quantum computing potentials and a lot of speculative, unfounded claims. Quantum computing itself is in the early stages of development, primarily focused on research rather than practical applications, especially on the scale described in QFS theories. There is NO ‘Quantum computer network’ in operation now, and given that Quantum computers are batch process, analog machines that cannot run digital software, it is not technically possible for Quantum computers to run a digital network. Quantum computers cannot run digital software, and can NOT host AI. Most of the Quantum computing world is still in research mode, and the technology is likely two decades away from any form of commercial adoption. Quantum computers, by the nature of the technology, will always be ‘batch processors’, and will NEVER be used to ‘run networks’.

Claims that the QFS is operational, or there is a Quantum computer based network, need to be challenged, and demands made for receipts be imposed upon those people making such claims as they are incorrect, inaccurate, and may be deliberate lies attempting to deceive.

The concepts of NESARA/GESARA and the Quantum Financial System (QFS) can be particularly appealing to individuals with limited financial understanding because they promise simple solutions to complex financial issues and present an idealized scenario where financial burdens such as debt and taxes are effortlessly resolved. These narratives are DESIGNED to specifically target and impact those with lower financial literacy:

Complexity and Jargon: The use of complex terms and financial jargon (like "quantum technology" in the case of QFS) can be overwhelming. People who aren't familiar with these concepts might assume the information is legitimate simply because it sounds sophisticated and technical.

Promises of Wealth and Debt Relief: These theories often include promises of imminent wealth distribution and debt forgiveness, which can be very attractive to anyone struggling financially. The hope of such outcomes can cloud judgment, leading individuals to overlook the lack of evidence or logical basis behind these claims.

Exploitation of Distrust: Many of these theories tap into a general distrust of governmental and financial institutions. For individuals who feel marginalized or cheated by the system, the idea that there is a hidden or suppressed solution can be very appealing.

Urgency and Exclusivity: By suggesting that these events are about to happen, these theories create a sense of urgency that can rush individuals into making hasty decisions, such as investing in certain assets, joining groups, or donating money to causes that purport to support the implementation of these acts.

Scams and Frauds: Scammers use these theories to legitimize fraudulent schemes, asking people to invest in new "quantum-resistant" cryptocurrencies, participate in exclusive financial opportunities linked to the supposed upcoming changes, or buy products and services that are "necessary" to prepare for the transition.

Social Proof and Echo Chambers: People discussing these theories often form tight-knit communities that reinforce each other's beliefs. This social validation can make the theories seem more credible to someone who is unfamiliar with how financial systems actually work. A key aspect of identifying these communities is the language that constantly brings the concept back to ‘faith’, and the invocation of language found in religious settings which is tied to the financial frauds of NESARA/GESARA/QFS.

The NESARA/GESARA/QFS scams are dependent on directing the language within the discussion to specific terms in order to invoke ‘faith’ as an emotion in order to support the scam internally within the ethical structure of the victim. It is a sophisticated attempt to prey upon in-built mental pathways. Once these paths are captured by the scammer, it becomes incredibly difficult to dissuade the victim from their attitude that these scams are real. This is due to the deep religious hooks within the victim’s personality. This language is further reinforced by the continuous exposure for a lifetime to the same language from THE most effective scam in history, the Federal Reserve note which is not money, and is a legislative supported debt instrument.

Federal Reserve Notes are legal tender, with the words "this note is legal tender for all debts, public and private" printed on each note. The notes are backed by financial assets that the Federal Reserve Banks pledge as collateral, which are mainly Treasury securities and mortgage agency securities that they purchase on the open market by fiat payment. In other words, the Federal Reserve Bank, which is not part of the Federal government, and is not a bank, is ‘backing’ their debt notes (aka ‘dollars’) with other debt instruments (not money) that the government produces that the FED purchases with its fiat dollars. So the dollar is a debt instrument issued by a private corporation, and loaned to the US Government for use at a cost of interest payments by the People of the USA to the private corporation of the Federal Reserve. The BIGGEST scam of them all.

There are many linguistic ties between the NESARA/GESARA/OFS scam and the ‘Iragi RV’, or the Zimbabwe RV. Note that these scams offer the Kuwaiti Dinar RV as ‘proof’ that the same occurrence will emerge for these other currencies from Iraq and Zimbabwe.

The situation of the Kuwaiti currency ‘revalue’ were entirely unique, and were based off of the geopolitical movements of the Bush Regime. This arose after the failure to convince Saddam Hussein to allow STF (special technology forces) of the US military to enter three ziggurats in Iraq for the purposes of examining, and removing artifacts. This failure led to the Bush Regime giving Saddam Hussein ‘permission’ to invade Kuwait. This permission was to create the conditions of the Iraq invasion of Kuwait. That invasion caused the Kuwaiti dinar currency to collapse as the financial world assumed that the government of the country was gone, thus the currency was worthless. This led to an international devaluation of the Kuwaiti dinar in the global financial markets. There is evidence to support the idea that members of the Bush Regime anticipated this effect, and purchased billions of dinars. They bought the Iraqi currency as they knew the Bush Regime would be restoring the Kuwaiti power structure as part of their invasion of Iraq to loot the ziggurats. This occurred, the Kuwaiti government was restored, and faith returned to the Kuwaiti Dinar within the international currency markets and thus the ‘value’ of the dinar was raised and those who were in on the scheme profited hugely.

Note that the government of Kuwait did NOT ‘revalue’ the dinar. That was a function of the open markets in currency trading, and the underlying plot by the Bush Regime to manipulate these markets as a side effort in their Iraq War. There was NEVER any repurchase of the Kuwaiti Dinar by the government of Kuwait in any deliberate attempt to “Re-Value” their currency.

No government will ever Re-Value their currency upwards in purchasing power (value). There is NO incentive for any fiat currency to be worth ‘more’ in purchasing power. It is in the nature of fiat currencies that they can NOT be revalued upward in purchase power by the government that issues them. INFLATION is the only route available for non-backed currencies.

During the 1930s, the United States was grappling with the Great Depression, a period of severe economic downturn that caused widespread hardship. In response to deflationary pressures—where prices and wages fell dramatically—there were concerted efforts by the government and the Federal Reserve to induce inflation into their currency which was dying against the real purchasing power of gold and silver constitutional money. These efforts aimed to increase the money supply and raise the price level, thereby relieving some of the economic stress. This effort was coordinated by the Fed and forced through a reluctant Congress by bribery, and extortion, and threats.

Key Actions by the Federal Reserve and the U.S. Government:

Abandonment of the Gold Standard (1933): One of the significant steps towards inducing inflation involved the United States moving off the gold standard temporarily. President Franklin D. Roosevelt suspended the gold standard, which had constrained the Fed's ability to increase the money supply because the dollar was pegged to a fixed amount of gold. By moving off the gold standard, the Fed could print more money which is the definition of inflation.

Executive Order 6102 (1933): This order required U.S. citizens to exchange their gold coins, gold bullion, and gold certificates for U.S. dollars. This measure was intended to prevent hoarding of gold and to increase the gold reserves held by the Federal Reserve, thereby giving it more leverage to increase the money supply. This action made every American citizen an economic eunuch now dependent on a private corporation for ‘money’, and they (the Fed) kept the money (gold), and rented out their currency (the dollar) in exchange for debt against the government and people of the US as was designed by the Freemasons who plotted to bring in the Federal reserve in 1910.

Devaluation of the Dollar: The Gold Reserve Act of 1934 officially devalued the dollar in gold terms from $20.67 to $35 per ounce of gold. This devaluation was aimed at increasing the price of goods, making American goods cheaper for foreigners and thus boosting exports. It also effectively increased the money supply in terms of gold-backed securities which were now constrained by the markets for debt that the Federal Reserve controlled.

Open Market Operations and Interest Rate Reductions: The Fed engaged in open market operations by buying government securities. This action increased the banking system’s reserves and the overall money supply. Additionally, lowering interest rates made borrowing cheaper, encouraging spending and speculation (boom and bust cycles only exist in fiat currencies) which they renamed as ‘investment’.

Public Works and Government Spending: Alongside monetary policy, fiscal policy played a critical role. The government increased its spending on public works and social welfare programs under the New Deal. This not only created jobs but also increased cash flow in the economy, contributing to inflationary pressure. The Federal Reserve was dying a natural death in 1933, and was saved by extreme legislative support that turned all USA citizens into debt slaves until the system itself should (once again) be dying due to natural economic forces (we are there, now).

Continued: https://clifhigh.substack.com/p/nesaragesara-the-progress-report

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🚨 BIG NEWS‼️

Acting CFTC Chair @CarolineDPham has announced that they will soon be participating as an observer in industry tokenization pilots. 👀👇🏼

00:05:45
Veritaseum CEO Reggie Middleton On The Use Of AI and AI Agents In The Future 🤖

The use of a mouse, keyboard, screen touch will all be a thing of the past.

00:02:16
ARE YOU PREPARING FOR WHATS COMING ?

Xrp
Xdc
Xlm
Ada
Hbar

ISO20022

00:01:18
👉 Coinbase just launched an AI agent for Crypto Trading

Custom AI assistants that print money in your sleep? 🔜

The future of Crypto x AI is about to go crazy.

👉 Here’s what you need to know:

💠 'Based Agent' enables creation of custom AI agents
💠 Users set up personalized agents in < 3 minutes
💠 Equipped w/ crypto wallet and on-chain functions
💠 Capable of completing trades, swaps, and staking
💠 Integrates with Coinbase’s SDK, OpenAI, & Replit

👉 What this means for the future of Crypto:

1. Open Access: Democratized access to advanced trading
2. Automated Txns: Complex trades + streamlined on-chain activity
3. AI Dominance: Est ~80% of crypto 👉txns done by AI agents by 2025

🚨 I personally wouldn't bet against Brian Armstrong and Jesse Pollak.

👉 Coinbase just launched an AI agent for Crypto Trading
Jake Claver XRP Price Prediction For 2035🤯

Listen to his answer on price at the 1:32:25 mark. 😳 ~ The Dinarian

Jake Claver is widely recognized as one of the most knowledgeable figures in the XRP community, especially when it comes to institutional adoption and the future of digital assets.

As Managing Director of Digital Ascension Group, he oversees custody of millions of XRP tokens for high-net-worth clients and family offices, giving him direct, hands-on experience with large-scale XRP strategies.

In interviews and public appearances, Claver has consistently emphasized XRP’s potential to become a central bridge in global finance, connecting traditional networks and major tech platforms.

He highlights the asset’s unique utility for high-value, cross-border payments and its growing adoption by institutions as key reasons for his bullish outlook.

On the topic of price, Claver has discussed scenarios where XRP could reach dramatic new highs if it captures even a fraction of SWIFT’s market share or becomes foundational to ...

Why Should You Have XDC In Your Wallet?

Here's a quick-start visual guide XDCNetwork101 📘

✔️ Fast (2s settlement), low-cost (~$0.0001 fees)

✔️ ISO 20022-ready and R3 Corda integrated

✔️ Trusted by TradeTrust, SBI VC, Deutsche Telekom, Archax & more

✔️ Built for tokenization, trade finance, Global Payment and regulated enterprise use

✔️ Energy-efficient & scalable, Military grade Security with XDC 2.0

💡 Whether you're exploring RWAs, launching dApps, or seeking compliance-first blockchains — XDC is the enterprise-ready hybrid chain to know.

📊 Dive into the facts, milestones, and how to get started — all in one image 👇

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Coinbase Just Launched X402 💥

Coinbase just launched x402 on Tuesday, May 6, 2025.

🔑 Key details about x402:

🔹️ What it is: x402 is a new, open-source payments protocol developed by Coinbase. It leverages the existing but rarely used HTTP "402 Payment Required" status code to enable instant stablecoin payments directly over HTTP (the standard web protocol).

🔹️Purpose: It aims to create a native payment layer for the internet, making it as easy to send and receive value as it is to exchange data.

🔹️How it works: When a client (human user, app, or AI agent) tries to access a resource that requires payment, the server responds with a 402 error along with payment instructions. The client can then make a stablecoin payment (initially focusing on USDC) directly to the server. Once the payment is confirmed, the client can access the resource.

🔑 Key benefits:

🔹️ Micropayments: Enables efficient and low-cost micropayments for various online services and content.

🔹️ AI Agent Autonomy: Allows AI agents to autonomously ...

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Persistence April 2025 Update
In April 2025, we launched Persistence DEX on Babylon Genesis, introduced new incentives, and took key steps toward becoming the BTCFi liquidity hub.

April was a crucial month for both Persistence DEX and the broader BTCFi community, with the Babylon Genesis Network going live in early April. To strengthen our position as the BTCFi Liquidity Hub, we actively engaged with the Babylon community and secured our spot as one of the first DEXs to launch following Genesis.

The launch of Persistence DEX later in the month reflects a shared vision between both teams – to bring utility and liquidity to Bitcoin and related assets, supporting Babylon’s mission to make BTC usable across DeFi.

Over the next few weeks, we’re focused on rolling out new trading pairs, introducing pool incentives, and onboarding more users into the Persistence DEX on Babylon. The DEX was purpose-built for trading stablecoins, LSTs, and Bitcoin assets, and it plays a key role in our roadmap to unlock meaningful Bitcoin-centric DeFi use cases. More on that below.

Let’s take a look at what happened throughout April.

Persistence One Highlights

  • We also published a blog, Introducing Persistence DEX alongside Babylon Genesis, for the communities, solidifying our case. In the post, we summarised the key features of the DEX and highlighted why it’s a natural fit for the Babylon ecosystem.
  • forum post on Babylon about the deployment of Persistence DEX also sparked healthy discussions within both communities.
  • We encouraged everyone in the broader BTCFi ecosystem to jump in and share their thoughts and feedback on the forum discussion and in our community chats.
  • Throughout the month, we continued working behind the scenes on our BTC Interoperability Solution, and towards deploying pool incentives for trading pairs on Persistence DEX on Babylon Genesis Network. We shared these updates through this infographic.

Keep reading further for other key highlights.

Media & Community

Here are some standout moments from the media and community front during April:

  • Our COO, Jeroen Develter, joined a podcast with All In BTC to talk about what’s next in Bitcoin DeFi, our upcoming intent-based Bitcoin bridging solution, Persistence DEX, and more. Listen here.
  • Jeroen further spoke about why he thinks building for Bitcoin Powered DeFi is the biggest opportunity right now, through multiple short video snippets on X (formerly Twitter).
  • Further, the community also tagged several projects to build liquidity on Persistence DEX on Babylon Genesis, after we encouraged them to drop suggestions.
  • Jeroen also highlighted how BTCFi now represents nearly 6% of all DeFi, having grown nearly 20x in 2024, and how it’s positioned to outpace the broader DeFi space.
  • After the deployment of Persistence DEX on Babylon Genesis, multiple DeFi media outlets covered us as one of the earliest DEXs to launch on the ecosystem.

XPRT Governance & Token Highlights

Here are some of the most important governance updates around XPRT from April 2025:

  • Proposal #134 was passed to disable the validator bond factor in the Persistence Chain’s Liquid Staking Module (LSM). The change aims to restore the simplicity and usability of staking operations that were impacted by the activation of LSM.
  • Proposal #135 was passed, approving stkXPRT rewards for incentivizing Persistence DEX pools throughout May 2025.
  • Proposal #5 was passed on Babylon Genesis, approving the Persistence Labs team address to upload CosmWasm contracts for the deployment of the Persistence DEX on the Babylon chain.

About Persistence One

Persistence One is building the BTCFi Liquidity Hub, enabling fast, near zero-slippage swaps for BTC, BTC-variants, and LSTs on Persistence DEX.

BTCFi’s rapid growth has created multiple BTC-related assets, making fragmentation a big challenge. Persistence One will provide a single liquidity hub, simplifying value transfer across the Bitcoin ecosystem.

 

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The SEC Can Learn From the IRS in Making Regulation Simpler for Crypto

The IRS has relied on voluntary disclosure programs to bring taxpayers into compliance rather than imposing punitive actions upfront. A similar model should be applied to crypto regulation as well, says Miles Fuller, Director of Government Solutions, TaxBit.

In February, the Department of Government Efficiency (DOGE) began soliciting public input pertaining to the U.S. Securities and Exchange Commission (SEC) — a move suggesting reform at the agency is imminent.

Since then, the SEC, in line with President Trump, has taken a far less adversarial stance towards the cryptocurrency industry, as evidenced by the appointment of crypto-friendly personnel and the abandonment of numerous lawsuits and investigations into crypto companies. But DOGE has the potential to implement further change, and interest in the SEC signals growing pressure towards regulators to reassess their approach to digital assets.

In response to the request for public input, Paul Grewal, Chief Legal Officer at Coinbase — one of the companies no longer facing a lawsuit from the SEC — proposed a policy requiring the SEC to reimburse legal costs for companies that successfully challenge enforcement efforts. The motivation for his suggestion is obvious, but the impact of DOGE on crypto will likely be a bit broader.

As Joel Khalili summarized in Wired, the SEC’s recent retreat from lawsuits represents “an early signal of the agency’s intent to work arm in arm with the industry to come up with a set of rules to govern crypto transactions and products.”

As things currently stand, the SEC’s lack of proactive guidance makes it difficult for businesses to plan long-term compliance strategies, and their enforcement actions often come after years of operation, leaving companies and their investors exposed to unforeseen legal risks. Going forward, this will likely change.

Clear Compliance Over Reactive Enforcement

Relying on enforcement instead of proactive guidance has forced companies like Coinbase, Ripple, and Celsius to spend millions in litigation to clarify their regulatory standing. But in one case against Debt Box, the SEC admitted to inaccuracies in its statements, leading a court to order the SEC to cover the company’s legal expenses — a preview of Coinbase’s suggestion. The ruling cast doubt on the agency’s credibility and highlighted concerns over its enforcement practices.

In the future, expect to see regulatory agencies – including the SEC – under increased pressure to align with the U.S. Treasury’s approach, which prioritizes clear compliance pathways over reactive enforcement. The Treasury’s digital asset guidelines are far more structured and address key areas like tax reporting, compliance and AML measures. Standardized definitions of what constitutes a security in the crypto space are essential for helping companies structure their products appropriately from the outset.

A Balancing Act

In addition to taking notes from the Treasury, the SEC can also look to the IRS for inspiration. A “safe harbor” provision for early-stage projects could encourage innovation while ensuring compliance over time, similar to proposals previously discussed by SEC Commissioner Hester Peirce. The IRS already embraced this approach, issuing temporary transitional relief for crypto taxpayers in January 2025.

The IRS historically relied on voluntary disclosure programs to bring taxpayers into compliance rather than imposing punitive actions upfront. A similar model should be applied to crypto regulation as well.

While some people assume regulation inherently hinders innovation, the opposite can be true. This is because clearly defined guardrails will entice more risk-averse entities to enter the ecosystem and help it grow. A light regulatory touch requires robust backend enforcement and can lead to unnecessary friction between regulators and businesses.

Altogether, better coordination between the SEC, Treasury, and IRS would help prevent regulatory conflicts and streamline compliance obligations for digital asset companies and stakeholders. The Treasury’s digital asset guidelines already offer a strong foundation for this type of cross-agency alignment. The current regulatory uncertainty and the SEC’s reactive enforcement approach stifles growth, while a clearer, more coordinated framework would benefit the entire ecosystem.

The Bottom Line

Between the DOGE’s request for input, the new administration's broader commitment to digital asset reform, and Coinbase’s proposal, the stage is set for reforms aiming to make regulatory oversight more predictable. While we are in the early stages of the new administration, changes are already occurring at a staggering pace. It’s clear that DOGE’s influence on SEC policies will make an impact – especially with public discourse on these issues further strengthening the case for clearer guidelines rather than regulation by enforcement.

Of course, it’s worth noting that DOGE’s plans for the SEC will likely extend beyond crypto, just as efforts to regulate the industry extend beyond the SEC. Ultimately, it would be beneficial for the new administration, in conjunction with Congress, to create a legislative framework for the industry, so enterprises and individual taxpayers alike understand what constitutes a commodity, security, and digital asset. In other words, we must learn to walk before we run. In the meantime, the SEC should adopt a strategy that can foster growth while maintaining investor protections.

Note: The views expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.

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Are same brand stablecoins fungible in different regions?

Many countries are introducing stablecoin laws, each with their own requirements, especially regarding reserves. If the same stablecoin brand is issued in multiple jurisdictions using the same brand, is it fungible (or entirely interchangeable)? There’s the practical fungibility versus the legal one, especially if a stablecoin collapses.

Highlights:

  • Each jurisdiction imposes different reserve composition and redemption rules for stablecoins
  • Multi jurisdiction issuers use arrangements between regions to harmonize reserves
  • Issuers cannot precisely track how many tokens circulate in each region due to secondary market transfers
  • Formal crisis plans will determine outcomes during stress events
  • During a collapse, holders in specific regions could face different recovery rates depending on local reserve adequacy.

While the biggest use case for stablecoins is currently for cryptocurrency transactions, there’s a growing appreciation of their benefits for cross border payments. Plus, the infrastructure to support this is expanding, with Stripe’s acquisition of Bridge being one of many examples. After passing the $200 billion issuance mark in December 2024, many predict it won’t be long before stablecoins reach the trillion mark. Citi recently estimated a base case of $1.6 trillion by 2030, with a bullish estimate of $3.7 trillion.

Defining fungibility

The definition of ‘fungible’ according to the Oxford Dictionary:

“Of a product or commodity that has been contracted for: that can be replaced by another identical item without breaking the terms of the contract. More generally: interchangeable, replaceable.”

What’s notable about this definition is that stablecoins issued in different jurisdictions will likely have separate contracts.

The core fungibility issue arises because a resident of one jurisdiction might receive a payment that involves a token that’s technically issued in another jurisdiction. In the examples we’re discussing, these are the same brand of tokens.

Technically, EU crypto exchanges may be breaking the rules

Imagine a global stablecoin, let’s call it GlobalCoin, issued in two jurisdictions e.g. Japan and EU each meeting local requirements. Clifford Chance partner, Diego Ballon Ossio, highlighted that this is potentially problematic in the EU. He noted that, “technically the EU issuer or exchange should have something in place to avoid the Japanese version of that coin to be listed, exchanged, and traded in the EU. Because it’s not exactly the same coin, particularly if say liquidity requirements differ.”

He gave the example of someone from Japan paying an EU resident with GlobalCoin via an EU cryptocurrency exchange. From the user’s perspective, a GlobalCoin is a GlobalCoin, they can’t differentiate where it was issued.

Mr Ballon Ossio continued, “If that coin was used in an exchange, that exchange is now admitting to trading a coin that technically hasn’t been approved because the Japanese version wasn’t approved. And actually you would not be allowed to offer that coin because that coin is being sold as an e-money token, but it’s actually been issued by a non-EU issuer.”

The EU’s MICA regulations don’t deal with this situation. There’s a pragmatic approach involving the issuers rebalancing the books between the jurisdictions, which isn’t perfect. It will work 99.99% of the time, but will be tricky in a de-peg event.

USDC is the first prominent example

The most prominent example of a stablecoin that’s issued in multiple jurisdictions is Circle’s USDC, which is primarily issued in the United States. While this article references USDC a few times, the content and issues are not specific to Circle or USDC.

Circle has EU emoney and MiCAR licenses and issues USDC in France under European rules. The EU version of USDC has a separate issuer, different terms (ie. a separate contract) and ringfenced reserves. For example, all EU USDC stablecoin holders can directly redeem the stablecoin with Circle SAS, provided they go through KYC and compliance procedures. In the US, only larger entities and distributors (primary participants) can redeem directly. The UK has changed its planned approach and now intends to allow redemption only via primary participants.

Jurisdictions have different reserve requirements

Looking at its reserves, in the United States the USDC stablecoin keeps around 15% of its reserves in bank deposits, according to Circle’s transparency reports. USDC temporarily lost its dollar peg when Silicon Valley Bank collapsed in 2023 holding $3.3 billion of USDC reserves. Before that, Circle kept around a quarter of its reserves at banks. Even 15% is more than most stablecoin issuers, in part because holders of other stablecoins often switch to USDC to off ramp. For example, Tether only keeps around 0.1% at banks.

Turning to EU’s MiCAR, it requires smaller coins to keep 30% of their reserves in cash, and larger ones 60%. The regulations attempt to address the risks by limiting the amount held by a single bank.

Another example is Japan, which currently requires 100% of stablecoin reserves to be held in bank accounts, although it’s exploring changing the rules to support government bonds.

In the case of Circle, it also has a license in Singapore. For its Singapore issuance, all reserves are held in a trust account at Standard Chartered Singapore.

Estimating regional stablecoin issuance

Each jurisdiction expects stablecoin reserves to be held onshore in the proportions required by law. Yet stablecoins are bearer tokens where most transactions take place in secondary markets, so issuers don’t know the identity of all their coin holders, or where they are based.

In order to rebalance the books between the regions, they have to estimate the regional figures. Europe has provided guidelines for how to do this for foreign currency coins, which involves getting reports from local crypto asset service providers (CASPs), including crypto exchanges and custodians. CASPs have to provide the issuer with reports on a daily basis. Self hosted wallets tend to be glossed over and these might be retail or institutional.

That said, if a large liquidity provider uses a coin issued in the US to pay for a multi billion Bitcoin transaction in the EU, that will move a lot of coins. However, some of these institutional wallets are traceable, although there is an increasing tendency for larger players to attempt to cover their tracks.

If jurisdictions don’t prescribe rules, then issuers will likely make estimates using issuance and redemption figures via primary participants (distributors).

In the case of USDC, in its MiCAR whitepaper it notes that it will rebalance the reserves between the two current jurisdictions. As one of the risks, the European USDC whitepaper says:

“Dual Issuer Risk. Circle LLC and Circle SAS have entered into a contractual arrangement to rebalance their respective reserves in the event that one reserve is no longer able to meet its liabilities. The Circle SAS Recovery Plan and Redemption Plan will take into account these intra-company considerations and outline a uniform and coordinated approach by both issuers in order to be able to cover any outstanding liabilities and satisfy redemptions in a prompt and equitable way.” 

What happens if the GlobalCoin stablecoin fails?

As we’ve shown, stablecoin issuers can make best efforts to ensure the reserves are sitting in the correct jurisdiction. But they won’t know precisely how many stablecoins are held in each jurisdiction until everyone wants to redeem simultaneously. So what happens if GlobalCoin fails?

There are two ways this will be addressed. One is by having a plan in place, and the EU requires emoney token (stablecoin) issuers to have both recovery and redemption plans. However, these are not public documents. Mr Ballon Ossio was willing to speculate what the contents might include. If there were a shortfall, the treatment is likely to be similar to a client assets framework. This would usually spread the loss across a single class of asset holders. In other words, if there was a 10% shortfall in reserves, then a US dollar stablecoin would be worth 90 cents for redemption purposes.

A second path is for regulators in jurisdictions to have mutual agreements. Mr Ballon Ossio highlighted that in the banking world there’s the Basel Committee framework for banks. However, just looking at the US draft stablecoin regulations, MiCAR and Japanese regulations, the requirements for redemption and holding liquid bank balances are vastly different. While Basel implementations differ between jurisdictions, there’s more homogeneity compared to stablecoins.

This fungibility topic probably won’t matter for 99.99% of the time. As more and more jurisdictions pass legislation, there’s more need for laws to provide legal clarity on this topic, especially given cross border payments are a key stablecoin use case. Hopefully it will be a very long time before there’s a need to explore what happens in the 0.01% scenario: a failure of a multi-jurisdiction stablecoin.

Source

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