There are some interesting ways that the existing financial infrastructure might be able to work and be intertwined with the crypto space. In this Motley Fool Live segment from "The Crypto Show," recorded on April 20, Fool.com contributor Chris MacDonald takes a look at two new pieces of proposed regulation that could impact the stablecoin market.
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Chris MacDonald: Interestingly there were two pieces of regulation that got put forward that I think are worth noting, and one is this TRUST Act, which is this Transparency of Reserves and Uniform Safe Transactions Act. And this act looks to first define what a stablecoin is, which is kind of important. Because there are a number of stablecoins out there, and some of them are built differently. There are algorithmic stablecoins, and just pure stablecoins backed by dollars or other assets.
So just defining those, and then also creating an environment where you need to be licensed to issue them. But it would also allow banks to accept stablecoin deposits, which is interesting. So this kind of goes to our discussion on the rails of crypto and how the existing financial infrastructure might be able to work and be intertwined with the crypto space. So there's some positives from this proposal.
The other proposal that's also interesting, probably more of a negative for the crypto space, is this e-cash proposal, which is Electronic Currency And Secure Hardware Act. And this proposal looks to potentially develop a cash-like dollar. But instead of it being run by the Federal Reserve, regulators are trying to get the U.S. Treasury department to create this stablecoin. So it looks like now there's multiple avenues for a centralized stablecoin to be created, and to what extent that impacts the existing stablecoin market remains to be seen. But that's kind of a risk that investors are looking at in terms of certain stablecoins that-- like, for example, Terra, which with the Luna token is the reserve currency there. Luna derives a lot of its value from demand, so the extent to which this affects demand might affect some of the stablecoins in the market. So there's a bunch of moving pieces here, but some good, and some bad.
