Summarize this content to 2000 words in 6 paragraphs in Arabic Unlock the Editor\u2019s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The writer is\u00a0a law professor at the American University Washington College of LawWall Street has long fretted about the disruptive threat from technology to the business of finance. Now with Donald Trump back in the White House, the prospect is moving closer.\u00a0As the Trump administration rolls out the red carpet for cryptocurrencies, it is also setting the scene for the rest of Silicon Valley to play a bigger role in finance.Members of Congress are pushing legislation\u00a0that would establish a regulatory framework for using so-called stablecoins as means of payment. These are digital assets backed by reserves of \u201csafe\u201d assets, designed to hold a constant value per coin of $1.With the imprimatur of the government and a light patina of regulation, stablecoins will increasingly compete with bank deposits as a place for people to park their cash. But, of course, stablecoins will be much riskier. Stablecoins can \u2014 and regularly do\u00a0\u2014 lose their peg to the dollar. If a stablecoin fails, its holders will not be protected by deposit insurance and any recovery will be tied up in protracted bankruptcy proceedings.We have seen how this plays out.\u00a0During the collapses of the stablecoin Terra, the crypto broker and lender Voyager and the fintech intermediary Synapse, many consumers were shocked to find out their funds were not insured, and that it would take months, if not years to recover anything. Prepare for confusion and panic when future customers discover that their stablecoins, teetering on the brink of a run, are equally vulnerable.\u00a0The proposed legislation will not address these issues, but it will signal official acceptance of wider use of stablecoins. Some banks have also announced plans to issue uninsured stablecoins alongside their insured deposits if the law passes.\u00a0What has flown beneath the radar, though, is that the largest tech platforms may prove to be the biggest beneficiaries of this stablecoin legislation.In the US, we have long had a policy of separating banking from other types of commerce.\u00a0Banks are mostly not\u00a0allowed\u00a0to engage in non-financial business, which prevents them from using cheap deposit funding to outcompete rivals in other lines of business. And thus far, accepting deposits has been off limits for tech platforms. This stablecoin legislation, however, would let Silicon Valley behemoths issue their own stablecoins \u2014 social media networks and ecommerce platforms could accept the functional equivalent of deposits.In Silicon Valley, platforms use reams of user data and network effect advantages to build unassailable market positions. As Hyun Song Shin of the Bank for International Settlements has noted, \u201cbig tech firms with an established platform have a running start when they venture into financial services\u201d. Once Silicon Valley is authorised to accept deposit equivalents in the form of stablecoins, the result could be \u201ceverything apps\u201d that compete at huge scale with Wall Street\u2019s business. For a sense of just how big a competitive threat they would be, think of how both central and commercial banks viewed Meta\u2019s onetime plans to launch the Libra digital currency. There is no whisper of bailouts in the stablecoin legislation, but they will be inevitable if a large enough stablecoin falters. If the industry is unrestrained, there could be systemic issues.Other recent actions will also make it easier for Silicon Valley to expand its financial footprint. The Consumer Financial Protection Bureau, the most tech savvy financial regulatory agency, has been sabotaged by sweeping job cuts.\u00a0That will make it difficult to enforce the new rule\u00a0regulating Silicon Valley\u2019s use of payment data, introduced during Joe Biden\u2019s administration in November. When acting director Russell Vought ordered a halt to most regulatory, supervisory, and enforcement activities at the CFPB, that also dealt a blow to efforts to force blockchain-based businesses to make greater efforts to protect consumers from hacks and other operational threats.The more we depend upon stablecoins (and other financial assets) hosted on blockchains, the more exposed we are to these kinds of operational threats. Most disturbingly, it is often not clear who, if anyone, is in charge of protecting blockchains from cyberthreats, or of getting things up and running after an outage. All of this is a far cry from the highly regulated infrastructure that supports traditional finance.Although Wall Street may not yet have woken up to the stablecoin challenge, it should be very worried about becoming another casualty of Silicon Valley disruption. Frankly, a lot of people believe traditional finance should be \u201cdisrupted\u201d. But after the dust has settled, we could very well find our financial landscape changed for the worse.\u00a0 <\/p>\n","protected":false},"excerpt":{"rendered":"
Summarize this content to 2000 words in 6 paragraphs in Arabic Unlock the Editor\u2019s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The writer is\u00a0a law professor at the American University Washington College of LawWall Street has long fretted about the disruptive threat from technology to the business<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[63],"tags":[],"class_list":{"0":"post-230994","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-tech"},"_links":{"self":[{"href":"https:\/\/globetimeline.com\/ar\/wp-json\/wp\/v2\/posts\/230994","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/globetimeline.com\/ar\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/globetimeline.com\/ar\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/globetimeline.com\/ar\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/globetimeline.com\/ar\/wp-json\/wp\/v2\/comments?post=230994"}],"version-history":[{"count":0,"href":"https:\/\/globetimeline.com\/ar\/wp-json\/wp\/v2\/posts\/230994\/revisions"}],"wp:attachment":[{"href":"https:\/\/globetimeline.com\/ar\/wp-json\/wp\/v2\/media?parent=230994"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/globetimeline.com\/ar\/wp-json\/wp\/v2\/categories?post=230994"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/globetimeline.com\/ar\/wp-json\/wp\/v2\/tags?post=230994"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}