Bitcoin and stablecoins have seen a lot of attention during the past week. After the Securities and Exchange Commission (SEC) Chairman Gary Gensler took part in a U.S. Congressional Hearing, the looming threat of new regulations against the sector growths.
In this context, the CEO of crypto exchange Coinbase Brian Armstrong asked his Twitter followers about these digital assets. Armstrong addressed the concerns of some users about stablecoins being just as susceptible to inflation as fiat currencies, the assets that support their peg.
Data from the U.S. Labor Department records a 5.3% rise in the Consumer Price Index (CPI) for a one-year period a 0.3% increase from July, according to data provided by Jurrien Timmer, Director of Macro for Fidelity.
The CPI is the standard used to measured inflation in the U.S. and has been rising as a consequence of the monetary expansion in that country. Some experts argued that there is a correlation between the increase in the metric and Bitcoin’s appreciation. Armstrong said:
If fiat backed stablecoins really become inflation coins (not so stable), then how will we get a coin that is truly stable? Perhaps something that tracks a basket of real world goods (purchasing power parity) using oracles?
To these questions, the CEO of Twitter Jack Dorsey said: Bitcoin fixes this. The cryptocurrency was designed to thrive in the current macroeconomic situation. Thus, it seems like the logical choice for BTC proponents.
Bitcoin fixes this
— jack⚡️ (@jack) September 15, 2021
However, the CEO of Coinbase disagrees. He claimed that Bitcoin has characteristics that make it unstable. Armstrong said:
Bitcoin is deflationary, which is also very important. But that’s not the same as having flat pricing – which is useful for long term contracts, trading pairs etc. Do you think Bitcoin will eventually stabilize in terms of purchasing power? Given the amount of Bitcoin is finite, and population/economy will keep growing, seems unlikely.
Bitcoin And Stablecoins In The Eye Of The Hawk
Armstrong’s statements caused controversy amongst the community. Some agreed with his views on Bitcoin, others sided with Dorsey.
Coinbase, Bitcoin, stablecoins, Ethereum, non-fungible tokens (NFTs), were all important topics on the recent Gensler Congress hearing. The SEC Chair claimed that stablecoins could be “securities” but failed to provide specifics as to why these assets will meet this classification.
U.S. Senator Pat Toomey pointed that out to Gensler. In addition, the Senator asked the SEC’s boss to provide more clarity on the matter. Toomey stated during and after the hearing, in an interview with CNCB, that stablecoins don’t meet the requirements to be classified as securities in the U.S. He said:
(…) Chairman Gensler will acknowledge that Bitcoin and Ethereum certainly are not securities, they look more like commodities. He’ll acknowledge that, but then he’ll say that stablecoins pretty much are securities, but if you asked me, they don’t actually meet the test (…). Let us know, what are the characteristics of a cryptocurrency that make it a security, so that people would know (…).
There has been a lot of criticism around the SEC’s actions, and lack of transparency. This is probably one of the main reasons why so many of the space shared Dorsey’s idea that Bitcoin could eventually become the “stablecoin” of the world.
At the time of writing, Bitcoin trades at $48,031 with a 3.4% profit in the daily chart.