Stablecoins’ role in crypto and beyond: functions, risks and policy
Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Category Archives: Blockchain, Crypto, Digital Assets Regulations
Intellectual Property and NFTs: What you need to know
Herbert Smith Freehills | Jul 25, 2022
Non-fungible tokens (NFTs) are one of the hottest intellectual property (IP) topics currently. NFTs can be used simply for marketing purposes or as a new form of asset to attract investment or as part of the transfer of products and services into the metaverse.
This new asset class has exploded across all sectors and raises some interesting challenges from an IP perspective. While NFTs have demonstrated themselves to be a powerful tool in the new digital era, they remain poorly understood.
NFTs can refer to or contain valuable intellectual property rights, for example, digital artwork, branded goods, or logos. Ensuring intellectual property rights are protected and respected should be a paramount consideration in NFT projects.
Releasing NFTs can give rise to a number of IP-related issues, such as:
- Who has the right to create and release NFTs
- Does the NFT infringe third party rights
- What rights are transferred with the NFT (and on resale)
- How this rights transfer is achieved
See: UK Court recognizes NFTs as ‘private property’
Even if there is no intention to create and release NFTs, brands must be vigilant to protect their IP in the metaverse and new web3 economy. Any strategy could include monitoring of key marketplaces and platforms, defensive registration of domain names (including the new Ethereum Name Service) and trade marks in new digital classes, and developing policies to employ if infringement is detected.
The quintessential use case for NFTs, to date, has been the sale and trade of digital assets like art, design and digital fashion. NFTs create scarcity for a digital asset that otherwise, because of their digital nature, would be capable of infinite dissemination.
The ability of NFTs to provide provenance over digital assets has also transferred into the real-world, and it is now common to see NFTs that are associated with physical products. For example, brands can now sell an NFT which is redeemable for a physical product (such as fine wine or sneakers), which creates a convenient market for the trade of those goods. The NFT also functions as an anti-counterfeiting tool to disrupt unlawful activities and tackle infringing copying of goods.
Misconceptions around the transfer of rights
The same is true of NFTs: the NFT is just a ‘certificate of authenticity’ for the digital asset, it does not intrinsically transfer any IP rights to the digital asset itself to the purchaser of the NFT. This has parallels to fine art, where the acquisition of a painting does not give the purchaser any right to the underlying copyright in the painting itself (unless there is an agreement with the copyright holder that specifies otherwise, or in some cases where the painting is a commission).
See: NFT Boom Will Surely Lead to Questions Over Copyright, Control and Plagiarism
Accordingly, as the default case, the purchase of an NFT does not assign (transfer) copyright or other IP rights to the purchaser. This default position can be amended by contract in a number of ways:
- the ‘smart contract’ by which the NFT is minted may contain provisions related to IP rights.
- the creators of the NFT may attempt to define the IP rights in relation to the NFT, before or after the sale of the NFT.
- The smart contract that is currently most commonly used for NFTs on the Etherium blockchain is known as the ERC-721 standard, which does not contain any special rules in relation to IP. A different smart contract, known as EIP-721, specifies that “Copyright and related rights waived via CC0“, with the reference to CC0 meaning that ‘creative commons’ is intended to apply to the NFT and the underlying digital asset, and that IP rights are waived on minting.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Coinbase Responds to New SEC Securities Listing Probe
Decrypt | Andrew Asmakov | Jul 26, 2022
The popular crypto exchange Coinbase is facing a new SEC probe investigating whether it let Americans trade digital assets that should have been registered as securities, according to a Bloomberg report citing people familiar with the matter.
Although the SEC didn’t allege any wrongdoing by Coinbase at the time, the agency said it had determined that nine tokens traded by the individuals accused of insider trading contained "hallmarks of the definition of a security."
See: Coinbase is Bleeding Customers Pushing the Exchange Out of Top 10
Of those nine digital assets mentioned by the SEC, seven are currently still listed at Coinbase.
Previously, the SEC said that it does not consider Bitcoin (BTC), the industry's largest cryptocurrency, to be a security, nor did the agency classify Ethereum as such.
Coinbase Responds
Responding to the Bloomberg report, Coinbase’s chief legal officer Paul Grewal took to Twitter to deny the exchange is listing unregistered securities.
I’m happy to say it again and again: we are confident that our rigorous diligence process—a process the SEC has already reviewed—keeps securities off our platform, and we look forward to engaging with the SEC on the matter. A refresher: https://t.co/SaacvrZEiU
— paulgrewal.eth (@iampaulgrewal) July 26, 2022
See: CSA 2021-2022 Enforcement Report highlights: Regulators’ Actions to Hold Securities Law Violators Accountable
This process includes an analysis of whether the asset could be considered to be a security, and also considers regulatory compliance and information security aspects of the asset. Coinbase does not list securities on its platform. Period.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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ECB Publishes Macroprudential Bulletin on Stablecoins, Climate Risk, and DeFi
ECB | Jul 25, 2022
Stablecoins’ role in crypto and beyond: functions, risks and policy
Stablecoins are in the spotlight due to their rapid growth, increasing global use cases and potential financial risk contagion channels. This article analyses the role played by stablecoins within the wider crypto-asset ecosystem and finds that some existing stablecoins are already critical to liquidity in crypto-asset markets. This could have wide-ranging implications for crypto-asset markets if a large stablecoin were to fail and could also have contagion effects if crypto-assets’ interlinkages with the traditional financial system continue rising.
See: UK Proposes Regulations That Would Recognize Stablecoins As A Form Of Payment
To date, the speed and cost of stablecoin transactions, as well as their redemption terms and conditions, have fallen short of what is required of practical means of payment in the real economy. Their growth, innovation and increasing use cases, coupled with their potential contagion channels to the financial sector, call for the urgent implementation of effective regulatory, supervisory and oversight frameworks before significant further interconnectedness with the traditional financial system occurs.
Is climate risk priced into crypto-assets?
Some crypto-assets have a significant carbon footprint and are estimated to consume a similar amount of energy each year to individual countries like Spain, the Netherlands or Austria. As the mining and expansion of these crypto-assets are fully dependent on energy supply, their valuation is particularly vulnerable to jurisdictions’ climate policies. Increasing financial exposures to such crypto-assets are therefore likely to contribute to increased transition risk for the financial system.
See: A Carbon-Negative Blockchain Making Money Beautiful
This [full] article provides an overview of the estimated carbon footprint of certain crypto-assets such as bitcoin and its causes. It also discusses the primary policy role of public authorities, which need to evaluate whether the outsized carbon footprint of certain crypto-assets undermines their green transition commitments. Finally, it analyses policy options for prudential standard-setters and the need for climate-related considerations in crypto-investors’ practices.
Decentralised finance – a new unregulated non-bank system?
Risks and Regulation of DeFi
- DeFi is subject to some of the same vulnerabilities known from traditional finance, which can be amplified by the specific features of DeFi.
- New risks inherent to DeFi, such as operational risks stemming from the underlying technology and governance risks, have risen with the expansion of DeFi.
- The lack of traditional centralised entry points for regulation and its opaque and anonymous nature pose challenges for policymakers in terms of enforcement and effective regulation and supervision.
See: A European approach to DeFi regulation
- Where regulatory gaps exist, the innovative ways in which DeFi provides financial services will require innovative ways of regulation to close regulatory loopholes. DeFi may also require the introduction of technology-based regulatory systems, so-called embedded regulation, where regulatory requirements are embedded technically into DeFi
- As vulnerabilities start to build, an internationally coordinated approach is needed to mitigate DeFi risks before they pose a risk to financial stability.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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SEC Charges 3 In Crypto Insider Trading Scheme
Protocol | Tomio Geron and Fintech team | Jul 22, 2022
For years, the crypto industry has been in a state of confusion about which tokens are in fact securities and which are not. A case filed by the SEC alleging insider trading by a former Coinbase employee and two accomplices could provide some clarity — but it also threatens to roil the industry and Washington as the march to regulate digital assets continues.
SEC Power Play
In the complaint, the SEC argues that nine of the 25 tokens that the three individuals traded in are securities under the Howey Test, a longstanding judicial standard that would mean they should be regulated by the SEC.
The insider-trading complaint makes a direct case that nine tokens are securities: AMP, RLY, DDX, XYO, RGT, LCX, POWR, DFX and KROM. If a judge agrees, that would create a precedent to bring those nine tokens under SEC regulation, and would possibly apply to similar tokens.
See: Coinbase is Bleeding Customers Pushing the Exchange Out of Top 10
Aside from the ongoing Ripple case, which was filed under a prior SEC chief, it’s the biggest move yet by Gensler’s SEC to regulate crypto through an enforcement action.
Behind-the-scenes struggle in Washington
More than one federal agency is seeking to regulate crypto: the CFTC, SEC, FinCEN, IRS, OCC and FDIC, among others.
CFTC Commissioner Caroline Pham called the SEC’s Coinbase case “regulation by enforcement” Thursday in a statement shared on Twitter. She appeared to take issue with the SEC seeking to have a judge deem these nine tokens securities. In the process, she shed light on her thinking about which tokens the CFTC might categorize as commodities under its oversight.
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View the U.S. DOJs press release on the insider trading tipping scheme --> here
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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U.S. Treasury Request for Comments: Crypto Competitiveness – Risks and Opportunities of Digital Assets
U.S. Department of the Treasury | Jul 12, 2022
WASHINGTON — The U.S. Department of the Treasury released a notice seeking public comment regarding potential opportunities and risks presented by developments and adoption of digital assets as part of its work under Section 5 of President Joe Biden’s digital assets Executive Order. Section 5 of Executive Order 14067, “Ensuring Responsible Development of Digital Assets,” directs Treasury, in consultation with the Secretary of Labor and other relevant agencies, to report to the President on the implications of development and adoption of digital assets and changes in financial market and payment infrastructures for United States consumers, investors, businesses.
See: Responsible Development of Digital Assets (Crypto): Decoding Biden’s Executive Order
Nellie Liang, Under Secretary of the Treasury for Domestic Finance:
For consumers, digital assets may present potential benefits, such as faster payments, as well as potential risks, including risks related to frauds and scams. The Treasury Department is seeking to benefit from the expertise of the American people and market participants by soliciting public comment as we engage in this important work.
Through this request for comment (RFC), Treasury is requesting input from the public that will inform its work in carrying out its mandate under section 5(b)(i) of the Executive Order. This RFC offers an opportunity for all interested parties to provide relevant input, data, and recommendations pertaining to the implications of developments and adoption of digital assets and changes in financial market and payment infrastructures for U.S. consumers, investors and businesses.
Read: EU agrees on landmark MiCA rules putting pressure on UK and US to regulation crypto assets too
Members of the public are encouraged to submit comments, and comments that respond to the notice will be available on www.regulations.gov.
A copy of the notice is available at Federal Register :: Ensuring Responsible Development of Digital Assets; Request for Comment.
View the original release --> here
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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CPMI and IOSCO publish final guidance for stablecoins
BIS | Jul 13, 2022
- CPMI and IOSCO issue final guidance on stablecoin arrangements confirming that the Principles for Financial Market Infrastructures apply to systemically important stablecoin arrangements that transfer stablecoins.
- Guidance is a major step forward in applying "same risk, same regulation" to stablecoins, and extending the international standards for payment, clearing and settlement systems to cover systemically important stablecoin arrangements.
- CPMI and IOSCO will continue to examine regulatory, supervisory and oversight issues associated with stablecoin arrangements and coordinate with other standard-setting bodies.
The Bank for International Settlements' Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) today published final guidance confirming that stablecoin arrangements should observe international standards for payment, clearing and settlement systems.
See: UK Proposes Regulations That Would Recognize Stablecoins As A Form Of Payment
The final guidance, which follows October 2021's proposals for consultation, reconfirms that if a stablecoin arrangement performs a transfer function and is determined by authorities to be systemically important, the stablecoin arrangement as a whole would be expected to observe all relevant principles of the Principles for Financial Market Infrastructures (PFMI).
This guidance is a major step forward in applying "same risk, same regulation" to systemically important stablecoin arrangements that are used for payments. It is also a key contribution to the G20 cross-border payments programme and supports the work of the Financial Stability Board (FSB) in this area.
Sir Jon Cunliffe, Chair of the CPMI and Deputy Governor for Financial Stability at the Bank of England:
Recent developments in the cryptoasset market have again brought urgency for authorities to address the potential risks posed by cryptoassets, including stablecoins more broadly. The recent market disruptions, while costly for many, were not systemic events. But they underline the speed with which confidence can be eroded and how volatile cryptoassets can be. Such events could become systemic in the future, especially given the strong growth in these markets and the increasing linkages between cryptoassets and with traditional finance.
Continue to the full article --> here
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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What’s the latest surrounding USDT (Tether) risks about?
Guest Post | Jul 21, 2022
Stablecoins are an extremely interesting type of cryptocurrency which is backed up by a reserve asset like the USD was before on August 15, 1971, when President Richard Nixon announced that the United States would no longer convert dollars to gold at a fixed value, thus completely abandoning the gold standard.
Buckle up, this is about to get difficult and complex. However, here is a more easy to read digestible and in-depth article about how the entire market can collapse because of Tether any moment.
So stablecoins are like the old USD-backed gold? Well yes and no, Stablecoins are mainly backed by fiat currency, which is decipetable to inflation. If stablecoins were only backed up by gold which is something limited in supply, then, we would have the “old” USD back. So, every dollar you buy USDT with is a virtual dollar lent to you but over there in their office they still hold your dollar until you sell the USDT again. Now we’ve all seen what can happen with extreme liquidity crunches in bear market cycles which forced crypto juggernauts Voyageur and Celsius into bankruptcy.
Has Tether learned its lesson and is it risking the same fate? USDT is founded by a Dutchman (Jan Ludovicus van der Velde) and the company behind it run by a vast team in which the executives are reportedly being currently investigated by the Department of Justice over a criminal probe into bank fraud.
Legally, a stablecoin can back up your virtual dollar with a debt loan to another company or back up your virtual dollar by things like gold. They are legally allowed to do that. But what if Tether is not actually backing up every dollar in their office? Well, this is where three-party audits come in. Every quarter, the company behind any stable coin needs to let an external audit professional verify if every single dollar lent out virtually is really backed up.
See: CFTC fines Tether US$41M for misleading claims about currency backing
However, some reports in the past showed us that Tether only had 70% of their stablecoin backed up. Right now, audit reports show us that 100% of all assets are nicely backed up in a 1:1 ratio, but also the report shows that only a mere 10% of their entire supply of Tether is backed up by actual Fiat money or currency. Over 50% of their “backing” are short-term loans they lent out to companies in China which are getting into more and more debt without the hope of recovering anytime soon. Stablecoins like USDC or DAI carry out monthly transparent audits. These stablecoins are founded by the company “Circle” and the exchange “Coinbase.” More and more people are turning to these more trustworthy stablecoins amidst the controversy surrounding USDT.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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