Creative Studio: Sum of Parts for Zero Knowledge

COMPETITION UNLEASHED VS. REGULATORY PANIC

THE FIGHT IN THE SMOKE

Imagine a fight club. Shoes, glasses, bricks, and grenades flying out in random directions. Screaming. Shouting. People running into a smoke shroud, only to come flying back out as though hurled by a giant. Occasionally arms or legs emerge, engaged in combat, only to be dragged back in.

Welcome to the stablecoin space. It'll get crazier and crazier.

Because the Genius Act unleashed the forces of competition upon the world of money. After the financial crisis, financial "innovation" froze in time. Regulators locked the system into the 2011 paradigm like a bizarro finreg version of the Amish. Restrictive rules around financial assets caused banks to largely end certain forms of lending, trading in many instruments, and more.

A shadow-banking system rose up. Most private and corporate credit now occurs outside banks. The rails of the modern financial system became decrepit. The stasis invited competition. It arrived in the most unexpected form: crypto.

Nobody in 2014 would have seriously told you crypto would disrupt Visa or Swift. Here we are.

PLASMA: BILLIONS IN DAYS

Tether. Founders Fund. Billions of dollars in days.

Plasma bills itself as "stablecoin first" layer 1. Neobank app. Cards with cash back. Yield options. Tether ecosystem tie-ins. Global south. Dollar deployment at scale. Riding Visa rails.

The "stablecoin first" pitch? Marketing hype. No chain can be fundamentally "better" for stablecoins. The chain launched with DeFi integrations from Aave and Euler. People will lend and borrow just like on Ethereum, likely with bridged assets - receipts for assets on other chains. Same things. Different branding.

THE FREE TRAP

Plasma's promise: zero-fee Tether transfers.

In crypto, free things are bad.

Fees and decentralization exist in symbiotic relationship. Fees reduce spam in systems with no central arbiter. They fund the nodes that keep networks honest. Pursuing free transactions means tradeoffs.

The tradeoff: register through an off-chain verification system. Functionally viable, probably. But a big compromise on crypto's fundamental value proposition - especially for a system aimed at the developing world. Trading permissionless access for free transfers. Not innovation. Just moving cost from transaction layer to identity layer.

Billions in days. Watch where this goes.

CLOUDFLARE'S ILLEGAL LAUNCH

Cloudflare announced a stablecoin. The pitch: scaled internet company, AI agent access, microtransactions, AI payments.

One detail: what they're doing is illegal.

The Genius Act captures publicly traded US companies. Requires public companies not primarily in financial business to get permission from a special committee. Which hasn't been formed yet. And will include banking regulators.

Either Cloudflare has an unannounced partner (possible), they're not offering this in the US (unlikely), or they're breaking the law. The banking lobby might have a point if tech companies evade Genius requirements. Why have the Bank Holding Company Act? Not sure tech wants that fight.

BANKS IN FULL PANIC

Bank lobbyists want to kill the rewards provision of Genius. The same provision they agreed to a month ago. Their members realized they might have to compete on merit.

Unacceptable. So they're lobbying Congress to unpass a law they just passed. Before it fully goes into effect. All to avoid treating depositors fairly.

THE DEAL NOBODY WANTS

The deal banks offer depositors since the financial crisis:

Give us your money. We pay you nothing. We invest it in risky stuff - commercial real estate loans to billionaire friends, project loans. If those do well, we pay ourselves huge bonuses. If those do poorly, government bails out depositors but we keep our compensation.

Raise your hand if that's fair. Everyone raising their hand works for a bank.

Privatized gains. Socialized losses. Neither capitalism nor socialism. A worst-of mix of both.

You can see why banks don't want competition. Amazing deal for banks. Terrible for everyone else.

US citizens: write your House representative and Senators. Make clear you're watching to see if they sell you out.

EUROPE: THE DEATH SPIRAL

The EU: considering revoking licenses already granted for multi-jurisdiction stablecoins. Stablecoins in the EU are governed by MICA. It requires holding 65%+ of reserves in non-interest bearing bank accounts.

Translation: MICA is a giveaway to banks that cripples stablecoins. Why are stablecoins predominantly USD and Euro stablecoins have no traction? This. Like with AI, the EU put such protectionist anti-consumer terms on the product that people don't use it. The EU bill designed to promote EU stablecoins crippled them so badly nobody wants one.

GOING FULL NORTH KOREA

They're realizing this now. Panicking. The result isn't rationalizing EU rules so stablecoins work. No. They're going to ban non-EU stablecoins.

One country successfully did this: North Korea. By taking the internet away from average citizens. Without that, you can't do it.

Europe is crashing into the reality of the internet. Either back off the monopoly-granting behavior of the crony capitalist nanny-state, or get punched in the face by reality. Repeatedly.

Let the punching commence.

WHERE THIS GOES