Good morning. Here’s the latest:
More news is below. But first: banks are getting into crypto.
Your crypto future
I’ve always thought of crypto as an unlikely addition to mainstream finance, like mustard on spaghetti. That’s because the financial world has been positively withering toward crypto. Jamie Dimon, chief executive of JPMorgan Chase, promised in 2017 to fire any trader who dabbled in Bitcoin, and other major banks took a similarly dim view. So I perked up over the past few weeks when some of the biggest names in banking suddenly began to compliment crypto. I initially assumed they were just genuflecting to Washington: The Trump family loves crypto; the president has made about $7 billion from a coin that bears his name; his sons run a crypto company. But my reporting shows something more complicated. Wall Street’s crypto plans aren’t just about politics. They offer a new way to profit — one in which banks can make more money by exposing their clients to more risk while facing less oversight. Some changes may threaten the very backbone of the banking system: your personal checking account. Crypto crash courseCryptocurrencies are digital money not issued by any particular government. Unlike paper currencies, whose value can be at least partly controlled by central bank interventions (think: printing more money), the price of crypto is set by supply and demand. Usually, the more people who want it, the more the price goes up, and vice versa. That might be ideal for speculators who want to bet on crypto price swings, but it’s a huge drag for anyone who wants to use cryptocurrency to buy stuff. It creates uncertainty about whether a transaction today will cost the same tomorrow. As a result, more people have turned in recent years to a form of cryptocurrency called a stablecoin. Unlike Bitcoin, stablecoins have a fixed value and a price that doesn’t swing up or down. Those being developed now are pegged to the U.S. dollar. What is happening?Now the biggest banks in the country — Chase, Bank of America and Citi, among them — are planning to launch their own stablecoins. Retailers like Amazon and Walmart are also studying coins of their own. This is all newly permissible under the GENIUS Act, a bipartisan law passed this summer with encouragement from the banks. The law is significant for a couple of reasons:
Your accountsBank executives told me they foresaw a not-too-distant future in which banks direct people with checking accounts to exchange their money for stablecoins. You could then use those stablecoins to buy things instead of using cash or credit cards. Banks’ stablecoins could be available as early as next year. The benefits? For you, this could potentially mean low fees and fast speeds for tricky transactions like overseas transfers. The drawbacks? Beyond losing interest on accounts, you would also forgo the federal insurance that pays back depositors in the event of a bank failure. That’s because the regulators treat stablecoin accounts as “investments,” not ordinary deposits. In short, your accounts would have fewer protections than they do now. Almost every banker I spoke to brought up a historical parallel: The so-called Wildcat banking era of the 1800s, in which small state banks issued competing currencies with little oversight from Washington. Mini financial crises ensued as tiny currencies crashed — and the federal government had to intervene. Read more here about why banks now love crypto.
Former Gov. Sarah Palin famously said she could “see Russia” from Alaska. “Saturday Night Live” mocked her, but Palin wasn’t wrong: Russia and Alaska are only 2.4 miles apart. You could walk that far in less than an hour. Maybe that’s why Trump and Vladimir Putin chose the state for their confab tomorrow. Alaska has often figured into relations between Washington and Moscow. In 1867, the U.S. bought the land from Russia for the equivalent of $160 million in today’s dollars. After World War II, Americans made it a state, constructed bases and used the last frontier to surveil its Cold War rival. Even today, many Native Alaskans have Russian surnames. Now Alaska may help write the next chapter in Russian-American affairs. Trump will press Putin for peace in Ukraine. Putin will try to keep as much Ukrainian territory as he can. But anything can happen when these two meet, as reporters remember from Trump’s first term. Peter Baker, our chief White House correspondent, breaks down their relationship, and the relationship between their countries. Read his piece here. More on Russia and Ukraine
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