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Stablecoin startups hustle + Tether’s scrutiny + risky crypto tax breaks 💸

Startups chase funding in payments boom, Tether gains political clout, and Trump’s crypto tax plan sparks debate.

Author

Lavena Xu-Johnson
December 12, 2024

gm đź‘‹

XRP rises 11% as Ripple secures approval for its RLUSD stablecoin, set to launch soon with ambitions to challenge USDC and Tether in the $200B stablecoin market.

Stablecoin startups chase cash in payments boom

Airtm, Conduit, and Lemon Cash are chasing fresh funding as stablecoins revolutionize cross-border payments. These startups promise faster, cheaper transactions for gig workers, e-commerce sellers, and businesses, with backing from blockchain technology.

Why it matters: Stablecoins bypass traditional banking systems, enabling users to move dollar-denominated funds internationally. Demand is surging in regions with unstable local currencies.

The pitch:

  • Airtm seeks $50M, reporting $1B in transactions and $30M in revenue.

  • Conduit wants $20M after processing $10B this year.

  • Lemon Cash, focused on Argentina, is raising a Series B round.

The challenges:

  • Compliance Risks: Complex transaction layers raise concerns about money laundering.

  • Bank Dependence: Startups rely on U.S. banks like Lead Bank, which could sever ties under regulatory pressure.

  • Big Players Loom: Companies like PayPal, with its PayPal USD stablecoin, are pushing deeper into the market.

The outlook: With growing demand, stablecoins are set to reshape payments. But if big brands adopt them directly, startups might find themselves squeezed out.

Tether's rise under scrutiny amid White House backing

Tether, the world’s most traded stablecoin, is facing mounting law enforcement scrutiny for its role in illicit finance while finding an influential ally in Howard Lutnick, Trump’s pick for commerce secretary.

Why it matters: Tether is now central to a wave of global crime investigations, cited as a go-to tool for money laundering and sanctions evasion by entities from Russian oligarchs to North Korean hackers. Yet, Lutnick’s backing underscores its growing clout in U.S. financial and political circles.

The backdrop:

  • Tether is pegged to the U.S. dollar, making it a favorite for criminals to move funds without price volatility.

  • Despite $19.3 billion in trades linked to illicit activity last year, the company claims it works with law enforcement to curb misuse.

The Trump connection:

  • Lutnick has championed Tether’s potential, overseeing Cantor Fitzgerald’s stake in the company and management of its U.S. Treasury reserves.

  • Under his leadership, Tether’s issuance soared to $138 billion, despite its controversial role in aiding sanctioned regimes and criminal networks.

What’s next: As Lutnick takes the helm in Trump’s administration, expect a clash between crypto’s promise of innovation and its darker underbelly—a tension that could redefine global financial regulation.

Crypto tax breaks: why they’re a bad idea

The Trump administration’s rumored plan to exempt crypto from capital gains taxes might sound like a win for enthusiasts, but it’s a risky move that could backfire.

Why it matters: Selective tax breaks create a slippery slope, leading to political favoritism and loopholes for corporations to exploit, distorting the broader economy.

Key points:

  • Uniformity beats favoritism: A general reduction in capital gains taxes is better than carving out exceptions for specific assets.

  • Perception issues: Ties between Trump and crypto donors fuel concerns of undue influence.

  • Investor risks: Tax-free crypto might attract less-experienced, lower-income investors, exposing them to volatile markets and potential scams.

The risk of tax dodging: If crypto gains preferential treatment, other assets could be restructured into crypto tokens to avoid taxation, creating massive loopholes and tax arbitrage.

The argument for crypto parity: Advocates argue crypto operates differently, akin to money in some cases, but crafting fair tax laws shouldn’t mean bending the rules for one industry.

Bottom line: Crypto needs clear, predictable regulations, not handouts that skew the playing field. Tax exemptions aren’t the answer to making crypto mainstream.

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