Stablecoin regulations might force ETH nodes to comply with the government

[Abiky]

I've stumbled across an article on "Brave New Coin" which indicated the US' government's intention to regulate stablecoins. Apparently, the house has passed a bill called the "STABLE ACT" in order to heavily regulate this emerging industry. Whenever it'll come into law or not, it's yet to be seen.

What concerns me is that such regulations might hold ETH node operators accountable for processing stablecoin transactions on the Blockchain which aren't complying with the law. While it'll be quite challenging to enforce regulations on a decentralized network, governments can simply trace the node's IP in order to get a hold of the operator's (node owner) identity. It might turn out to become a complete disaster for the Ethereum blockchain if governments are able to successfully prosecute ETH nodes processing illegal stablecoin transactions. The only solution would be to adopt a privacy mechanism into the Blockchain. But that would mount pressure into ETH's creator (Vitalik) as we speak.

If the bill is passed into law, what do you think the outcome will be? Will Ethereum be able to remain impervious against government regulations? What will happen to stablecoin developers? Will they be held accountable for their actions? Your input will be greatly appreciated. Thanks in advance.

[Abiky]

Bump.

[bittreo]

This really is a trouble.

Now porn is banned/illegal in many countries however their native people do host porn sites. Correct me if I am wrong. When something is hosted online and that is banned, government can do anything. The question is how do they run such porn sites while staying away from government tracing? There exist off short hosting companies which are established in countries where DMCAs/Claims are not answerable. So, being a node owner or validator, you gotta find such cloud hosting services instead of hardware. This is not a temporary solutions as numerous porn sites and even scams utilize the same way.

This was a solution to a validator. But on a large scale, it terrifies many blockchain operations running on POS mechanism indeed.

[BitcoinPanther]

I think, not only ETH but all blockchain that issues stable coin will be subject to comply with the government's policy and rules with regards to financial matters.  It is unavoidable, not complying = cease and deceased order.  This will bring a huge impact on the blockchain industry especially those that holds stablecoins.

[Argoo]

It hardly describes exactly what restrictions the US government is preparing in relation to the circulation of stablecoins.  It should be borne in mind that the US government may not even regulate, but prohibit the use of stablecoins that are backed by their dollar.  They have the right to do so, and the Chinese government has already exercised this right in relation to its yuan.  
I think that nothing threatens the ethereum coin and validators yet.  If they process transactions involving prohibited stablecoins, then tracking them by IP address will do nothing if there is no international treaty on the extradition of criminals between the United States and the relevant state.  This is in the event that these actions are recognized as criminal.  However, this is unlikely, since the public danger of these actions will be too low.  However, to discuss this in detail, you first need the law itself.

[Ucy]

I guess that will affect only stablecoins backed by USD?
Anyway, Decentralized Crypto Projects should be built in such a way that regulation can be possible without compromising on ideals like decentralization, transparency, immutablity, censorship resistant, anonymity etc.
Coins/tokens should be well decentralized and you could have them regulated without centralizing them.

[avikz]

If the bill is passed into law, what do you think the outcome will be? Will Ethereum be able to remain impervious against government regulations? What will happen to stablecoin developers? Will they be held accountable for their actions? Your input will be greatly appreciated. Thanks in advance.

I couldn't find the article from Brave New Coin magazine but the below link also talks about the same thing,

https://www.forbes.com/sites/seansteinsmith/2020/12/09/cryptocurrency-legislation-is-on-the-rise--what-the-proposed-stable-act-could-mean-for-crypto/

Government is just paving ways for CBDCs, at least that's how I see this draft bill! Government already knows that it is impossible to control a decentralized network so they are trying to hit the new peojects by asking them to register with Federal Reserve and complying with various requirements before they can start issuing stable coins.

I don't think government will come after the nide operators because it will be more like finding a pin in a haystack! Also US government can't control the node operators from other countries so even if they crack down US based nodes, illegally issued stablecoins will still be able to get confirmation from nodes operated from other countries! So it's just a waste of efforts and money by the US government if they want to come after the node operators!

[Abiky]

I couldn't find the article from Brave New Coin magazine but the below link also talks about the same thing,

https://www.forbes.com/sites/seansteinsmith/2020/12/09/cryptocurrency-legislation-is-on-the-rise--what-the-proposed-stable-act-could-mean-for-crypto/

Government is just paving ways for CBDCs, at least that's how I see this draft bill! Government already knows that it is impossible to control a decentralized network so they are trying to hit the new peojects by asking them to register with Federal Reserve and complying with various requirements before they can start issuing stable coins.

I don't think government will come after the nide operators because it will be more like finding a pin in a haystack! Also US government can't control the node operators from other countries so even if they crack down US based nodes, illegally issued stablecoins will still be able to get confirmation from nodes operated from other countries! So it's just a waste of efforts and money by the US government if they want to come after the node operators!

Possibly. But I think the US government will shut down Fiat on/off ramps as a last resort in case all of its efforts become in vain. With heavy-handed regulations, it may be possible to block nodes located within an specific region. The government might require ISPs to block individuals running nodes throughout the country. Even connecting to nodes located in other regions, will not be possible. Of course, using VPN and/or Tor will allow anyone to bypass government restrictions. But not everyone will do this, as doing such practice will be deemed "illegal" by the government.

For the sake of the ETH blockchain, it's best for the government to regulate stablecoins directly instead of holding node operators accountable for their actions. By simply requiring stablecoin issuers to register as a money transmitter, the number of scams will be greatly reduced on the industry. Those who don't comply with the latest regulations will simply face prosecution from the government. It'll be interesting to see how everything unfolds in the future as stablecoins become more popular in the crypto/Blockchain space. Whenever governments will have a friendly stance towards the industry or not, it's yet to be seen. ETH may be decentralized, but Vitalik Buterin's large prominence on the project has a lot to say about it. Governments could pressure him to make ETH regulatory-compliant or face consequences. Satoshi never disclosed his/her identity on the Bitcoin project because he/she knew this would happen. Vitalik could've done the same in order to prevent governments from holding him accountable for his actions. We're going to have to see what happens in the future with stablecoins and ETH node operators as governments devise new regulations to enforce control over this emerging industry. Just my thoughts