[miohtama]

Some the benefit of using stablecoins are 1) they do not need user accounts set up for payments, so easier for machine to machine (AI agent can manage its own money) 2) they work everywhere not just in credit card rich countries 3) security profile is different (no credit card fraud)

Of course Cloudflare is riding the stablecoin hype here a bit. At least they are large enough they might be pull this off

[disgruntledphd2]

> Some the benefit of using stablecoins are 1) they do not need user accounts set up for payments, so easier for machine to machine (AI agent can manage its own money) 2) they work everywhere not just in credit card rich countries 3) security profile is different (no credit card fraud)

Just to note, that Cloudflare is a public company which means that they have both internal and external auditors.

They definitely need to worry about fraud, but the first two things they need to worry about are sanctions screening (don't do business with the four countries the US doesn't like) and AML (anti-money laundering).

Stablecoins are a potentially huge vector for this kind of badness, so it would be unwise for Cloudflare to try to yolo this (but they probably will, because almost all tech companies try to work with finance this way).

[Karrot_Kream]

> Stablecoins are a potentially huge vector for this kind of badness, so it would be unwise for Cloudflare to try to yolo this (but they probably will, because almost all tech companies try to work with finance this way).

Do you have any proof for this assertion or is it time to milk crypto cynicism for upvotes on this site again? The GENIUS Act (which regulates stablecoins) specifically calls out complying with AML and sanctions lists. So there's a clear regulatory regime.

[disgruntledphd2]

> Do you have any proof for this assertion or is it time to milk crypto cynicism for upvotes on this site again? The GENIUS Act (which regulates stablecoins) specifically calls out complying with AML and sanctions lists. So there's a clear regulatory regime.

Look, it's a fact that lots of criminals use cryptocurrency (see all of the ransomware attacks over the past decade). Secondly, crypto has 100% been used to get around capital controls (particularly in China some years back).

I assume that internal drug syndicates are using crypto (as it makes sense for their business).

Now, what do stablecoins offer here? Simply put, if you send your crypto to some stablecoin issuer, then you can redeem for fiat. There's clearly substantial ML risks here, and more particularly lots of unsophisticated (from an AML perspective) counter-parties here. More specifically, the models used for transaction monitoring and reporting are less likely to pick up on the signals associated with crypto ML/crime activity.

Like, this seems super clear to me, and I'm not making any value judgements here (personally I think that stablecoins/crypto are mostly turning into regulatory arbitrage, but that's not germane to my point here).

> The GENIUS Act (which regulates stablecoins) specifically calls out complying with AML and sanctions lists. So there's a clear regulatory regime.

You should look at the penalties for getting this wrong. Particularly in OFAC, they are no joke (personal responsibility for issues). And untested regulatory regimes tend to get altered based on what happens in the market, and this is gonna be a wild ride.

[Karrot_Kream]

I'm not sure what point you're trying to make. The best I can make out of it is: lots of criminals use cryptocurrency and cryptocurrency has been used to get around capital controls so any use of cryptocurrency is suspect. This seems deeply unserious to me and doesn't even begin to engage with stablecoins. Fiat is being used for all of those things. The trick, as always, is to observe that legitimate flows of money overwhelm illegitimate flows. Even then I'm not sure this is true of fiat but I hope it is for the big fiat regimes at least.

[disgruntledphd2]

> I'm not sure what point you're trying to make. The best I can make out of it is: lots of criminals use cryptocurrency and cryptocurrency has been used to get around capital controls so any use of cryptocurrency is suspect. This seems deeply unserious to me and doesn't even begin to engage with stablecoins.

The point I'm trying to make is that there's loads of dirty money in crypto (I think that's fair given all the ransomware). Banks/financial institutions who support crypto off-ramp are gonna be hard pressed to determine how much of the crypto assets they see are legitimate vs criminal.

So, the likely outcome of lots of crypto/stablecoin providers with fiat off-ramps is that it provides a way for this dirty money to get laundered into clean fiat/assets. This is gonna be a real headache for these providers, and I really can't see how they ever do due diligence/AML/KYC on all of this money.

That being said, dirty money has always and will always exist (barring some totalitarian global state) so this isn't a new problem, just one that I think will be concerning for financial institutions and regulators.

[trenchpilgrim]

> sanctions screening (don't do business with the four countries the US doesn't like)

Not just countries; a changing list of organizations and individuals as well.

[Karrot_Kream]

Yes indeed this is clearly delineated in the GENIUS Act regulating Stablecoins:

> Issuers would be subject to the Bank Secrecy Act, and the Financial Crimes Enforcement Network (FinCEN) would be required to write tailored anti-money-laundering (AML) rules. S. 1582 would require that FinCEN facilitate "novel methods … to detect illicit activity involving digital assets." S. 1582 would require issuers to certify that they have implemented AML and sanctions compliance programs. The bill would prohibit anyone who has been convicted of certain financial crimes of being an officer or director of an issuer.

OFAC compliance is a regular thing in Internet companies. AWS and Cloudflare maintain blocklists designed to help other companies stay OFAC compliant and agree with US sanctions lists. These are all well-known.

[miohtama]

Stablecoins are well established now, having regulation both in the US and in the EU to address risks, including sanctions. They are used by several public companies including Stripe, PayPal and Shopify.

[disgruntledphd2]

Stablecoins are, but it's the interaction of crypto with fiat that could lead to problems.

Like, I hope this doesn't happen but I find it hard to believe that there won't be a concerted effort to get around AML using cyrpto.