Stablecoins can revolutionize payment systems, provide a stable store of value for people living under totalitarian or corrupt regimes, and lower transaction costs (particularly for cross-border payments). But the stablecoin revolution is threatened by lawmakers and regulators, explains a new report by the Competitive Enterprise Institute.
“The United States can lead the world in cryptocurrency innovations, outpacing China and other totalitarian regimes, but only if lawmakers and regulators don’t ban or regulate private sector digital currencies out of existence,” said Paul H. Jossey, author of the report, A Market Approach to Regulating Stablecoins, the Future’s Money.
Government officials warn of mostly unfounded risks and harbor dislike of privately issued cryptocurrencies because they compete with fiat monetary systems, but the huge benefits of asset-backed stablecoins in particular should outweigh such fears, the report explains.
“Stablecoins that are pegged to the U.S. dollar could be the future’s money,” said Jossey. “Stablecoins can help billions of people living under repressive regimes, free consumers from middleman bank fees, and make all manner of transactions quick and easy. Policymakers may fear losing control over currency, but instead of destroying this new innovation, they should focus on discouraging and prosecuting fraud and requiring companies to disclose assets.”
The problem is that Western countries are pursuing regulatory frameworks and government-run substitutes to private sector currencies, the report explains. In the U.S., the President’s Working Group on Financial Markets, for example, has recommended a stifling federal regulatory framework. And the European Central Bank discourages integrating stablecoins with existing payment systems.
The report walks through policymakers’ bad ideas and proposes a regulatory framework that would allow the market participants to compete and thrive while providing confidence in issuers’ underlying reserves.
View the report, A Market Approach to Regulating Stablecoins, the Future’s Money by Paul H. Jossey