In a June 17, 2025 guest essay in the New York Times, economic historian Barry Eichengreen argues that governmental support for stablecoins will undermine rather than underpin economic stability. Here are a few of the major points in his essay.
- The Genius Act, proposed by the President and his allies, “would give hundreds – perhaps even thousands – of American companies the ability to issue their own currencies.”
- 150 years ago, during the Free Banking Era, America had a similar system which yielded much economic chaos and financial ruin.
- The Genius Act focuses on a stablecoin, a type of crypto currency that claims full backing by a stable asset such as dollars or Treasuries.
- During the Free Banking Era, sometimes stability resulted, but often it didn’t because shopkeepers would need to keep track of the trading rates of different currencies as well as their validity. This “unwieldly process” would destroy “something every society needs: the singleness of money.”
- The regulatory challenges of multiple stablecoins would be daunting, and the regulatory authorities would have to decide when to ignore or exempt stablecoin holders from the existing regulations. The collapse of Silicon Valley bank and the overriding of the limits on depository insurance (FDIC limits) come immediately to mind. The government bailed out many who held more than $250,000 in an insured account.
- “If the value of one or more stablecoins collapses, panicked investors might rush to redeem their holdings of other tokens. Regulators would feel compelled to step in to prevent the collapse of the payment system.”
- Almost all economies have sought to create uniform and reliable payment systems needed for their complex and interconnected economies. The Genius Act does precisely the opposite.
How much Walmartcoin, Amazoncoin, or Trumpcoin would you want to hold? My answer is zero.
No Con Economics 