Thoughts tagged "stablecoins"

Short thoughts, notes, links, and musings by . RSS

Great background on why Coinbase sank the crypto bill they’d just spent months lobbying for, and the fundamental conflict between the banking lobby and the crypto lobby when it comes to stablecoin interest.

“Monopoly Round-Up: The Slow Death of Banking in America”.
Matt Stoller in BIG by Matt Stoller.
Crypto interests came after the local banker last week in a bitter Congressional fight. They didn't win, but it's not over. Plus, the "Mamdani effect" is real, and Canada aligns with China.

Adam Levitin on the GENIUS Act:

[I]n regard to cash deposits, the stablecoin investors will have priority over the claims of ma-and-pa for their bank deposits (and thus over the FDIC's subrogation claim when it pays ma-and-pa).

Yes, you read that correctly: Congress is about to put the claims of stablecoin investors ahead of ma and pa's bank deposits. That's just stunning. Now ma-and-pa's deposits are FDIC insured, so they'll be alright, but it means the FDIC's Deposit Insurance Fund is footing the bill. In other words, the GENIUS Act is subsidizing stablecoin issuance on the back of bank deposits. By subordinating the FDIC's subrogation claim in a bank insolvency to the claims of stablecoin investors, the GENIUS Act is effectively letting FDIC insurance leak out to cover uninsured stablecoins, without any insurance premiums paid.
“Forcing Bank Deposits to Subsidize Stablecoins: the GENIUS Act”.
Adam Levitin in Credit Slips.
Whatever else one might think about stablecoins or the GENIUS Act, its insolvency provisions are an absolute mess, both conceptually and in drafting. If the GENIUS Act becomes the law, we're in for a FUBAR situation when a stablecoin issuer ends up insolvent. Even more concerning, if a bank custodian for a stablecoin issuer's reserves ends up insolvent, the claims of the stablecoin investors will come ahead of the bank depositors. That's right. Crypto comes ahead of ma-and-pa.  The effect: stablecoins are being subsidized by bank deposits. Now that's GENIUS.

GENIUS Act stablecoin bill stalls in the Senate

The GENIUS Act stablecoin bill has stalled in the Senate with key Democrats — including some of its early co-sponsors — voting against it. Democratic opposition increased after Trump’s World Liberty Financial cryptocurrency platform released its own stablecoin, allowing the president to profit from transactions including a $2 billion deal between the Emirati state-owned investment firm and the Binance crypto platform.

Senators who voted against the bill include Ruben Gallego (AZ), Mark Warner (VA), Lisa Blunt Rochester (DE), Andy Kim (NJ), Kirsten Gillibrand (NY), and Angela Alsobrooks (MD). Gallego was one of the top recipients of crypto industry campaign funds in 2024, receiving $10 million in crypto super PAC backing.

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