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OpEd: Draft U.S. Bill on Stablecoins Highlight Differences with CBDCs

Coindesk | George Kaloudis | Apr 17, 2023

Unsplash Andy Feliciotti U.S. Capital building - OpEd:  Draft U.S. Bill on Stablecoins Highlight Differences with CBDCs

A draft of a stablecoin bill that had been circulating among U.S. lawmakers since last fall was published over the weekend.

  • At its center are stablecoins and central bank digital currencies (CBDC), which have conveniently been set up as a hot button issue for the upcoming election cycle. The stablecoin part of the bill is largely concerned with Endogenously Collateralized Stablecoins and Qualified Payment Stablecoin Issuers
  • If the bill becomes law “endogenously collateralized” stablecoins (aka algorithmic stables or ones backed by digital assets issued by the stablecoin issuer itself) would be unlawful to issue, create or originate for two years.
    • This seems like a good rule for U.S. lawmakers to pursue in the name of protecting Americans. Algorithmic stablecoins do not work, period.
    • And they probably never will because they depend on a flywheel effect that works perfectly fine when things are going according to plan, but are quite literally designed to spiral to zero once hit by some exogenous shock.

See:  Whispers of Ancient Wisdom: Crypto and CBDCs

  • Part of the draft bill layout a framework for Qualified Payment Stablecoin Issuers in the United States allows banks, depository institutions, and nonbank institutions to issue stablecoins, but could pose problems for future stablecoin issuers who do not look like traditional banks.
  • The bill also calls for a study on a Federal Reserve Digital Dollar and a briefing on CBDCs.
    • The conversation around CBDCs in Washington, D.C., will be critical to maintaining personal privacy and preventing draconian monetary policy.
    • A surveillable, programmable, and centrally controlled CBDC would not benefit most Americans and should not be adopted by the government as a genuine path forward into the digital future.

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