Last week, Congresswoman and “Squad” member Rashida Tlaib (D-Mich.) sent Crypto Twitter into a tizzy with the following proposal:
The bill’s academic/think tank proponents followed up with posts such as this:
There’s a lot to unpack here and a lot of crossed wires, mostly due to (I suspect) the fact that the proponents of the bill are MMT theorists and not engineers. While they may have fairly elaborate theories about what function cryptocurrency serves (and in particular how it has the potential to undermine their macro strategy of money printer go brr), they may have a somewhat looser grip on how cryptocurrency actually works.
1. What the bill does
I preface this essay by saying that stablecoin issuers should be licensed. What sort of license is anybody’s guess. Currently I should think a money transmitter license would be the thing but there’s no reason in principle why an issuer shouldn’t go get a bank license as well.
The STABLE Act does way more than that, and appears to require any blockchain that runs stablecoin code to be licensed, among other things. For example:
- The bill outlaws the issuance of a stablecoin otherwise than by “an insured depository instiution that is a member of the Federal Reserve System,” i.e., a bank.
- The bill bans the issuance of stablecoins, provision of “stablecoin-related” services, or “otherwise engaging in any stablecoin-related commercial activity,” including activity involving stablecoins issued by other persons, without obtaining written approval in advance from the appropriate federal banking agency.
- The bill creates a requirement for preapproval, among other things, for “otherwise engaging in any stablecoin-related commercial activity.”
It’s a swing and a miss:
- First, the largest stablecoins available in the marketplace – which shall remain nameless for the purposes of this blog post – have lists of compliance issues a mile long already. Adding another requirement doesn’t answer the question of how we get…