Uninsured Crypto Stablecoins: A Looming Threat to Our Financial System and Our Economy

Financial regulation expert Art Wilmarth calls on Congress to reject the proposed GENIUS Act’s misguided approach to regulating stablecoins. He would require all issuers and distributors of stablecoins to be FDIC-insured banks. The GENIUS Act would pose great dangers to our financial system by allowing nonbanks to issue stablecoins without the protections provided by federal deposit insurance and the regulations governing FDIC-insured banks. If enacted, the GENIUS Act would set the stage for future runs on stablecoins, which would likely trigger costly systemic financial crises and government bailouts.

An antitrust concern is that the GENIUS Act would allow Big Tech firms and others to acquire nonbank stablecoin issuers and use stablecoins to conduct a banking business. That outcome would severely undermine our longstanding policy of separating banking and commerce and would potentially enable Big Tech firms to dominate financial markets.

Professor Wilmarth's recent article on stablecoins and the GENIUS Act is available for free download at https://ssrn.com/abstract=5272859