Why is Congress so laser-focused on stablecoins? At a time when families can barely make ends meet with inflation, and global tensions are flaring, our elected officials are in a hurry to regulate…stablecoins? It’s the equivalent of rearranging deck chairs on the Titanic, and quite honestly, it smells like a big pile of something rotten. As a blockchain journalist for years, I've seen enough hype and empty promises to spot a potential financial catastrophe brewing, and this stablecoin push has all the hallmarks.
Regulatory Capture In Plain Sight
Let's be blunt: the stablecoin industry is spending big bucks to get its way in Washington. Campaign contributions, lobbying efforts – it’s all right there, in their own words. If so, you are really rather naïve and unobservant, to say the least. The new legislation conveniently exempts stablecoins from securities law and allows for lower reserve requirements. This is not a story of financial innovation, but one of financial power.
The STABLE Act and GENIUS Act together sound like a stablecoin industry’s wish list and that ought to make everyone nervous. Remember the 2008 financial crisis? Complex financial instruments drove the madness, leaving the public — and many policy makers — dazed and confused. At the same time, regulators got too chummy with the companies they were supposed to regulate. Are we really so eager to set ourselves up to make those same mistakes again?
Systemic Risk Hiding in Plain Sight
Stablecoins, by design are meant to be dollar-pegged, and leveraged on the other side to safe assets. What happens when that peg breaks? Not surprisingly, we’ve already seen this happen in the market with Tether, USD Coin, and most recently with the notorious collapse of TerraUSD. Even a minor decrease in confidence triggers a big stampede. Individuals rush to redeem their stablecoins for actual dollars.
Now, imagine this scenario playing out on a bigger scale. Hundreds of millions, if not billions of dollars, would be pulled from stablecoins and funneled into conventional banks. This would risk destabilizing the entire financial system, creating a domino effect that degrades everyone’s economic security. It’s a bank run on steroids—increasingly rapid, exacerbated by the speed and hyper-connectedness of the crypto world. And Congress wants to encourage this?
The most alarming fact about these bills though, is that they permit money market funds to be used as collateral. And, unlike the other options, money market funds needed huge government bailouts in the 2008 crisis. Are we forgetting history?
Tether's Shadow Looms Large
Let's talk about the elephant in the room: Tether. For years, all sorts of speculation has surrounded the extent and quality of Tether’s reserves. Are they actually entirely backed with cash or cash-like instruments? Earmarks that lack a full, independent financial audit. We find the lack of a full, independent financial audit deeply troubling.
If Tether’s reserves are indeed as dubious as some suspect, the whole ecosystem of stablecoins may be standing on a house of cards. Even a moderate run on Tether could set off a similar cascading collapse. This would clear out billions of dollars and rattle confidence throughout the whole crypto market. And guess who would be stuck paying the tab? Regular investors, people like you and me.
Think of it like this: imagine a dam built with questionable materials. Perhaps—but not certainly—that will be true for the short run. Sooner or later the weight will get too heavy and bring the whole house down. Tether is that horrible dam, and Congress is letting it off the hook.
Trump's Stablecoin? Seriously?
The mere fact that the Trump family is getting into the stablecoin business should set off major alarm bells. World Liberty Financial? Does that name inspire confidence? So Trump wants to personally sign a stablecoin bill by August? Why? Why has this been such a high priority for his administration?
The optics are terrible. Congress is racing against the clock to pass the legislative fix. Just as one example, this new law might be paying the Trump family directly through taxpayer money. It’s the very definition of a conflict of interest, and it erodes the intended integrity that the process was built upon.
This isn't about innovation or financial inclusion. It's about lining the pockets of powerful people.
Privacy Nightmares and Big Tech
The problem with this proposed legislation is that it provides numerous safe harbors to Big Tech. Now, behemoths like Meta and Amazon might enter the stablecoin market. Are you sure you want these companies in charge of your dollars? After all, they already have access to mountains of your personal data.
The privacy implications are terrifying. These companies could track your spending habits, analyze your financial data, and use that information to target you with personalized ads and promotions. It’s a dystopian nightmare, and it’s precisely the sort of thing that we ought to be going to war against.
Think about Amazon tracking every purchase you ever made, and then using that data to start charging you more or limiting your options. It’s a lot more control out there than any company should have.
The road to hell may be paved with good intentions, but Congress’s stablecoin obsession is a highly destructive detour. We have to stand up for more diligent examination, openness and accountability while we still can. Our financial future depends on it. Don't let them get away with this.
