Op-Ed: Stablecoins Are Backed by ‘Reserves’? Give Us a Break.

Originally published by American Banker

In a recent op-ed in American Banker, Judith Rinearson argues that stablecoins, cryptocurrencies with valuations tied to a real-world fiat currency, are safe because the state money transmitter requirements that they are subject to require them to be backed “100% by reserves.”

She contrasts the backing of stablecoins with bank deposits, for which the current “reserve requirement” is zero. However, Rinearson conflates vastly different meanings of the term “reserves” and is thus wrong on all counts. Unfortunately, the “stablecoins are backed by reserves” canard is a source of widespread misunderstanding.

It is difficult to decide where to begin.

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The views expressed do not necessarily reflect those of the Bank Policy Institute’s member banks, and are not intended to be, and should not be construed as, legal advice of any kind.