Banks have to follow strict guidelines about who they can take money from and how they can use it. These rules, while imperfect, protect consumers and the economy from fraud, frequent bank collapses, and the financing of terrorists.
Equally concerning, if corporations or social media platforms issue stablecoins, consumers could be encouraged to buy and store them with the company in hopes of taking advantage of special offers. The legislation contains language purportedly limiting such ties, but loopholes persist. If such corporations teeter financially, consumers might rush to redeem their stablecoins all at once, potentially triggering a chain reaction in the financial system that could ultimately threaten the stability of traditional banks.
Financial instability emanating from poorly regulated stablecoins (or other crypto assets) is a serious risk. Should a financial crisis happen—even a small one—the deregulation, dismantling, and disarray that our federal government is experiencing thanks to the Trump administration and Elon Musk’s Department of Government Efficiency (DOGE) could delay the recovery and rescue efforts Americans expect from financial regulators.
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.
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