Decisions on how to regulate stablecoins, and other parts of the crypto industry, should be based on what we know about crypto’s past and present and discount starry-eyed forecasts of its future.  The past demonstrates public blockchains cryptocurrencies are highly volatile; main blockchains have no mechanisms for ensuring stability; and that after 13 years there are unfulfilled promises and no widespread use of cryptocurrencies for productive purposes. The present shows that speculation is the main use case for currencies with the leading exchanges investing in feeding hype with celebrity-studded ads among other things. Crypto exchanges and other participants with a stake in the continued trading of currencies are now selling the “vision thing”: a vague and distant future of a decentralized internet and financial system. Now we also have hard evidence that lax regulations of stablecoins, combined with the inherent volatility of the native cryptocurrencies have resulted in the classic systemic financial risks from runs and contagion. This article advocates for stringent regulation of stablecoins: fully backed with cash and short-term instruments, with a trustee, and in a regulated bank. It also argues for regulators going further to ensure stablecoins are not used to support unsafe applications.

By David S. Evans[1]



Fortunately, despite all the hype, cryptocurrencies are a small part of the financial system.[2] At the peak value in Oct


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