Money in the 2020s is in some respects very different than money in the 1920s, but as the Bank for International Settlements notes, the world seems intent on unlearning some important lessons. Who issues money, and how it is regulated, matter. Poorly regulated privately issued money is a recipe for disaster. Yet the Trump administration, in particular, seems intent on bringing “stablecoin” into the mainstream. Stablecoin are digital tokens that can be held in a digital wallet and used for payment on blockchains. Its defining characteristic is that the issuer promises it will be redeemed for an equivalent sum of whatever the token was originally issued in exchange for (e.g. if you provide $1 to get 1 stablecoin token denominated as a $1 token, the issuer promises to return $1 to you if you return your token). The dominant version of stablecoin are “asset backed” and “full reserve”. This simply means that the issuer takes the currency they receive and buys assets that it retains until needed to meet redemption requirements. In theory, high quality liquid assets stand behind the promise of redemption. There are currently around $275bn in issued stablecoins.
