Professor Arthur E. Wilmarth Jr. of the George Washington University, believes that the US Senate’s GENIUS stablecoin Bill contradicts its name and would “create a dangerously weak regulatory regime for stablecoins.” The law professor wrote an article on the topic in American Banker, and a longer policy brief. While some of his recommendations are controversial, he provides food for thought.
One of his major concerns is that a run on a large stablecoin is almost inevitable at some point in the future. Given stablecoins will, in his view, be weakly regulated, he sees risks in the potential knock on effect on the financial sector and financial stability.
In the past, during crises the federal government has provided blanket guarantees for uninsured bank deposits and money market funds. With the likelihood of a future de-peg of a significant stablecoin, he wants to see some federally supervised insurance fund established for stablecoins.
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