In July, the state of Wyoming made headlines by posting an open job position for the head of its Stable Token Commission, which aims to launch the state’s own stablecoin. Wyoming is the first state to pass a law on a state stablecoin, but it is not the only state considering such a move. In April, Texas lawmakers proposed a bill to create a state-based digital currency backed by gold. The concept of state stablecoins raises important questions about their impact on the monetary stability of fiat money and the power of the Federal Reserve, as well as the desirability of a return to a system with state banks printing their own monetary notes.
The Wyoming Stable Token Act, introduced in February 2022, defines the Wyoming stable token as a virtual currency that represents and is redeemable for one U.S. dollar held in trust by the state of Wyoming. Essentially, the state would tokenize the federal currency on a 1:1 ratio with deposits. The purpose of this initiative is to enable Wyoming to transact in a digital currency without risk. The Stable Token Act establishes the Stable Token Commission, which will work to further develop the details of the project.
The legislation faced challenges along the way. In March 2022, Governor Mark Gordon vetoed the bill, expressing concerns about the readiness of the state’s Treasury to implement the project safely. However, a year later, the bill was passed into law without Governor Gordon’s signature. While he acknowledged the potential of the state stable token to enhance Wyoming’s reputation in the digital asset world, he still had reservations about the lack of an overall plan for the project.
The introduction of state stablecoins raises questions about their compatibility with the existing monetary system. The U.S. dollar was created to establish a nationwide monetary standard under the purview of the federal government. Therefore, the launch of state tokens could contradict the logic of central bank currency, similar to private cryptocurrencies. However, Wyoming’s stable token is tied to the value of the U.S. dollar, making it more like a state-issued financial asset than a separate currency. State lawmakers argue that they are not competing with the Federal Reserve but rather enabling a new technology.
Related Post
While there has been no public response from the Federal Reserve or crypto-focused legislators regarding the Wyoming project, there are potential conflicts between states and the federal government. Some experts believe that there could be a compromise where the Federal Reserve allows states to issue stablecoins under a specific framework. Discussions about a national framework for stablecoins are already taking place.
Private stablecoins have also gained traction, with companies like PayPal launching their own initiatives. According to Zachary Townsend, CEO of Bitcoin-based life insurance provider Meanwhile, the concept of stablecoins is open to almost any entity, whether political or corporate. He predicts that there will be numerous private stablecoins in the future.
Peter Herzog, state policy lead at the Crypto Council for Innovation, believes that until a federal regulatory framework is established, states will continue to step in to create rules and regulations to promote innovation and protect consumers. Different models for stablecoins, involving various decisions on underlying collateral and governance, are being explored.
In conclusion, the launch of state stablecoins, pioneered by Wyoming, raises important questions about their impact on the existing monetary system and the role of the Federal Reserve. While there may be conflicts between states and the federal government, there is also potential for collaboration and compromise. The rise of private stablecoins further adds to the complexity of the stablecoin landscape. As the regulatory framework develops, it will be interesting to see how state stablecoins and private stablecoins coexist and shape the future of digital currencies.
