Thread by @faryarshirzad

A piece from @greg_ip in @WSJ today asks whether stablecoins are a risk to the economy because they are "private money." It's a fair question, but the framing skips over how the US monetary system has actually worked for 160 years.
"Private money" isn't the exception in our system — it's the rule. Roughly 90% of M2 is privately issued: commercial bank deposits and money market fund shares. Each carries different risks and is regulated commensurately — banks by Basel, capital, FDIC, and stress testing; MMFs by SEC liquidity rules; and now GENIUS stablecoins by a purpose-built federal regime.
The right question isn't "public or private." It's whether the regulation matches the risk. GENIUS does.

Banks are regulated the way they are because of what banks do: lend, transform maturities, run roughly 10:1 leverage, and create credit. GENIUS issuers cannot do any of those things. By statute, they hold cash and short-dated US Treasuries 1:1 against on-demand claims. No loans. No leverage. No fractional reserve. The free-banking analogy doesn't hold. Pre-1863 notes were backed by speculative state bonds under inconsistent state rules, with no federal floor. GENIUS imposes exactly the floor that era lacked: high-quality liquid assets, segregation, par redemption, monthly attestations, and federal supervision.

The article's three risk claims — "broke the buck," "reach for yield," and loss of singleness — actually argue for GENIUS's design rather than against it. Prime MMFs broke the buck in 2008 because they held commercial paper. GENIUS stablecoins cannot. The reserve list is closed by statute: cash, short-dated Treasuries, and Fed-eligible repo. Reach-for-yield is foreclosed in law, not left to issuer discretion. On singleness, what matters is whether a holder can redeem a stablecoin for a dollar at the issuer and spend it as a dollar in commerce. GENIUS guarantees this: par redemption, segregated reserves, a statutory priority claim, monthly attestations, and real-time on-chain visibility — more transparent than any bank deposit. Small secondary-market price moves on exchanges are normal market dynamics, not a singleness failure — what matters is that every deviation resolves back to par at the point of redemptions. GENIUS ensures that it will.

Two empirical claims also deserve a second look. Overseas use is framed as a vulnerability. It's the opposite — it's the dollar's reach. Most USDC is held outside the US, by users who were never US bank depositors. That demand is buying short-dated Treasuries and extending dollar dominance onto rails the US supervises. Ceding it doesn't shrink demand; it routes it to non-US issuers, non-dollar stablecoins, or CBDC arrangements that bypass US oversight. On illicit finance, stablecoin transactions are uniquely traceable. Headline percentages routinely conflate flagged-address volume with actual illicit value. On-chain forensics support sanctions enforcement in ways correspondent banking never could.

The closing line — that stablecoins "may have to follow the same path" as banks — assumes the destination is bank regulation. It isn't, and it shouldn't be. Congress and regulators spent 150 years calibrating a regime to bank risks. GENIUS did the same calibration exercise for a different instrument with a structurally narrower risk surface. Importing bank rules where the underlying risks don't exist wouldn't improve safety. It would foreclose the public benefits — faster payments, programmable settlement, broader dollar access — that make payment stablecoins worth getting right.

Here's Greg's piece:
wsj.com/finance/curren…