“Why Restrict Stablecoins?” by Professor Lawrence White (George Mason University)
Competition among unrestricted stablecoins has been compared by its critics to historical episodes of “wildcat banking.” That comparison is offered as rationale for regulating stablecoins, but fraud in banknote issue was in fact historically rare, and fraud in stablecoin markets has also been rare.
Competition among unrestricted stablecoins is has some similarities to successful historical episodes of “free banking,” competitive note-issue under minimal restrictions, but stablecoin issuers are also unlike historical banknote issuers in some respects. Proponents of the US “Genius Act” for restricting dollar stablecoins (signed into law in July 2025) predict that it will make stablecoins more popular globally. But the market-leading stablecoin (Tether USD) became popular without such restrictions, so that prediction is doubtful. The Genius Act does not remedy any apparent market failure but can be seen instead as a wishful fiscal measure.