Time Bomb: How Uninsured Stablecoins and Crypto Derivatives Threaten Financial and Economic Stability | naked capitalism

Contributing sentiments towards policy:

84% : On July 18, 2025, the President Trump signed into law the ''Guiding and Establishing National Innovation for U.S. Stablecoins Act" (GENIUS Act).
65% : In addition, the GENIUS Act gives federal and state regulators broad authority to allow nonbank stablecoin issuers to sell highly-leveraged crypto derivatives and other speculative crypto investments to the public.
62% : Nonbank stablecoin issuers will siphon away large amounts of deposits from FDIC-insured banks because the GENIUS Act permits affiliates of stablecoin issuers and crypto exchanges to pay "rewards" on stablecoins.
58% : By doing so, the GENIUS Act has greatly increased the likelihood that future runs on stablecoins and fire sales of crypto derivativeswill trigger systemic crises in our financial markets that have devastating spillover effects on our economy.
55% : The GENIUS Act also permits nonbank stablecoin issuers to sell to the public a potentially unlimited range of crypto derivatives and other crypto investments that are approved by federal and state regulators as being "incidental" to the activities of crypto asset service providers.
54% : Congress must remove those threats by (1) repealing the GENIUS Act and passing legislation that requires all stablecoin providers to be FDIC-insured banks, and (2) adopting legislation that requires all crypto derivatives to comply with the rules governing non-digital derivatives under Title VII of the Dodd-Frank Act.
54% : Congress must remove those threats by (1) repealing the GENIUS Act and passing legislation that requires all stablecoin providers to be FDIC-insured banks, and (2) adopting legislation that requires all crypto derivatives to comply with the rules governing non-digital derivatives under Title VII of the Dodd-Frank Act.
53% : In 2023, stablecoins were used as payment instruments for 60% of unlawful cryptocurrency transactions (including crypto scams, ransomware, evasion of capital controls, money laundering, and tax evasion) and 80% of all cryptocurrency transactions conducted by sanctioned regimes and terrorist groups.
52% : Such delegations of responsibility to trusted parties cause public blockchains to resemble permissioned distributed ledgers, which are administered by banks, broker-dealers, clearing facilities, and other traditional financial institutions.
49% : As shown below, the GENIUS Act plants the seeds for a crypto-fueled "Subprime 2.0" financial crisis that could be even worse than the global financial crisis of 2007-09.
48% : Uninsured Nonbank Stablecoins Are Highly Vulnerable to Investor Runs, Which the GENIUS Act Will ot prevent A stablecoin is a crypto-asset whose issuer represents that the stablecoin's value will maintain parity with a designated fiat currency or some other referenced asset or group of assets.
47% : To remove the intolerable threats posed by uninsured nonbank stablecoins and crypto derivatives, Congress should repeal the GENIUS Act and pass legislation requiring all issuers and distributors of stablecoins to be FDIC-insured banks.
46% : Congress should also pass legislation requiring crypto derivatives to comply with the prudential rules established by Title VII of the Dodd-Frank Act for non-digital derivatives.
46% : When public blockchains change their operations to function like permissioned ledgers, they effectively become financial intermediaries, and there is no longer any possible justification for regulating them differently from traditional financial intermediaries.
46% : The GENIUS Act Opens the Door for Big Tech firms and Other Commercial Enterprises to Conduct a Crypto Banking Business, Magnifying the Risks of the Current Crypto Bubble Under the GENIUS Act, Big Tech firms and other commercial enterprises can acquire nonbank stablecoin issuers and use those issuers' funds and services to establish crypto-based financial empires.
45% : In addition, some governments view dollar-linked stablecoins as a threat to their monetary sovereignty and are considering measures to ban or limit the use of dollar-linked stablecoins in their countries.
45% : Those acquisitions will also greatly increase the likelihood that future crypto crashes will spread across the entire span of our economy, inflicting catastrophic losses on our financial system, economy, and society.
43% : In fact, nonbank stablecoins operating on permissionless public blockchains do not offer a viable technology for providing fast, reliable, and cost-effective general-purpose payments or other large-volume financial services.
43% : The bursting of the speculative crypto bubble produced by "Shadow Banking 2.0" and "Subprime 2.0" will almost certainly cause a similar crash, with potentially devastating spillover effects on our financial system and economy.
42% : The GENIUS Act - despite its Orwellian sobriquet - is a profoundly misguided lawthat creates enormous dangers for our financial system, economy, and society.
41% : Those two problems - which arise out of the basic tenets of public blockchains - prevent public blockchains from providing a feasible technology for high-volume financial services.
40% : To mitigate the scalability problem, public blockchains have used "Layer 2" strategies such as sidechains and off-chain processing.
37% : Permissionless public blockchains suffer from two major problems - lack of scalability (the inability to process large numbers of transactions quickly) and immutability (the inability to correct mistaken, fraudulent, and unauthorized transactions).

*Our bias meter rating uses data science including sentiment analysis, machine learning and our proprietary algorithm for determining biases in news articles. Bias scores are on a scale of -100% to 100% with higher negative scores being more liberal and higher positive scores being more conservative, and 0% being neutral. The rating is an independent analysis and is not affiliated nor sponsored by the news source or any other organization.