The fast-moving world of cryptocurrencies keeps investors, observers, and regulators on their toes. In just over a decade, cryptocurrencies have gone from obscure digital novelties to trillion-dollar technologies with the potential to revolutionize global finance and the broader financial system.
Bitcoin and other cryptocurrencies are built on blockchain technology, which is a decentralized ledger that is secured by cryptography. This gives them a fundamentally different structure from traditional currencies, which are backed by central banks and regulated by government agencies. Cryptocurrencies also have a massive following and attract investment from a wide range of high profile investors, including hedge fund managers.
To proponents, cryptocurrencies are a democratizing force that empowers individuals and strips power from financial establishments such as Wall Street and central banks. Critics, however, say that they can be used to facilitate criminal activity and rogue state activities, and that their drastic price fluctuations make them unsuitable for everyday use.
Stablecoins are one type of cryptocurrency that aims to solve the latter problem, aiming to be a stable alternative to Bitcoin and other volatile cryptos. These coins claim to be backed by other assets, earning them the moniker of “stablecoins.” But can they live up to their claims and hold their value?
The GENIUS Act, which was passed this summer, requires stablecoin issuers to hold sufficient reserves on hand to back 100% of the coin’s circulating value. Harvard Law Today spoke with Howell Jackson, a professor of law and a former adviser to the Biden White House on digital asset policy, about the new rules.