SVB collapse shows fickleness of crypto money
second largest stablecoin got caught up in the collapse of a California bank late last week, it reprised the now-famous maxim of Nobuhiro Kiyotaki and John Moore. “Evil,” the economists had claimed in a 2001 lecture, later made available as a paper of the same title, “is the root of all money”.
Events last week showed that Kiyotaki-Moore may have been right, not just in their analysis but also in their hyperbole: people accept and hold money not because it circulates freely and is widely used to store value, but because it helps the society overcome the scourge of broken promises. For something to aspire to money-ness, it must be free of even the slightest doubt in that regard.
Yale School of Management finance professor Gary Gorton and Federal Reserve attorney Jeffery Zhang have highlighted this regulatory vacuum, and how it prevents stablecoins from becoming what they refer to as “no-questions-asked” money. Nobody should have to do due diligence on a medium of exchange because it’s supposed to be free of the evil of broken promises. NQA money needs the state’s blessing — and oversight.
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