Matt Hougan, CIO of Bitwise, strongly refutes the comparison of stablecoin to the 'free banking' era of the 19th century, arguing that these comparisons distort modern policy perspectives.
Stablecoin is now widely accepted but is also controversial as many people are concerned about risks while Hougan emphasizes that historical comparisons are no longer relevant to today's technological and legal realities.
MAIN CONTENT
Matt Hougan condemns inaccurate comparisons between stablecoin and the 'free banking' era of the 19th century.
The 'free banking' era experienced many financial instabilities due to a lack of standards and transparency.
Stablecoin today is clearly regulated, fundamentally different from the classic free banking system.
Is it reasonable for Matt Hougan to oppose the comparison of stablecoin to 'free banking'?
Matt Hougan, CIO of Bitwise, believes that the comparison between stablecoin and 'free banking' is unrealistic and distorts the current policy debate.
He emphasizes that the 'free banking' era nearly 200 years ago cannot be compared to modern technology and the strict regulations that stablecoin must adhere to. According to Hougan, using these historical metaphors is unreasonable and misleading.
"Analogies should clarify, not obscure. When it comes to Stablecoin, let’s stick to facts and frameworks that reflect how they actually work."
Matt Hougan, CIO Bitwise, 7/2024
What was the 'free banking' era and what was special about it?
'Free banking' in the United States lasted from 1837 to 1863, a period when private banks freely issued paper money without national standards.
This system caused much instability due to banks issuing currency based on low-quality collateral such as weak railroad bonds or undeveloped land. Geographical discrepancies in fees and complex currency exchange procedures made the system lack liquidity and caused widespread distrust.
"None of these things apply to Stablecoin," Hougan emphasized.
Matt Hougan, CIO Bitwise, 7/2024
The major difference from free banking is that stablecoin is now governed by legal frameworks like the GENIUS Act, which require clear collateral requirements, refund regulations, and operational transparency. They trade publicly on global exchanges, prices are continuously updated, and they can be exchanged quickly without needing the issuing bank.
Is the risk of stablecoin really as serious as the warnings from historical comparisons?
According to Matt Hougan, concerns about risks posed by stablecoin are being exaggerated due to outdated historical comparisons.
He emphasizes that state-regulated stablecoin currently has a market cap limit of about $10 billion, which is a very small proportion of the cryptocurrency market, while most stablecoins are federally regulated with strict regulations ensuring safety and liquidity.
Criteria Free Banking Era (1837-1863) Current Stablecoin Management No national standards, free banking Modern laws with clear regulatory frameworks (GENIUS Act) Collateral Weak railroad bonds and undeveloped land Transparent collateral, often cash or reputable government bonds Transaction method Must go to the issuing bank to exchange currency Fast digital transactions on global exchanges, capable of online exchanges Liquidity Very low, paper money discounted by distance High liquidity, continuously updated prices, can be exchanged immediately within the day
Frequently Asked Questions
Who is Matt Hougan and what is his role in the stablecoin field?
Matt Hougan is the Chief Investment Officer at Bitwise Asset Management, an expert with extensive experience in the cryptocurrency market, known for his deep insights into stablecoin policy.
Why is the comparison of stablecoin with 'free banking' misleading?
This comparison does not reflect the modern technology and legal framework of stablecoin, while the 'free banking' era was marked by instability, lack of standards, confusion, and inflated real risks.
How is stablecoin managed today?
Stablecoin is regulated by modern laws, such as the GENIUS Act, requiring transparency of reserve assets, clear refund regulations, and supervision by federal agencies.
What proportion does the stablecoin market currently hold compared to the entire cryptocurrency market?
State-regulated stablecoin accounts for about $10 billion, very small compared to the total cryptocurrency market cap, with over 95% of stablecoin regulated by strict federal regulations.
What is the biggest difference between stablecoin and paper money from the free banking era?
Stablecoin has high liquidity, fast transactions globally, and is supported by modern legal frameworks, while old paper money is very difficult to exchange and lacks stability.
Source: https://tintucbitcoin.com/bitwise-cio-stablecoin-thua-ky-nguyen-1830/
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