update 8 October 2021

Former Treasury Secretary Compares Stablecoins to Casino Chips

Steve Mnuchin– former Treasury Secretary of the United States– recently discussed stablecoins and FinTech investment opportunities. While he sees potential in blockchain technology and stablecoins, he also says they shouldn’t operate like “casino chips.”

Stablecoins and Casino Chips

Mnuchin aired his thoughts earlier today in an interview with Bloomberg Invest Global. He begins stating that there’s “gigantic opportunity” in “real-time, cross border currencies,” and calls both blockchains and stablecoins “interesting”.

IMAGE: Steve Mnuchin
Steve Mnuchin. Source: NBC

However, he then refers to a recent Bloomberg article casting doubt on Tether, the largest cryptocurrency by market cap. Regulators and the crypto community alike have long been skeptical of Tether’s claim that their stablecoin is fully backed. Though they have released audit results and attestations, Tether refuses to unveil the specific goods supporting their $69B market cap.

Mnuchin is concerned with this. He said that such stablecoins should be under regulations and “freely transferable” while assuring that they’re USD back them. In Mnuchin’s opinion, a qualified custodian bank should store stablecoin reserves securely.

“[Stablecoins] shouldn’t be like casino chips,” said Mnuchin. “In my opinion, if you’re gonna issue a stablecoin, the actual money should be in a regulated bank– in a trust account. The people who hold the stablecoins should be able to exchange those for real dollars at any time”.

Mnuchin concludes by stating that US treasuries should accept stablecoins as investments. Also, these assets should have the backing of other highly liquid investments.

While Mnuchin’s stance on crypto regulation seems relatively balanced, he was far more strict during his time as Treasury Secretary. In 2019, he promised to impose strict rules on Bitcoin to prevent secrecy in payment processing on the network. Also, he held concerns over Bitcoin’s use in illicit finance, which is a statistical non-issue.

All Eyes on Stablecoins

Stablecoins are front and center for US financial regulators at the moment. Even when Fed Chairman Powell confirmed his no-ban stance on the crypto space, he showed most concern for stablecoins specifically.

Furthermore, SEC chair Gary Gensler said that his top priority around crypto is regulating stablecoins. For instance, both he and Powell fear their potential use for illicit finance, alongside their credible value-backing. Also, Gensler also referred to stablecoins as “poker chips” at the casino tables. Lastly, he even suggested that they could be classified as securities.

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The President’s Working Group on Financial Markets plans to release a report on stablecoins at the end of October.