Open Banker
6 posts
John Pitts@PolicyPitts
Back to school means 2 things: 1. Mack Wallace writes on the danger and opportunity in the feds exit from graduate student lending; and 2. In an effort to attract the youth demographic, @theOpenBanker has hired my 14 y/o as nepo baby social media intern. Enjoy(?) their tweets.
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@NikMilanovic @gwlaw Thanks for highlighting! Here's the article link, for anyone who's interested: openbanker.beehiiv.com/p/dangeroussta…
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We've seen a lot of takes in-favor of the GENIUS Act, so in fairness, I thought I'd share the perspective of someone who's bearish:
Professor Art Wilmarth at @gwlaw belives the GENIUS Act is a deeply flawed piece of legislation that would:
👉Allow nonbank entities to issue uninsured stablecoins without proper oversight.
👉Threaten financial stability, consumer protection, and the broader economy.
His arguments:
🧨 Systemic Financial Risks:
👉Nonbank stablecoins function like uninsured bank deposits, making them vulnerable to runs, similar to past financial crises.
👉Historical parallels: Past crises (1980-92, 2007-09, 2023) showed that uninsured short-term instruments often required government bailouts.
👉Example: In 2023, Circle’s USDC dropped to $0.87 after SVB's collapse; a government bailout was needed to stabilize it.
⚠️ Failures of Stablecoin Technology & Usage:
👉Public blockchains (on which most stablecoins run) suffer from:
Scalability issues
👉Immutability problems (fraud/error correction is hard)
👉“Layer 2” fixes mimic traditional financial systems, so they should be regulated like banks.
👨💻 Big Tech Entry into Banking:
👉The GENIUS Act would allow tech giants (Apple, Google, Meta, etc.) to:
👉Enter the banking space via stablecoin issuers.
👉Gain access to sensitive financial data.
👉Build dominant financial empires, undermining the separation between commerce and banking.
🏦 Shadow Banking 2.0 & Subprime 2.0 Risk:
Stablecoins could:
👉Drain deposits from FDIC-insured banks, harming community lending.
👉Fuel a crypto derivatives boom, creating a speculative bubble like the subprime mortgage crisis.
🧱 Additional Flaws in the GENIUS Act:
👉Weak reserve, capital, and liquidity requirements.
👉Lax chartering criteria for issuers.
👉Poor regulatory oversight, especially over state-chartered and foreign issuers.
👉Minimal consumer protections.
👉No federal safety net for failed issuers—inviting ad hoc bailouts.
@twifintech @thestablecon
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