by Gerald P. Dwyer
The American Institute for Economic Research
Are stablecoins similar to notes issued by wildcat banks in the United States? Among some pushing for explicit regulation of stablecoins, apparently the answer is yes, including a U.S. Senator and Federal Reserve governors in public statements and Gary Gorton and Jeffery Y. Zhang in a paper titled “Taming Wildcat Stablecoins.”
Stablecoins are cryptocurrencies that are designed to maintain a stable value relative to a fiat currency, gold or possibly other assets. The most traded stablecoins have a redemption value of one U.S. dollar or one Euro.
Wildcat banking refers to some banks in the United States’ antebellum banking history. The name “wildcat banks” referred to banks that were started “where the wildcats roamed” in Michigan, which started a free banking system in 1837, the year it became a state. It is hard to think of Michigan that way today, but it was a frontier state at that time. Michigan was the first state to adopt free banking. It was a disaster.