REALITY CHECK
SURPRISE voteR for Donald Trump
I have a former student who will remain nameless, and yes, she gave permission to use her profile and her story. Minority. 1st generation immigrant. LGBTQ. Lives in the northeast. Works in fashion, in her early 30s. She does not regret her vote and I'll tell you why. Democratic opposition to tech and crypto.
Because her and young people like her, know technology, and hate banks. You do not understand how much they hate banks. To the degree that you think? No. Way, way more. Absolutely, the number one thing that you can do to turn young voters away is stand in the way of technology and side with banks.
So how do stablecoins come into this? If you are opposing stablecoins, you oppose them with real-estate billionaires, rich bankers who want to preserve their cartel, the worst of white-collar criminals, racists who think minorities shouldn't have access to our country's financial system, and the tech illiterates - mostly, over the age of 75 who on average, still struggle with their email. So that's your team (along with some ivory tower academics who have somehow convinced themselves that the financial system of 2011 is sacred and should never be changed, like some weird financial version of the Amish).
Siding against you? Nearly every middle class American, literally everyone under the age of 45, and legitimately, anyone who thinks banks should not be able to constantly rip people off before inevitably exploding and requiring a bailout.
Supporting stablecoins? If you think minorities should have fair access to the financial system, support systemic reform in banking, think financial crime is worth fighting, or even, that you don't think you should have to lend money to a billionaire commercial real estate developer at 0% to be allowed to buy a coffee, you have to.
If you don't know why, read on.
If you do and you support the stablecoin bill, you are way ahead of me and the kind of person we need to bring the Democratic party back from the brink.
If you want to support racists and criminals? Well, I've got nothing for you and I'm not on your side.
Introduction
If you know who I am, you already know that I am one of the most significant proponents of US dollar stablecoins.
What you might not know or realize, because of how fraught and broken the discussion around crypto has become (partially because of the detractors, but partially because of the people in crypto, if we are being honest about apportioning blame), is that I am a pro-regulation, pro-market reform, former trader at an investment bank who was an expert in financial market structure and banking, who is now a college professor and New York Democrat.
This, I would suggest, is not the usual platform that one would expect for a crypto person. The space has a (not entirely unjustified) reputation for being some linear combination of anarcho-libertarians, the tech version of anti-dollar goldbugs who believe in Bitcoin as a religion (I call them Satoshi's Witnesses if you want a good name), scammers and fraudsters, and a bunch of nihilistic degenerate gamblers. Quite the mix, isn't it?
Only here is the problem: the actual value proposition of what is being created is almost entirely disconnected from many of those views and we are falling for the classic social media trick of believing the loudest and most toxic voices online are actually representative of the median opinion of Americans. They are not.
There are a lot of very serious, well-intentioned people building in this space. If you want me to name names, the teams at Paxos, PayPal, Avalanche, Stellar, GMO, Brave, Mysten Labs, and Uniswap would be some good places to start if you want to talk to folks who are trying to do good things for the average person and you need to understand the space.
Therefore, before we talk about stablecoins, let's talk about some goals that I have and that the majority of the space and Americans would support.
Goal #1
Provide an Alternative to Bank Monopolies
Should you have to lend money at 0% to a billionaire to buy a coffee?
Absurdly, our current system says "yes, you have to" and the fact that we need to be having this discussion at all is the problem. Why?
How your relationship with a bank works:
You give the bank your money
They take that and lend that to billionaires to build commercial real estate, to corporations to run their businesses, and more (I know if you are a bank lobbyist, you are going to say "residential mortgages and the American Dream!" but there is less of that than you would think on bank balance sheets - one reasonable estimate is roughly 10-15% of all US bank balance sheets are composed of residential mortgages)
If they do well on those loans, the bank pays their executives giant bonuses
If they do poorly on those loans, they stick the losses to the depositors (and either get bailed out, or just explode and leave the depositors holding the bag)
In return for the privilege of participating in this, they pay you zero interest and charge you fees
That seems insane, right? If you care about consumer protection, this is pretty much the literal opposite of a system that you would create. The incentives are horrifically misaligned, there's no rational reason for a consumer to take that deal except for state power being used to enforce a monopoly to screw them, and the only beneficiaries are extremely rich executives (both at the borrowers and at the banks). It's insane!
So why does this exist?
First, we have silently allowed banks to create a payments cartel in the United States. Because of the creep of technology from the 1970s to today, electronic payments have gone from not existing to highly optional to literally required if you want to even be able to pay for things. And not just electronic payments, but very specific forms of electronic payments that have to go through (you guessed it) banks!
Second, we have allowed our regulators to box out all forms of technological innovation. In the past, the purpose of a regulator was consumer protection, but the combined efforts of the FDIC and Federal Reserve have inverted that. They have defined consumer protection as bank stability, without asking if the banks are actually creating any value for the consumer or it's a fair deal, so now any disruptive technology that threatens the paradigm I described above is considered anti-consumer. Yes - not paying giant bonuses to billionaires who make under-market loans to other billionaires by ripping off middle Americans is anti-consumer. This is the definition of regulatory capture.
I would humbly suggest that if you are a Democrat who cares about financial inclusion, consumer protection and fairness, and antitrust leading to better outcomes, then if you are not trying to fix this, you've really missed the target.SEC FAILS REGULATION
So now let's talk about a regulator who totally and 100% did not do that thing I just said: the SEC.
For the four year tenure of Joe Biden, the SEC was essentially the main antagonist facing crypto outside of the perpetual antagonist that crypto faces (crypto itself, for those keeping score at home). Specifically, the SEC managed to teach a masterclass in how not to regulate, and had I sat down on Jan 1 of 2020 and written down a list of what to absolutely not, under any circumstance, do to effectively regulate a novel technology, the SEC marched down that list and then blew through it, inventing new list entries I never would have had the audacity to conceive of and also doing them. In a way, it is impressive. I have never seen someone speedrun a collapse of regulatory trust and authority in this fashion, and the incredible energy and complete imperviousness to reality, feedback, or the consequences of their actions was remarkable.
Unfortunately, it also totally undermines everything.
So what happened? I will try to keep this at least somewhat brief and touch on the large themes of the SEC under Biden, so if I missed some things in here, please understand even in an article I only have so much space, and I only have so much time on this earth.
Goal #2
Fight Financial Crime
I'm going to start by saying this one is going to confuse a lot of people coming from someone in the crypto space, but this is why I know the debate is so broken.
Yes: one of my main goals is to make sure we can effectively fight financial crime, and for all Democrats, I believe this should be an uncontroversial goal.
What is financial crime?
Money laundering: Making illegal funds appear legal
Scams and frauds: Deceptive schemes to extract money from victims
Tax evasion: Illegally avoiding tax obligations
Corporate obfuscation: Complex accounting tricks (like Enron) to hide financial reality
Ransomware: Holding data hostage for payment
In short, it is the process of committing crimes through money or with money.
I'm not going too far out on a limb here with most people (other than the anarcho-libertarians, perhaps) to say this is a bad thing. More so, one of the things we should be thinking about is that despite building a titanic fortress composed of paper and forms since the 1970s, imposing massive compliance costs on institutions, and excluding many people from the financial system because they get trampled by this bureaucracy (especially minorities), we catch something like 1-5% of total financial crime, depending on which estimates you prefer.
Read that again.
We've built a massively complex, incredibly expensive system that tramples on the least powerful in our society in order to catch a tiny fraction of bad actors.
Maybe defund the police should have been pointed at the Bank Secrecy Act?
Why is this system so ineffective?
System Fragmentation: The current system is highly fragmented, meaning that no financial institution can see anything other than themselves and some exposures one hop away. This means if the string of crime is an American sends money to a relative, who spends it at a business, who sends profits to an owner, who then sends money to Hamas, only the financial institution at the very end of the chain even has a chance of detection. Therefore, the entire system is only as strong as the weakest link. JP Morgan Chase can (and probably does) have the best anti-fraud systems in the world, but as long as Sixth Bank of Corrupt Criminal Conduct exists in a foreign jurisdiction, it doesn't matter.
Government Resource Crisis: We have a skill issue. The US government receives Suspicious Activity Reports (SARs) with a huge amount of narrative information attached to them, and do you know what we do with that information? We have a handful of people attempting to manually read millions of SARs. That is right. In the age of automation, AI, and big data, we've got like three dudes in a broom closet going through things by hand. This is deranged and the kind of thing you'd expect in a Kafka novel, but it's actually the government.Therefore, one of my big concerns is also fixing this. We can't live in a world where banks and crypto exchanges are constantly fined for not catching crime the system is designed not to catch while the government itself actively fails to even implement the basic things needed to do the catching. It would be hilarious if it weren't so sad and damaging so many lives.
If you don't believe this is important, I am an advisor to a company called Inca Digital, one of the few trying to take this problem head on.
One of the things Inca does on the side is trying to sue crypto scammers to get money back for victims, with at least some degree of success, and one of the times I was on the phone with Adanm the CEO and founder of Inca Digital for an update on our cases, and he delivered devastating news:
"One of our named plaintiffs committed suicide."
Take a moment with that. Think about what that means. Our ineffective anti-crime efforts in the financial system aren't just abstract policy failures—they lead to real human tragedy. Americans are losing their life savings to scammers, falling into despair and depression, and in some cases, taking their own lives.
All because we can't or won't build better systems to protect them. We need to do better.
Goal #3
BUILDING FINANCIAL INCLUSION
I believe Americans should have access to electronic payments and the financial system. If we are going to apply caveats to that, my only caveats would really apply to criminals (maybe some shouldn't) and minors (we need controls around their activity). Let me say that again: the default situation should be that Americans have access to the payment system, and when I say that, I mean all Americans. Black? White? Gay? Trans? Christian? Muslim? Yes, yes, and yes. All means all.
So how do we get there? I think it would be an uncontroversial statement to say that the financial system has not historically treated some minorities well (see: redlining), or that the current financial system has had real problems treating certain industries or groups of people fairly (see Operation Chokepoint 1.0 and 2.0). Why does this keep happening? It stems from a core belief with our financial system that is the same one also keeping the bank payments monopoly in place, which is that to join the financial system to do something as trivial as buy a coffee, you should need permission from a private corporation.
Pause. Think about that. If a bank doesn't want you in the system, the default position is no, you may not buy a coffee from a shop that doesn't take cash (an increasing number of them). That's a little weird, right? If the bank happens to be racist (either on purpose, or just by preferring "high net worth" clients), or just doesn't have the forms in your language and you make a mistake, or they just don't think you are worth the "trouble" (defined however they or their regulator want to define trouble, up to and including your political speech), they can reject you. It's very hard to get a clear paper trail on these things, and even harder to lawyer up and actually fight a bank on this.
Therefore, you have large groups of people who just get screwed and shut out, and end up dealing with check cashers, payday lenders, and the other scalpers of the financial grey market.
I think they deserve better. I believe there should be systems where the default is that you can participate unless we catch you doing something bad, that a single banker sitting in an office in Des Moines who runs compliance should not be able to reject Dominicans living in the Bronx sight unseen because they are a "risk", and banks should not be running a chokepoint operation on poor Americans nationwide.
Can we fix this with an extensive and massive regulatory compliance program that constantly monitors and regulates the banks? The evidence so far suggests not only does this not work, it might actually be making the problem worse.
You know how we can fix it? Flip the script.
stablecoin 101
what is a stablecoin?
A stablecoin is the representation of a unit of fiat currency on a blockchain.
Its how I define it for my NYU Stern students, and it's the one that you should have in your head. That's it!
When you think of it that way, it kind of makes this whole debate about stablecoins seem a little bit absurd, right?
First, I'm going to give you a mental trick, and if you are unfamiliar with this, it's world-changing for how you can cut through the nonsense in this debate. Any time you hear "blockchain" replace that in your head with "Microsoft Excel" or just a different ledger.
So let's now rewind what I said: "A stablecoin is the representation of a unit of currency in a Microsoft Excel spreadsheet, or some other ledger".
Can anyone, anywhere, explain to me why this has become a giant political hot button issue based on that? Seems implausible, right?
However, we're getting a number of heated arguments about them, so I am going to go through the major ones one by one to knock them down, because this really all is quite absurd.
reality check #1
“Stablecoins threaten Consumers”
Since 2018 the New York Department of Financial Services (NYDFS) has been regulating stablecoins and BUSD, one of the largest stablecoins on earth, was under their aegis.
How many NYDFS regulated stablecoins have ever broken the peg or damaged consumers? Zero.
For all the screaming and sound and fury around them, once you apply a basic regulatory framework to stablecoins, they become, for lack of a better word, boring. Zero NYDFS stablecoins have ever had any issues.
Certainly, there have been stablecoins that have exploded (see: UST) and others where there have been doubts about the assets (see: USDT). But you know what's interesting? All of those are unregulated, offshore issues. Since 2009 or so, onshore cash product stability has had solutions. It's been solved. The NYDFS borrowed the homework from federal money market reform and applied it to stablecoins (no leverage, bankruptcy remote, very safe and liquid assets only). The GENIUS act, with no insult to the authors (because I think this is a smart move) borrows the homework of the NYDFS.
So this is a solved problem - what isn't solved is unregulated stablecoins.
If you oppose regulating stablecoins, knowing that regulation makes them safer, what are we doing here?
reality check #2
Stablecoins threaten Banks
I want to be 100% clear about this - stablecoins are 100% a threat to something banks are doing. That something is this: screwing consumers.
When you offer consumers a way out of the trap that I described above, that is to say now they can have a regulated, bankruptcy remote vehicle that only does exceptionally boring things like owning t-bills, and they can use that thing instead to make all their electronic payments, they might prefer that to banks!
That is a good thing, not a bad thing. I will remind you that right now banks are paying 0% on deposits and keeping 100% of the profit when it goes well and handing the losses to depositors and the public when it doesn't. Is this the system you want to defend? And if you do, why?
For those who fall prey to bank lobbyists and captured regulators arguing that it will dramatically increase the cost of mortgages for the common person if we allow this, I will remind you of the stat I raised above, which is that banks barely hold residential mortgages on their balance sheets now (if we are being cynical, one might say only just enough to convince people they are doing social good while shoveling most of the money to private equity and commercial real estate billionaires).
reality check #3
Stablecoins are a systemic risk
In the Genius act, stablecoins are only allowed to own the following:
Bank deposits
T-Bills
Overnight Repurchase Agreements & Reverse Repurchase Agreements secured by gov't securities
Do you know what else is allowed to own only these exact same assets? ~ $7 trillion dollars of existing government money market funds.
Is anyone running around calling Vanguard an existential threat to the financial system for running an extremely short-dated, extremely liquid money market fund?
Or Blackrock? Since now they’re running a government money market fund for Circle, the largest manager of stablecoin reserves is Blackrock, .
If we regulate stablecoins to do the same activities as existing financial institutions, how can anyone argue they're a threat? And if they are, why are regulators worried about $200B of stablecoins but completely unconcerned about the nearly $7,000B of government money market funds? The only people worried seem to be bank executives who are mad it's less money they can use to screw depositors.
Its the same as the argument using SVB as a cautionary tale for stablecoins. To them I say: you pointed out that banks are a threat to stablecoins, not the other way around.
What happened with SVB? Circle, the issuer of USDC, had $3.3B of deposits at SVB. What was SVB paying them for that? Almost nothing. What did SVB do? They went and made exceptionally poor decisions about how to lend that money and blew themselves up Exemplifies exactly the issue that I criticize: banks are serially reckless and consistently fail at remaining solvent.
When banks are the only option? Banks are the systemic problem.
reality check #4
Stablecoins SUPPORT CRIME.
Having this view in 2025 is a bit like believing that automobiles were going to destroy society and holding onto that belief into the 1960s. Simply put, this is wrong, and the supermajority of usage in crypto is not criminal unless you believe that my using my Avalanche card earlier today to buy a coffee from Starbucks with USDC is criminal (which some of the coffee mafia in Brooklyn would probably agree is criminal, to be fair to my neighbors).
More so, I'm going to make a much stronger argument:
Crypto is the solution to financial crime.
Public blockchains are public. We can see where the funds go. We know about the North Korean efforts to steal money in crypto because we can see everything happening. To think crypto is used only for crime is a mistake of visibility for frequency.
Put differently, if we catch a murder in a rich white neighborhood because there were security cameras, police everywhere, and 18 different people who witnessed it, does that mean that neighborhood is high risk but the poorest and most violence-plagued majority black inner city neighborhoods in Baltimore are safe? Obviously we don't believe that (and if you do, seek both help and a professional statistician immediately).
Now, this example is obvious in crime because we all have experience with the physical world and understand, intuitively, the concept of physical danger in a way that we do not intuitively understand ledger technology and the methods of money laundering. That's a good thing, by the way; all of society cannot be dedicated to that, even if a handful of total sickos like me are.
However, I am here to tell you we are making the same mistake with crypto, and here's how I can demonstrate this:
Quantify for me the amount of money that passed through BofA at some point in a chain before ending up in the hands of Hezbollah?
What is the number of transactions through major US correspondent banks that eventually were used downstream as payments for sanctioned Russian oil?
How many Mexican drug cartel members have used proxy agents to push funds through the US banking system in the last five years?
Nobody can answer those questions. That is, in fact, the point of my asking them. The current system is so opaque, so fragmented, so broken that we might not even have estimates of those that are even vaguely useful (more than one and less than 1 billion is not a great answer for the last question, but that's the level of specificity you get with some methods, for example).
Do you know how we could answer all those questions? If we put everything banks currently do on a public blockchain.
Pause and think about that for a moment. The exact system where we can see the crime (and thus can develop tools to respond to it, though the fact that we haven't yet is one of my biggest complaints with both the crypto community and law enforcement - everyone is behind the curve) is the one where you can potentially stop it. The current system is guaranteed to fail. Why would we want to preserve that?
Again, having this problem backwards in your head is how you accidentally end up on the side of the criminals. And if you don't believe me, there is a guy named Adam Zarazinski who is a reservist in the US Air Force, former JAG, and now runs a crypto intelligence company called Inca Digital I mentioned before which is tracking all of this stuff. Go ask him what he knows, and how to stop it. The answers are there.
In fact, I would go so far as to say the absolute worst mistake we could make is demanding the standards of the current financial system (where we have to KYC everyone, making banks individually responsible for their local domain only) be imposed on blockchains. It doesn't work, it mainly serves to create huge inefficiencies and damage minorities, and the only people who like it are those who can hide behind security theater to do evil things. Extending that to stablecoins would be a generational own goal, like someone looking at the experience of the Great Depression and saying no, actually, we need more of that, so let's bring back the Smoot-Hawley tariffs (yeah, I went there).
FOR STABLECOINS
:
Global Dollar Stability: We can bring US rule of law and dollar norms to the entire world. There are many countries where the rule of law is less than great, to be diplomatic, and the management of the currency is also less than great, to be diplomatic. If you live in a country with persistent double digit or triple digit inflation and a government that constantly shuts down the banks and steals your money, guess what? Now you have another option, and that option is a US dollar stablecoin. We talk often in the Democratic party about the importance of immigration so that people have greater economic opportunity; stablecoins are exporting one of the main benefits immigration to the entire world!
Breaking Banking Monopolies: In general, I am pro-competition because I want labor and new entrants to have a chance to win, rather than turning our financial system into some sort of landed aristocracy type that favors capital over labor and the only entrants allowed are those who the gatekeepers and legacy elite deign to admit to their system. The latter is the traditional Dick Cheney style economic elitism, the rejection of which lead to the 2008 landslide in favor of Democrats. It is essential that we don't accidentally flip sides on that one.
Financial Inclusion Through Zero Fees: I once had to pay a vendor in Hong Kong for something. It took less than 1 second and I paid a transaction fee of less than 1 cent using Solana. Now you understand why bank executives are panicking and lobbying you non-stop to ban these things. It's going to destroy their profit margins and suddenly they might not get that second private jet.
Preserving Liberty With Permission-less Entry: You don't need permission to start using it. I say start because you do actually need permission to keep it (stablecoins can freeze, seize, and otherwise interdict flows without needing to know the private keys of the wallet in which the coins are held, which is far more powerful than our current financial system in terms of anti-crime and anti-fraud). But to receive it the first time, or just use it for small amounts? You don't need to onboard at a bank where that risk officer in Des Moines has to make a judgment on if you, a recent immigrant to America with a "funny" name, should be allowed at their bank. You just need to have the internet.
Financial Democratization: Properly regulated, stablecoins essentially turn a money market fund in economic substance into a payment instrument. This is actually a huge transformation of our system. It breaks the accidental monopoly we have given to banks on electronic payments and fulfills a vision that should be the core one of every single Democrat in America: the average American can invest in our country through short-dated treasury debt, and use that as collateral to pay for everything in their daily lives. This is Treasury Direct, but on an insane science fiction space steroids level.
Funding America's Future: I don't know if you have noticed, but the US has a lot of debt outstanding. In fact, our debt-to-GDP is over 100%, which is typically a pretty bad situation to be in, historically. Usually the way out of this is massive inflation that leads to major spending cuts and economic pain. This doesn't have to be the case, though. If we can find a way to continue to fund the deficit while buying time to get our economic house in order and glide the plane to the ground instead of crashing it in a nose dive, everyone is better off. What do stablecoins create? New buyers of US debt outside of the US itself. Again, to buy a stablecoin, all you need is the internet and something of value to trade for it. Many foreign citizens will opt for this instead of their local options. Unless you are a massive budget hawk and want spending to go to zero right now or you want to destroy the dollar, this is a huge positive.
ENDPOINT
Stablecoins are better for financial inclusion.
Stablecoins are better for fighting financial crime.
Stablecoins expand the reach of US law and dollar norms.
Stablecoins fund the deficit.
Stablecoins break down bank cartels and oligopolies.
For Democrats, every single one of these positions is a mainline priority. Every. Single. One.
And yet somehow, we opposed them, and Republicans supported them.
Now, do you understand why she - my student - voted for Donald Trump?
We need to get her, and the rest of her generation, back on our side.
