Wyoming to launch stablecoin in 2025 in response to Fed’s policy of supporting ‘too big to fail’ banks

(Kitco News, Thurs. Aug. 22nd, 2024) – The debate around stablecoins in the U.S. has taken an intriguing turn as Wyoming Governor Mark Gordon told the crowd at the Wyoming Blockchain Symposium on Wednesday that the state plans to launch a state-issued dollar-pegged stablecoin in 2025.

“Over the last seven years, our legislature has passed more than 40 laws to create a regulatory environment conducive to innovation around [blockchain] technology,” he said in a statement released before the symposium. “States have a unique ability to issue stable tokens that can increase U.S. dollar hegemony and function as a public good.”

Gordon, who also serves as Chairman of the Wyoming Stable Token Commission, said the move is part of the state’s embrace of blockchain technology. In his speech, he noted that the Wyoming Stable Token will be backed by cash, U.S. Treasury securities, and repurchase agreements held in reserve.

According to the Wyoming Stable Tokens Act, interest income generated on the underlying securities will be used to diversify state revenue streams, with capital distributed to Wyoming’s school foundation program.

Gordon said that once the design and backing of the stablecoin are finalized, the state will reach out to exchange partners for listing sometime in Q1 2025.

Wyoming’s motivation to launch its own stablecoin started with the 2007-2008 financial crisis, he said, which was caused by the collapse of the mortgage-backed securities market and the issuance of high-risk debt instruments by institutions.

“There was a time before 2008 when capitalism was really important, and that meant failure could happen,” Gordon said. “Somewhere around the 2008 time frame, we made a decision that too big to fail is something that the government was going to stand behind.”

He explained that this “too big to fail” approach directly opposes the ethos many in Wyoming hold, which sees risk as a prerequisite for real growth. He added that Wyoming’s work on this front, and regarding digital assets in general, gives the state a “first mover” advantage and primes the state to capture the growth from digital assets.

“Adoption of digital assets will be crucial in keeping the spirit of innovation alive in America,” the pinned message on Gordon’s X profile says.

While discussing the Federal Reserve banking system, Gordon said it was a “drag on innovation” and highlighted the failures of the two previous central banks in the U.S., which were established under the Madison and Jackson administrations.

The announcement has initiated a debate around central bank competition and a potential conflict between the state-issued dollar tokens and the Federal Reserve Bank.

While some see the issuance of private stablecoins by states as direct competition with the Fed, Wyoming Senator Chris Rothfuss argued that a state-issued, dollar-pegged token would not compete with the central bank since it is responsible for issuing the underlying assets the state-issued digital token is backed by.

Comments from Senators Tim Scott and Cynthia Lummis 

The Wyoming Blockchain Symposium also featured a discussion between Senators Tim Scott (R-SC) and Cynthia Lumis (R-WY).

During their talk, Scott said that if he becomes chair of the U.S. Senate Banking Committee, he will propose the creation of a subcommittee focused on the digital asset industry. He is currently the ranking Republican on the committee, which is led by Senator Sherrod Brown (D-OH). If Republicans gain majority control of the Senate, Scott could potentially become leader of the committee in 2025.

“Wouldn’t it be kind of cool if we had a subcommittee on the banking committee that focuses on the industry so that we bring more light to the conversation, more hearings on the industry, so that we get things done faster,” Scott said.

Lummis responded by noting the “headwinds” in the Senate Banking Committee, specifically pointing to Brown and Senator Elizabeth Warren (D-MA). “They’ve been extremely influential with their colleagues on the Democratic side of the aisle, so we’ve hit the wall on the banking committee,” she said.

Lummis suggested that a bill to regulate crypto would likely have to come through the Senate Agriculture Committee and acknowledged that the Senate is running out of time to pass meaningful legislation before the election.

She said that at this point, the best-case scenario is the passage of a bill that focuses on the Commodity Futures Trading Commission (CFTC)—which the Agriculture Committee has jurisdiction over—after the election.

Lummis added that the legislation would likely be “Christmas-treed” with add-ons including language to regulate stablecoins and potentially Senate Majority Leader Chuck Schumer’s SAFER Banking Act, which would give cannabis businesses access to banks.