When the instrument is new, the question is old

CNBC reports that Coinbase has partnered with Moov to extend stablecoin capabilities to community banks, timed deliberately ahead of a Senate vote on digital-asset regulation called, with some optimism, the Clarity Act. I will take the report at face value and say plainly: this is the most interesting story in American finance right now, and the Senate would do well to approach it with more rigor than the name of the bill suggests it intends.

I am the first to grant that I cannot speak to the precise engineering of payment rails, cryptographic ledgers, or the settlement mechanics of a stablecoin. These are technical matters born two centuries after my time. But I can speak to what a stablecoin is in its economic function: a private instrument that purports to perform the role of money — a reliable unit of account and medium of exchange — while being issued not by the public sovereign but by a private firm. That is a proposition I have encountered before. I did not then think it wise to leave it unregulated, and I do not think so now.

The partnership described by CNBC is shrewd. By routing stablecoin infrastructure through community banks — institutions that carry a public trust, a charter, and a regulator — Coinbase is borrowing the legitimacy of the chartered banking system for an instrument that has not yet earned equivalent scrutiny. I do not say this is dishonest. I say it is exactly what a vigorous private interest does when it seeks to expand its reach, and it is precisely the moment at which Congress must decide whether the public check will be equal to the private ingenuity.

What ought that check to look like? From my disposition — not from any recollection of events I could not have witnessed — I would urge the Senate to ask three questions. First: is the stablecoin fully and verifiably backed by assets of equivalent quality, subject to audit the public can trust? A currency whose reserves are opaque is a currency that will fail in a moment of stress, and the failure will not be borne by its issuers alone. Second: does the issuer have access to the Federal Reserve's payment system, and if so, on what terms? Access to the public infrastructure of money is a privilege, not a right, and it carries obligations. Third: what happens in insolvency? The holders of a stablecoin in a bankrupt issuer are not, as the law now stands in most jurisdictions, depositors with FDIC protection. That asymmetry — private profit in good times, public cost in bad — is precisely the arrangement I spent my tenure as Secretary working to prevent.

The Senate vote described by CNBC is, by inference, a preliminary procedural step, not a final passage. That is the appropriate stage at which to insist on rigor. Once an industry is chartered and its infrastructure embedded in the community-bank system, the political will to impose discipline collapses. I know this from experience with the Bank of the United States: the moment the institution became useful, it became politically durable, for good and for ill. The time to write the rules is before the dependency is established, not after.

My recommendation is direct. The Senate should pass a regulatory framework — not a prohibition, not a blank check. Stablecoins, if properly reserved, audited, and supervised, can extend the efficiency of payments and serve commerce as well as any instrument I championed. But the clarity the bill promises must include clarity about who bears the risk when the peg breaks, what the reserve requirements are and who verifies them, and how the public payment infrastructure is accessed and at what cost. These are not novel demands. They are the demands of sound money, which have never gone out of fashion, whatever the instrument of the hour may be.