Can Governments Create Digital Currencies?


In July, Wyoming announced an open job position for the head of its Stable Token Commission, the executive to be responsible for the state’s very own stablecoin. This initiative is similar to the one proposed in Texas, in April, where bills for creating a state-based digital currency backed by gold were introduced.

Many questions emerge from the idea of state stablecoins: How would they impact the monetary stability of fiat money and the Federal Reserve’s power? Could they be compatible with a central bank digital currency? Do people really want to return to a system with state banks printing their own monetary notes?

The Wyoming Stable Token Act was introduced in February 2022. It defines Wyoming’s stable token as a virtual currency representative of and redeemable for one U.S. dollar held in trust by the state. A reservation in Section 2 of the Act makes the state’s attorney general responsible for monitoring the startup phase of the token’s issuance. The commission’s director shall provide their report on the doability of the stable token no later than Nov. 1, 2023.

In March 2022, Governor Mark Gordon vetoed the bill, considering the lack of information and the cost of accounting services, blockchain development and other necessary expenses. A year later, the governor applauded the effort made by legislators to enhance the document, but voiced new reservations about the lack of an overall plan. On March 22, 2023, the Stable Token Act was passed into law without Governor Gordon’s signature.

The idea of state stablecoins could contradict the logic of central bank currency, but Wyoming’s stable token is rigorously tied to the same old American dollar, making it less of a separate currency and more of a state-issued financial asset. Chris Rothfuss, the minority leader in the Wyoming State Senate, explained it is not competing with the Federal Reserve but enabling a technology.

Brent Xu, CEO of Web3 bond-market platform Umee, sees a potential conflict between the states and the Fed, while Zachary Townsend, CEO of Bitcoin-based life insurance provider Meanwhile, and Peter Herzog, state policy lead at the Crypto Council for Innovation, believe the Federal Reserve could allow states to issue stablecoins under a particular framework.

The discussions concerning the national framework for stablecoins, the potential value of Wyoming’s stable token and the fact that PayPal recently launched its own initiative show the era of multiple stablecoins could be closer than we think.

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