In today’s briefing:
- From Free Banking to Stablecoins: A Historical Parallel for the US Dollar
From Free Banking to Stablecoins: A Historical Parallel for the US Dollar
- The recent turbulence in the crypto-native stablecoins, marked by de-pegging and liquidations, exposes vulnerabilities in reserve management and a lack of capacity to handle “bank runs”.
- These vulnerabilities are a replica of the “wildcat banking” that occurred during the “free banking era” in the US.
- This era was characterized by state-chartered banks issuing notes with diverse and inconsistent practices, leading to discounts on notes circulated outside the issuing state, and instability from fraudulent or under-reserved banks.
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