Regulation

This chapter summarizes the major principles for the regulation of new digital coins that feature in the current debate. Again, the principle of “no questions asked” represents the logical cornerstone of the theme. It is emphasized that officials can take action against (and in fact have prosecuted) misconduct even in the absence of specific regulation of new instruments. Following Gorton and Zhang, the proper regulation of stablecoins is argued to resemble that of banks as depository institutions. In such respect, the theoretical problem of what is a bank is discussed as far from settled. Among the key issues, one acknowledges the synergy between the sides of the balance sheet and the special liquidity backstops available.