The Wall Street Journal criticizes stablecoins, saying "they are private currencies": posing significant economic risks

Stablecoins are not just bridges for cryptocurrencies—they are becoming a de facto “private currency”: not controlled by central banks, not dependent on deposit insurance, yet able to directly affect the total money supply. In a recent analysis, Greg Ip, a columnist at The Wall Street Journal, points to the core issue: when the issuance and redemption of stablecoins are fully determined by private institutions such as Tether and Circle rather than the Federal Reserve, the foundation of economic stability is being quietly undermined. However, the regulatory paths for stablecoins are taking markedly different directions worldwide—America is taking a market-led route, the European Union is pursuing a cautious regulatory route, and Taiwan still has no clear policy framework to date. For an economy that is highly dependent on international trade, the implications are far-reaching.
(Background: The US GENIUS stablecoin law being rolled out does not mean freedom; the regulatory iron net has only just begun)
(Additional context: Economists: Stablecoins can’t save dollar hegemony)

Table of Contents

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• From the dollar standard to private currencies: How stablecoins are rewriting the monetary equation
• The clash of two regulatory philosophies: GENIUS Act vs. MiCA
• Stablecoins meet central banks: Taiwan’s monetary sovereignty anxiety
• Not just Wall Street perspectives: Stablecoin economics are rewriting

The total market capitalization of stablecoins surpassed $200 billion in 2026. The two largest issuers, USDT and USDC, together hold more than $150 billion in U.S. Treasury securities and reverse repurchase agreements. At first glance, this figure may look like nothing more than a growth story in the crypto industry, but in his Wall Street Journal column, Greg Ip raises a sharper question: when these privately issued digital currencies have essentially become part of the money supply—and issuance and redemption are driven entirely by corporate decisions—how much control does the Federal Reserve still have over the money supply?

This concern is not far-fetched. In monetary economics, there is a classic concept called “near-money,” referring to financial instruments that are not defined as money by official fiat yet have high liquidity and transactional utility. Before the 1980s, money market funds were considered “near-money.” Today, stablecoins are playing the same role—only on a larger scale, faster in pace, and with less regulation.

From the dollar standard to private currencies: How stablecoins are rewriting the monetary equation

The operating mechanism of stablecoins appears straightforward: users deposit dollars, issuers purchase low-risk assets such as Treasury securities as reserves, and then mint stablecoins equivalent in value on the blockchain. This is almost identical to the logic of money market funds—absorbing funds, allocating to Treasuries, and providing liquidity. The only difference is that stablecoins can be transferred seamlessly worldwide within 24 hours and do not require any banking clearing system.

According to public information, Tether currently holds about $113 billion in assets. More than 80% of this is allocated to U.S. Treasury securities, reverse repurchase agreements, and money market funds. In Circle’s USDC reserves, the share of U.S. Treasury securities and cash is also 85% or more. This means stablecoin issuers have become a buyer force that cannot be ignored in the U.S. Treasury market.

In his in-depth analysis of stablecoins and dollar hegemony, Spyros Andreopoulos points out that demand for stablecoins is, to a certain extent, demand for dollars. Under the provisions of the GENIUS Act, a large portion of these reserve funds ultimately flows to federal debt. Treasury Secretary Bessent even predicts that the stablecoin size will grow to $2 trillion—at which point its holdings of Treasuries would be sufficient to affect the short-term interest rate yield curve.

But there is a paradox hidden here: if stablecoins only replace money market funds, then net demand for Treasuries does not increase. The key lies in international channels—stablecoins are shifting the balance sheets of assets and liabilities outside the United States toward dollar assets through dollarization effects. For emerging market countries, this means mitigation of currency mismatches; but for the Federal Reserve, it introduces an intermediary variable that cannot be ignored in the transmission path of monetary policy.

The clash of two regulatory philosophies: GENIUS Act vs. MiCA

At present, global stablecoin regulation is emerging along two distinctly different paths, and these two paths will profoundly determine how stablecoins affect the economy.

The U.S. GENIUS Act has been signed into law by Trump. The most notable feature of this framework is “market-led.” The bill requires stablecoin issuers to hold highly liquid reserves (U.S. dollar cash, insured bank deposits, and government debt with a remaining term of no more than 93 days), but the requirements for leverage and capital adequacy are relatively relaxed. The logic of the Trump administration is clear: to make stablecoins a digital extension of dollar hegemony while avoiding overly strict regulation that could suppress innovation.

The EU’s MiCA regulation takes a different route. MiCA divides stablecoins into “asset-referenced tokens” and “electronic money tokens,” and sets more specific requirements for issuer capital, investor protection, reserve segregation, and periodic audits. The EU’s position is closer to the logic of traditional financial regulation: stablecoins are essentially a payment tool or an investment product, so they should be regulated in line with financial institutions.

The difference between these two approaches is not only a matter of regulatory technique—it also reflects different understandings of the “nature of money.” The United States tends to view stablecoins as an innovative payment tool, letting the market decide the boundaries; the European Union views them as a potential carrier of systemic risk, requiring firewalls to be put in place before they grow.

For Taiwan, this is not a debate far away. Taiwan currently has no special laws regulating stablecoins. The central bank’s stance leans toward caution—having repeatedly stated that stablecoins may disrupt the mechanism of monetary policy transmission—but there is no concrete regulatory timetable. When the U.S. GENIUS Act and the EU’s MiCA are already in place, if Taiwan continues to delay establishing a framework, it may face the risk of financial regulatory arbitrage.

Stablecoins meet central banks: Taiwan’s monetary sovereignty anxiety

Returning to Greg Ip’s core argument: the stablecoin creation process lacks a central bank countercyclical adjustment mechanism. When markets panic, ordinary banks have deposit insurance and central bank discount windows as liquidity backstops; stablecoins do not. Issuers can only sell reserve assets to meet redemptions, and during panic redemptions, large-scale selling of Treasuries may trigger sharp fluctuations in short-term interest rates.

This risk is not just a theoretical exercise for Taiwan. Taiwan is a key hub in the global chip and electronics products supply chain, processing more than $700 billion in annual import and export trade. With such a large scale of cross-border payments, demand is substantial. USDT and USDC are already widely used in Taiwan’s over-the-counter markets and crypto exchanges, and they have effectively become settlement tools for parts of international trade.

In the past, Taiwan’s central bank’s stance toward cryptocurrencies has been quite clear: it does not recognize them as legal tender, provides no guarantees, and calls on the public to assess risks cautiously. But for stablecoins—this “near-money” tool—the central bank’s attitude appears more ambiguous. On the one hand, stablecoins’ dollar-pegged mechanism makes it less likely that they will be directly rejected the way Bitcoin is; on the other hand, if Taiwanese companies and individuals make heavy use of USDT for international trade settlement, the central bank’s control over the supply of Taiwan’s new dollars could be indirectly affected.

Looking at other Asian economies’ responses: Hong Kong has launched the “Stablecoin Ordinance,” establishing an issuance licensing system. It requires licensed issuers to maintain a physical office in Hong Kong and keep sufficient liquidity reserves. Singapore’s Monetary Authority of Singapore (MAS) has incorporated stablecoins into the Payment Services Act, requiring reserve assets for single-currency stablecoins to be held in separate trust accounts. Taiwan has not yet proposed a similar framework.

Not just Wall Street perspectives: Stablecoin economics are rewriting

Greg Ip’s WSJ column has brought this issue to Wall Street’s attention, but academic circles and the policy community have already been analyzing the monetary economics of stablecoins. Even the Federal Reserve itself is paying close attention: among the six key challenges it faces in 2026, “stablecoin regulatory framework design” is listed as a core issue on par with interest rate policy and balance sheet management.

Tether’s partnership with the Georgian government to launch the GELT stablecoin pegged to the Georgian Lari demonstrates another dimension of stablecoins: localization and multi-currency stability. When stablecoins are no longer just “dollar stablecoins,” but can be pegged to any fiat currency, their impact on the global monetary system will shift from an “extension of dollar hegemony” to “the decentralization of monetary sovereignty.” The National Bank of Georgia (NBG) has already set issuance rules for this—obtaining written approval from the central bank first, providing full reserve backing, and ensuring anti-money-laundering compliance. This approach may be a template Taiwan can consider.

Taiwan’s central bank may not need to rush to match the regulatory pace of the United States or the European Union, but at least it should begin building a classification framework for stablecoins: Which stablecoins are systemically important? When should issuers be required to disclose the composition of their reserves? When stablecoin size reaches a certain threshold, should it be included as a supplementary indicator in the money supply aggregate?

In the end, the most profound insight in Greg Ip’s argument may not be the conclusion that “stablecoins are risky,” but that they force us to rethink a fundamental question: in the digital age, what is money? If a digital asset issued by private institutions, backed by Treasury securities, and freely circulating globally is functionally no different from money, then how should each country’s central bank redefine its own role?