The Wall Street Journal published an Opinion piece, "Stablecoins, Money-​Market Funds and the S&​L Crisis," which compares the introduction of stablecoins to the growth of money market funds decades earlier. Author Thomas Vartanian writes, "Celebrations over the recent passage of the Genius Act should be muted. It institutionalized cryptocurrencies in the U.​S. by creating the first comprehensive regulations for stablecoins. But all too often when Washington lets new financial products on the scene, they aren'​t adequately regulated and quickly gain an advantage over existing financial instruments that are more heavily policed. Market convulsions, economic downturns and bank failures follow. I watched it happen when money-​market funds burst into the market in the 1980s, bringing banks to the brink of insolvency. Stablecoins could do the same thing." He tells us, "I was in the room in the 1980s, when Congress and financial regulators struggled to find a way to allow money-​market funds to coexist with banks. Markets didn'​t cooperate and Washington acted too slowly to stop disaster. While the government had long ago capped the interest banks could pay depositors at 5.​25%, money-​market funds could offer whatever the market demanded. When interest rates and inflation hit double digits, depositors rightfully shunned banks to earn 12% in a money-​market fund. While the Genius Act prohibits stablecoin issuers from paying interest, it doesn'​t explicitly stop crypto exchanges and other intermediaries from doing so. If Congress and regulators aren'​t eagle-​eyed, exchanges have plenty of incentive to try. A report from the Treasury Department in April estimated stablecoins could lure $​6.​6 trillion in deposit outflows. That could cause the sort of disaster I witnessed 40 years ago." Vartanian comments, "Between 1979 and 1989, money-​market funds grew more than 20-​fold, sucking deposits out of the banking system which would have otherwise been converted into loans for homes, cars and businesses. The securities firms offering money-​market funds benefited from a regulatory ambiguity as similar to the one that now affects stablecoins. While securities companies weren'​t allowed to take deposits, there was no clear rule about money-​market funds. Scrambling to clean up this financial mess, Washington debated whether it was better to even the playing field by capping money-​market interest rates or by eliminating depositor interest limits entirely for banks. Bank regulators chose the latter as a matter of practicality and persuaded the securities, mutual-​fund and money-​market-​fund industries not to oppose legislation -- in part by holding over the heads of securities firms the threat of Justice Department criminal prosecution for unlawfully soliciting deposits." He adds, "If we learned anything from the era, it is that Washington must continually adjust regulation on new products to be functionally symmetrical with banks' limits. People who create, sponsor or transfer money and investments should be required to meet high standards of integrity and financial knowledge. The system can'​t tolerate any more Sam Bankman-​Frieds. And policymakers must be armed with better resources, artificial intelligence and more-​reliable data so that they fully understand how changes in market structures will impact traditional trusted intermediaries and the economy they support. At some point cheering innovation must give way to a balancing of the benefits with the new financial risks."

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