Regulating Global Stablecoins: A Model-Law Strategy
Digital currencies have the potential to improve the speed and efficiency of the payment system. The principal challenge is retail: to facilitate day-to-day payments among consumers as an alternative to cash, both domestically and across national borders. Two models of digital currencies are becoming viable: central bank digital currencies and nongovernment-issued currencies that are backed by assets having intrinsic value (stablecoins or, when widely used internationally, global stablecoins). Because they are not government issued, global stablecoins present complex and novel cross-border regulatory challenges, including managing the costs of complying with a multitude of national laws and ensuring international legal enforceability. Given the rapid growth of stablecoins, these challenges urgently need legal solutions. Two strategies have been devised for addressing similar challenges: either enact an international treaty or propose a model law for the relevant jurisdictions uniformly to enact as their national law. The Uniform Commercial Code (“UCC”) itself exemplifies such a model law, designed to reduce the high costs of coordinating and complying with different commercial laws in U.S.-interstate domestic transactions. This Article analyzes a model-law strategy to regulate global stablecoins, showing it should be more politically realistic than a treaty approach. The Article also designs, critiques, and proposes possible text for such a model law. The model law should be politically feasible for nations to enact because, as the Article shows, its design and proposed text are generally consistent with the principles and recommendations advanced by the world’s leading central banks and multinational financial organizations for regulating global stablecoins.
Steven L. Schwarcz