The Moneyness of Stablecoins

Money is omnipresent. Yet defining its fundamental character proves surprisingly difficult. Functional descriptions tell us what money does, not what money is, and they certainly do not explain how something becomes money in the first place. These questions rarely surface in everyday commerce, but they become unavoidable when a new instrument emerges claiming to be money. Stablecoins present precisely this challenge: dollar-pegged digital assets projected to reach $4 trillion in issuance by 2030 and promising to transform the global payment system. To determine how effectively stablecoins can serve as money, this Article develops an original framework for "moneyness," a concept that captures the degree to which an instrument's legal and institutional architecture enables it to perform monetary functions. To be sure, economists have long theorized moneyness by distilling the attributes that allow diverse assets to function as money within market economies. Financial regulation scholars have advanced this understanding by demonstrating that moneyness is fundamentally a legal phenomenon. They have shown that safety and information insensitivity that characterize reliable money can be achieved only through public law interventions, including deposit insurance, central bank liquidity facilities, prudential supervision, and resolution frameworks. We build on this work to identify a critical yet undertheorized dimension of moneyness: an instrument's capacity to operate effectively within the domain of private law. The degree to which something functions as money, we argue, depends not only on public protections but also on the measure in which an instrument can ground an enforceable claim, settle obligations, and circulate freely among holders. To that end, we identify four constitutive elements of moneyness: the legal nature and substance of the claim, its safety, its discharge capacity, and its negotiability. We begin our analysis by deconstructing the architecture of stablecoins, drawing on the contractual and regulatory frameworks of the two dominant issuers, Tether and Circle, to reveal a significant disconnect between the aspiration to create effective monetary instruments and the legal architecture underlying them. We then apply our framework to assess the moneyness of stablecoins before and after the enactment of the GENIUS Act, the first comprehensive federal stablecoin legislation. We observe that the Act brings genuine improvements yet fails to resolve critical deficiencies (and indeed, it introduces new ones). Should policymakers seek to enhance the moneyness of stablecoins, we counsel for the adoption of five targeted reforms: Federal Reserve master account access for qualifying issuers, industry-funded insurance for claimholders, a secured interest regime to replace the Act's flawed bankruptcy provisions, finality rules establishing when stablecoin transfers conclusively discharge obligations, and express tokenization of the stablecoin redemption right. Underlying these proposals is a broader insight: successful financial regulation demands careful attention to the private law foundations that structure the transactions and the claims it seeks to govern.