Advantages and Disadvantages of US Government Stablecoins – Professional Tax Services

Stablecoins are a cryptocurrency that are generally backed by reserves. This helps ensure that the value of the coins remains aligned with the value of whatever they are pegged to, such as US dollars. If backed by dollars, US stablecoins could potentially be exchanged for the equivalent in US currency.

Three Bills

On July 18, three bills were passed into law: The Anti-Central Bank Digital Currency Act, The Digital Asset Market Clarity Act, and the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act.

The Anti-CBDC Act prohibits the Federal Reserve from issuing a central bank digital currency. The Digital Asset Market Clarity Act divides regulatory jurisdiction for digital assets between the Commodity Futures Trading Commission and the Securities and Exchange Commission. The legislation called the GENIUS Act establishes the regulatory framework for stablecoins, which makes them more secure and reliable than non-stable cryptocurrencies such as Bitcoin.

Potential Advantages of US Government Stablecoins

In addition to their stability, US government stablecoins will offer faster and more affordable transactions by avoiding several intermediaries that are required by conventional finance. This will also make stablecoins more cost-effective and efficient for international transactions.

US Government stablecoins have the potential for wide adoption, which may allow them to be used for everyday purchases. In addition, those invested in Bitcoin and other traditional coins backed by nothing could find it easy to cash out their traditional crypto for stablecoins, which, in turn, could be exchanged for US dollars.

Potential Disadvantages of US Government Stablecoins

Federal government-backed stablecoins could enable the government to track every transaction, thus raising civil liberty concerns about surveillance and loss of financial privacy. Other potential disadvantages include:

• Programmable features that could allow authorities to restrict how and where money is spent.

• Potentially marginalizing commercial banks, thus placing unprecedented financial power into government hands.

• Government-backed coins being frozen or deactivated.

• Centralized digital systems becoming prime targets for cyberattacks.

• As jobs disappear, government stablecoins could be transformed into a tool for social engineering, thus establishing a universal basic income and social crediting. This, in turn, could lead to penalizing those citizens who fail to follow government climate regulations.

If you have specific questions concerning cryptocurrency or stablecoins, we suggest you contact your tax or financial professional. As always, we provide our clients with unlimited complimentary tax planning advice and more.

Professional Tax Services is a locally owned provider serving over 3,700 local residents and businesses. For more information, call 661-259-1967 or visit www.scvprotaxservices.com.

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