It’s 2025. Stablecoins are embedded in global payment systems. Public debates over digital dollars have stalled. Financial surveillance is rising. And with Project 2025 reshaping Washington, the regulatory foundations to address these issues are under threat.
Having worked on Capitol Hill drafting stablecoin legislation, and later contributing to digital payments policy at the U.S. Treasury, I’ve seen how we arrived here—the policy choices, regulatory fractures, and political dynamics that shaped this moment. While some of our efforts succeeded, many failed to go far enough. In the following post, I offer a retrospective that considers what worked, what didn’t, and what’s at stake if we don’t reclaim public control over the future of money.
Digital Currencies and Public Alternatives
During the COVID-19 pandemic, a powerful narrative emerged: cash spreads disease. Though the science was weak, the message stuck. Retailers refused cash payments. ATMs disappeared, especially in low-income neighborhoods. Banks and fintechs accelerated digital wallet adoption under the guise of safety, while private firms and crypto platforms seized the moment to push digitized, app-based payment systems as inevitable.
But what replaced cash was not simply technology—it was infrastructure that bakes surveillance, exclusion, and profit extraction into the architecture of daily life. Digital payments generate vast amounts of behavioral, transactional, and location data, and the shift away from physical currency meant a loss of autonomy and privacy.
There was also another problem taking hold at this time. The growth of stablecoins—digital assets pegged to fiat currency, often marketed as payments solutions—mirrored a familiar problem: shadow banking outside the perimeter of prudential regulation.
On Capitol Hill, some of us saw these threats clearly. To address the latter problem, we drafted The Stable Act, which was introduced under Rep. Rashida Tlaib. It proposed bringing stablecoin issuers under federally insured depository institution (IDI) requirements, mandating 1:1 reserve backing in FDIC-insured accounts, and applying rigorous oversight to wallet providers and intermediaries. The aim of this legislation wasn’t to stifle innovation; it was to address the obvious fact that stablecoins function as deposit substitutes, offering perceived liquidity, stability, and redemption—yet operating without the legal obligations or systemic safeguards of banks.
Simultaneously, we championed public-sector alternatives: namely, eCash, a digital legal tender designed to replicate the anonymity, peer-to-peer functionality, and universal acceptance of physical cash. Unlike central bank digital currency (CBDC) proposals heavy on surveillance, eCash would operate offline, without accounts, and without transaction tracing.
The fight wasn’t just technical—it was about who controls money, and whether digital infrastructure serves the public or entrenches private power. Together, the Stable Act and eCash represented a coherent, affirmative vision for the future of U.S. money. The Stable Act aimed to close long-standing loopholes in shadow banking by insisting that any liability functioning like a deposit must be regulated like one—regardless of whether the issuer was a bank, fintech, or crypto platform. At the same time, eCash offered a democratic alternative: a public, privacy-preserving digital instrument that could replicate the civil liberties of physical cash while supporting inclusion, resilience, and offline access. In other words, these proposals were not defensive reactions to technological change—they were blueprints for a financial system grounded in public accountability and civil rights rather than commercial surveillance.
Unfortunately, however, neither proposal gained sufficient traction or consensus to pass. Several factors contributed to their failure. First, Democrats were internally divided: some offices and committees had already become aligned with industry-backed narratives that framed stablecoins as benign “innovation,” while others underestimated the systemic risks and treated the problem as too niche or technical to prioritize. Second, the legislative focus in 2020–2021 remained consumed by pandemic recovery, leaving little political bandwidth for structural financial reform. Third, intensive lobbying by crypto firms—combined with the broader pro-innovation posture of the time—created hesitation among moderates who feared being painted as anti-technology. Finally, progressives lacked a unified messaging strategy; we warned about surveillance, shadow banking, and systemic spillovers, but those arguments struggled to break through until the risks became too visible to ignore.
Fragmentation and Regulatory Gaps
Without adequate legislation to address stablecoins, the task of confronting the threat of shadow banking fell to the Treasury Department. Published in 2021, the President’s Working Group (PWG) on Financial Markets report on stablecoins called for prudential regulation of issuers and oversight of wallets—but it also revealed deep fractures about which existing framework was right for regulating them.
Some agencies leaned on enforcement and the securities framework. They argued that stablecoins met the Howey test, which determines whether an asset is a security based on investment expectations and reliance on third-party efforts. They also believed that enforcement through securities law would be faster than bank regulation.
Other agencies recognized that this was insufficient. Stablecoins aren’t just securities. They’re also notes—a category explicitly listed in the Securities Act—and functionally certificates of deposit issued without FDIC insurance or bank charters. They promise stability. They are marketed to inspire trust and redemption, even when the legal fine print denies it. They rely on exchanges and intermediaries to simulate liquidity—often deliberately creating the illusion of convertibility. Yet a definitional loophole persists. U.S. law prohibits non-banks from issuing deposits but circularly defines deposits as instruments issued by banks. As a result, stablecoins evade classification as deposits despite mimicking their economic function.
We have, unfortunately, been down this road before—most notably with money market mutual funds (MMFs), which were treated as securities until their instability triggered systemic risk and government intervention in 2008.
The lesson? Enforcement alone is insufficient. We needed a new tier of regulation—banking oversight for instruments that function like deposits, regardless of their tech stack. Without functional regulation that captures shadow money, the risks compound.
Unfortunately, the failure to act decisively between 2021 and 2024 has left us with a fragile and fragmented system. This failure reflected not industry capture so much as structural disorganization within the Democratic coalition. Agencies disagreed on jurisdiction, Democrats disagreed on strategy, and no centralized authority—Congress, FSOC, or Treasury—asserted decisive leadership. This institutional drift allowed the status quo to persist, leaving today’s system more fragile, more fragmented, and increasingly vulnerable to spillover risks as stablecoins become embedded in mainstream payments and liquidity networks.
Losing Control of the Narrative
Perhaps the most frustrating loss during this period came not in legislation or regulation, but in the narrative around digital currencies. Early concerns about a central bank digital currency (CBDC) centered on surveillance. Conservatives claimed a digital dollar would track spending, suppress dissent, and enable government control. The irony? They weren’t entirely wrong. Many CBDC proposals were overly centralized. But instead of offering a better alternative—like eCash—mainstream Democrats defended flawed proposals or dismissed the privacy issue outright.
Part of the reason Democrats ceded the narrative was a longstanding internal discomfort with challenging anti-money laundering (AML) and Bank Secrecy Act (BSA) surveillance powers. Many policymakers feared that supporting privacy-preserving designs would trigger national security pushback or be perceived as soft on crime. Others wrongly assumed privacy concerns were fringe issues rather than mainstream civil rights questions. This misjudgment allowed conservative factions to dominate the values-based messaging.
Advocates and academics had warned for years that financial surveillance, driven by the AML/ BSA regimes and data monetization, disproportionately harms marginalized communities—how government agencies already accessed Treasury data, how credit scoring amplified bias, how fintech apps sold user data to law enforcement and hedge funds. Democrats could have seized the moment. Instead, we ceded the moral high ground. The right weaponized privacy to kill the very public infrastructure that could have preserved it. They shut down CBDC pilots, smeared public payments, and hardened opposition to any federal alternative.
The deeper issue was not simply messaging failure, it was that Democrats themselves lacked a coherent theory of what public digital infrastructure should accomplish. At each critical juncture—legislative, regulatory, and narrative—Democrats lacked a unified theory of public digital infrastructure. Progressives pushed for structural reform, but the party as a whole struggled to articulate a coherent alternative to private-sector dominance. This fragmentation created openings for the right to reshape the debate.
Fighting Back Against Privatized Financial Infrastructure
The current political climate reflects a culmination of these dynamics. Project 2025, a coordinated deregulatory blueprint, aims to defund and dismantle the Consumer Financial Protection Bureau (CFPB), politicize the Federal Deposit Insurance Corporation (FDIC), and expand private sector control over federal payment rails. Already, figures like Elon Musk have secured access to U.S. Treasury payment systems, while surveillance firms such as Palantir position themselves to manage SEC data infrastructure. Meanwhile, stablecoin issuers, fintech platforms, and other shadow banking actors exploit regulatory gaps to integrate further into systemic financial flows—all with minimal oversight.
This trajectory risks expanded surveillance, where benefit payments, tax refunds, and social safety net disbursements are intermediated by private platforms vulnerable to data exploitation; politicized access, where financial services are contingent on ideological alignment or risk scoring; and deepened inequality, as marginalized groups are disproportionately exposed to exclusion and predatory practices. Absent public options like eCash, FedAccounts, or postal banking, private intermediaries will increasingly control the infrastructure of economic participation.
So what is to be done?
These challenges trace back to a single through-line: at every stage Democrats lacked a coordinated strategy. The party was not “captured” by the crypto industry so much as fragmented, reactive, and internally conflicted about how to balance innovation, surveillance, and systemic risk. Without unified direction, opportunities for decisive action slipped away. To safeguard economic justice and systemic stability, policymakers must fight a battle on at least five fronts:
- Codify Functional Regulation for Stablecoins: Close definitional loopholes. If an instrument behaves as a deposit, regulate it within the banking perimeter, regardless of issuer form.
- Advance Public Financial Infrastructure: Scale eCash, FedAccounts, and postal banking as competitive, privacy-preserving, inclusive options.
- Reassert Privacy as a Progressive Value: Elevate financial privacy as a civil right. Legislate enforceable protections against surveillance in all public and private payment systems.
- Defend Regulatory Institutions: Protect and resource the CFPB, FDIC, FinCEN, and oversight agencies. Resist Project 2025’s efforts to weaken accountability.
- Prevent Platform Monopoly Over Public Money: Block exclusive private control of federal payment rails. Mandate interoperability, transparency, and public accountability in all systemically critical financial infrastructure.
While this moment echoes past failures in financial governance—from MMFs to shadow banking to the unchecked rise of tech monopolies—unlike with past crises, we have the tools and foresight to intervene. Progressives, technologists, regulators, and advocates must act decisively to build a digital financial system rooted in privacy, stability, and democratic accountability. If we fail to regulate stablecoins, defend public options, and confront institutional capture, we risk entrenching surveillance, exclusion, and privatized control over the very infrastructure of economic life. The fight for the future of money is here. And the outcome depends on how boldly—and how technically—we meet this moment.
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This post is part of series on the law and political economy of cryptocurrency. Read the rest of the posts here.
