Stablecoins Are Growing Up — Whose Pocket Does the Money Come From? Nellie Liang on Life After GENIUS
Listening notes on the 2026-09-14 Macro Musings episode: former Treasury Under Secretary Nellie Liang on stablecoins after the GENIUS Act — the historical warning about private money, how much Treasury bill demand each stablecoin dollar creates, and what the global dollar gains and loses. Educational content, not investment advice.
Money is not, properly speaking, one of the subjects of commerce; but only the instrument which men have agreed upon to facilitate the exchange of one commodity for another. It is none of the wheels of trade: It is the oil which renders the motion of the wheels more smooth and easy.
— David Hume, “Of Money” (1752)
What this episode is about
On this episode of David Beckworth’s Macro Musings (September 14, 2026), the guest is Nellie Liang. She spent more than thirty years at the Federal Reserve Board. After the financial crisis, when Bernanke restructured the Fed, she became the first director of its new Division of Financial Stability. She later moved to Brookings, and Janet Yellen then brought her to Treasury as Under Secretary for Domestic Finance. The conversation centers on a paper she wrote with Brent Neiman of Chicago Booth for the Aspen Economic Strategy Group: “Stablecoins after GENIUS: Private Money, Public Debt, and the Global Dollar.”
Beckworth opens by saying he likes how balanced the paper is: no hype, no doom. After listening, I agree. Liang has been pushing for stablecoin legislation since 2021, and she clearly sees promise in the industry. Yet every time she names a benefit, she puts the trouble that same benefit causes on the other side right next to it.
Key takeaways
1. The GENIUS Act mattered more than she expected
When Treasury published its first stablecoin report in November 2021, the market was about $25–30 billion. Today it is around $250–300 billion. The report flagged three risks back then: reserve assets of uneven quality, redemption and operational risk, and big tech firms creating their own money and building walled gardens. Treasury spent years working with the House Financial Services Committee without getting a bill through. The new administration made it a priority in its first six months, and the bill passed.
Liang says the act provided “clarity,” then adds, “no pun intended” (there is a separate market-structure bill in Congress called CLARITY). With clear rules, the issuers started moving, and so did the banks: regional banks are forming tokenized-deposit networks, and Open USD has pulled together a consortium of about 140 companies. She sees Open USD as different from Libra in 2019 because it is shared underlying infrastructure run by a consortium, closer to SWIFT. How 140 companies will govern it, and which blockchain it will use, hasn’t been announced.
2. It already works as private money, and it is still small
Stablecoins are backed by reserve assets. The issuers take no deposits, make no loans, and have no Fed backstop. Liang calls that private money. The market is about $300 billion; M1 is about $19 trillion. Her warning comes from history: private money has never been stable over the long run, and a large private money system cannot live outside central bank money for long. If stablecoins grow that big, the Fed and Congress will have to decide what to do. Then she adds: “But we’re not there.”
3. The use cases are cross-border payments and remittances, sold on speed and 24/7 access
The benefits: faster, cheaper, always on, and eventually programmable. Real traction so far is in cross-border business payments and remittances. A small US business paying an overseas supplier whose bank differs from its own no longer has to route through a chain of correspondent banks. World Bank data show fees of 10–15% for sending $200 through less-traveled remittance corridors. Beckworth tells a story about a friend’s family buying a house in Argentina: the deal had to be done in US dollar cash, so they hired a security team to physically haul several hundred thousand dollars from one bank to another.
On 24/7 access, Beckworth mentions Aaron Klein, a past guest who pounds the table about payment delays; he told Liang before recording not to do the same, since the mics pick it up. Klein’s point: households living paycheck to paycheck with less than $1,000 in checking can’t wait two or three days for their pay to clear. More than a hundred countries have built fast payment systems, with the widest adoption in Brazil, Kenya, and India, and research finds they help households smooth consumption and lower the fixed cost of each transaction. The US has the Fed’s FedNow and the large banks’ RTP network running side by side, and neither has much uptake.
4. What makes it useful is what makes it easy to hide in
Speed, low cost, cross-border reach, and bearer ownership make payments better, and they also make money laundering and sanctions evasion easier. Stablecoins behave like cash: once issued, they can change hands many times without the issuer keeping any record. Liang’s next point surprised me. The blockchain is public, so you can’t see who, but you can see every transfer, and tracing patterns after the fact is easier than with cash. Tether and Circle have both frozen accounts at law enforcement’s request. The sticking point is legal: when an issuer freezes an account without a court order, whether it is protected if the customer sues remains unclear.
5. A net positive for the dollar, with a blunter sanctions lever
The dollar’s global role gives the US two things: cheaper borrowing, and the ability to enforce sanctions through correspondent banking — the threat of cutting a foreign bank off from US correspondents gets it to comply. Stablecoins compress that chain of correspondent relationships into a single on-chain settlement, which blunts the second benefit while keeping the first. Liang still sees the net as positive. Other countries are building new payment systems; without a digital dollar instrument, the US would lose share of cross-border transactions. And stablecoins make dollars easier for people abroad to get, which creates new demand for dollars.
6. Each $1 of stablecoins adds about $0.60 of net Treasury bill demand
This is the arithmetic in the paper most worth reading closely. At the two largest stablecoins, 79% of reserve assets are Treasury bills or Treasury repo, so each $1 of stablecoins creates about $0.80 of gross T-bill demand. Then the question is where the money comes from: money market funds, bank deposits, currency, or abroad. Money market funds already hold at least 80% of their assets in T-bills, so money moving from there is a wash — the stablecoin buys, the fund sells. Banks hold few T-bills, and money from abroad is entirely new. Applying a private-sector forecast with three scenarios — $0.9 trillion, $1.9 trillion, and $4 trillion — she and Neiman arrive at roughly $0.60 of net new demand.
Liang says it herself: “I’m sure we’re wrong, but I don’t know how to make it right.” What the arithmetic does is expose the cost: most net new demand comes from bank deposit outflows and money from abroad. If deposits leave community banks, small business lending takes a hit. She sees that as a transitional disruption, not a permanent displacement of credit.
Further thoughts
1. A stablecoin pegged one-to-one — is my money safe in there?
When I heard the policy section, I thought of a common intuition: it’s pegged one-to-one, so it’s about the same as money in a bank. The episode offers a way to take that apart by looking at the assets behind it, in three layers.
First, one-to-one is a promise, and whether it can be redeemed depends on what the issuer holds. GENIUS allows cash, T-bills, and uninsured bank deposits as reserves, and treats all three the same, with no risk weights.
Second, assets that all get labeled “high-quality liquid assets” still carry different risks. A T-bill is backed by the US government; an uninsured deposit is backed by one particular bank, and if that bank fails, the money waits in line. Liang wants different risk weights for different reserve assets, so issuers have a reason to hold more T-bills. She cites the EU’s MiCA, which requires issuers to hold about 2% capital, as a reference point, and makes clear she isn’t proposing to copy the 2%.
Third, the rules are still being written. The OCC has to set capital, liquidity, and risk-management standards, and the one-year deadline in the law has passed. Part of the “safety” people hold today rests on rules that don’t exist yet.
I’d carry this way of looking to anything marketed as “principal-protected” or “redeemable anytime”: what’s behind it, in what proportions, and where I stand in line if one piece fails. Liang adds another angle: large-scale adoption may come less from retail users and more from corporate treasury departments folding stablecoins into cash management, and they will pick issuers with clean reputations and settlement certainty. So when I try to judge which stablecoin can grow, I’d look at its reserve composition and which corporate customers it has won, and put social-media buzz last.
2. My checking account pays almost nothing — is that just how it is?
Beckworth describes briefing a group of federal financial regulators. Someone raised a hand and asked: we spent hundreds of years developing this banking model, it’s the optimal way to provide credit and payments, why would you want to disrupt it? He asked back: are you sure this is the final destination? Why must payments be tied to credit intermediation? By his account, it blew their minds.
When I heard that, I thought of my own checking account. The money sits there earning next to nothing, and few of us give it a second thought. The episode breaks that “just how it is” into three layers.
The first is regulation. Regulation Q once barred US banks from paying interest on deposits, which gave rise to money market funds. After Reg Q was repealed, the ban on paying interest on transaction accounts stayed on the books until Dodd-Frank removed it. The law has allowed it for years; few banks do it.
The second is habit. Liang’s explanation is that low rates lasted so long that people stopped expecting interest on transaction accounts, and when the Fed hiked, depositors getting little of it came to seem normal. A sustained higher-rate environment, plus competitors like stablecoins, could shift that equilibrium.
The third is the case for the other side, and I think it’s the layer most worth keeping. Taking deposits and making loans are complementary: community banks lend to small businesses using local information, loans too fragmented and too local to ship off to capital markets. If deposits move away, that credit gets hurt first.
My own read: an arrangement that has lasted a long time shows it can survive; it doesn’t show it’s the best one. Before breaking it, find out what it protects and for whom. I ask the same question about companies: if a good business rests on customers not bothering to switch, when might switching get cheap? Stablecoins and instant payments are lowering the cost of moving deposits.
Resources
- Nellie Liang and Brent Neiman, “Stablecoins after GENIUS: Private Money, Public Debt, and the Global Dollar,” Aspen Economic Strategy Group, 2026.
- President’s Working Group on Financial Markets et al., Report on Stablecoins, November 2021.
- World Bank, Remittance Prices Worldwide database.
- Dan Awrey, Beyond Banks: Technology, Regulation, and the Future of Money, 2024 — Beckworth recommends it on the show for its account of unbundling what banks do.
- The earlier Macro Musings episode with Aaron Klein on real-time payments.
One Thing to Take Away
When something new grows, subtract what it pulls away from or replaces; what’s left is the net addition. When Liang ran the stablecoin numbers, the $0.80 of gross demand, minus what moved over from money market funds, came to $0.60 — and part of that $0.60 is deposits that community banks lost.
One thing I’ve tried: pick one new recurring expense from this month — a new subscription, a gym pass, a new app — and write next to it which old expense or habit it replaced. Subtract what it replaced; what remains is what’s actually new in your life. If what it took over was the hour you used to spend at dinner with your family, write that down too.
This article is an educational discussion of investment method. It is not advice to buy or sell any individual security, offers no target prices, and does not analyze any current holding. Investing carries risk; make your own decisions or consult a qualified professional.