Tuesday Tips for the Week of March 30th
Chris Odinet, Andrea Tosato, & Yesha Yadav
Yesha Yadav
Abstract
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.
Chris Odinet & Andrea Tosato
Chris Odinet
Andrea Tosato
Abstract
Stablecoins have become one of the cornerstones of the digital asset ecosystem, facilitating over $10 trillion in annual transactions. Yet while lawmakers, regulators, and scholars worldwide have focused intensely on centralized stablecoins issued by identifiable companies like Tether and Circle, a parallel market of decentralized stablecoins has quietly grown to command billions in value, all without comparable scrutiny. These protocols, exemplified by MakerDAO’s DAI, operate as autonomous software systems, without identifiable issuers, and with users interacting exclusively with code rather than corporate counterparties. As this shadow infrastructure becomes increasingly integrated into mainstream finance, billions in user value remain exposed to legal uncertainty and without adequate legal protection.
This Essay provides the first comprehensive legal analysis of decentralized stablecoins and, in doing so, reveals a major private law vacuum that distinguishes these tokens from traditional financial instrument. Through our systematic examination of MakerDAO, we demonstrate that the absence of legal personhood leaves users in a complete contractual void, renders title to their holdings uncertain, and largely forecloses viable remedies in tort, criminal, or fiduciary law. Moving beyond critique, we then propose three private ordering solutions, ranging from transparency requirements to decentralized insurance mechanisms to legally incorporated DAOs, that each offer different trade-offs between decentralization and legal certainty.
Finally, we provide the first comparative analysis of how the European Union’s Markets in Crypto-Assets Regulation (MiCAR) and the United States’ recent GENIUS Act approach decentralized stablecoins. While both frameworks explicitly defer substantive regulation of these protocols to future study, their interim strategies reflect diverging regulatory philosophies. MiCAR employs functional definitions that technically encompass decentralized stablecoins but impose impossible compliance requirements that effectively ban them via liability transfer. The GENIUS Act adopts structural prerequisites that categorically exclude protocols that lack identifiable issuers, thus leaving them in regulatory limbo. Neither framework successfully resolves the fundamental challenges that these decentralized protocols present: namely, replicating financial functions without financial institutions. By mapping both the private law vacuum and the regulatory landscape, our analysis charts a path toward coherent legal frameworks.
Cathy Hwang & Justin Weinstein Tull
Cathy Hwang
Justin Weinstein-Tull
Abstract
Most American contract law disputes take place in the shadows, unnoticed by commentators, scholars, and casebooks. These disputes–often heard by lay judges in local courts that do not publish their opinions–account for more than 80 percent of total contract disputes. Using state-level filing data and original interviews with local court judges, this Article unearths, for the first time, this vitally important yet understudied world. Our findings provide a blueprint for new research on local courts and contract law, with wide-ranging implications for theory and practice.
This Article makes three contributions to the literature. First, we identify what we call “values-driven adjudication.” Through interviews, we find that local court judges know relatively little about legal concepts like unconscionability, parol evidence, and canons of construction–principles that scholars, lawyers, and students have always believed form the basis of contract law adjudication. Instead, local court judges rely on broader values of fairness, commitment to mediation, fidelity to law (as they understand the law to be), and community norms. Second, while values-driven adjudication might cause concern at first glance, we find that many of the broader ideas local judges instinctively rely on vindicate contract law’s underlying values. Local judges may not know the contours of the doctrine of unconscionability, for example, but they do care that contracts are fair. They may not know that efficiency motivates some contract law doctrines, but they do attempt to mediate contract law disputes in ways that avoid appeals. Finally, we consider the wide-ranging implications of these findings for contract theory, contract design, civil justice, and judicial education, and we call for more research on this shrouded but vitally important world of local courts.