States issuing their own digital money sounds like Murray Rothbard’s nightmare. That libertarian icon spent his career railing against central banks and “fiat” currency, money backed by nothing but law. But instead of free markets in money, we are getting governments racing to mint tokens on the blockchain, like the Bahamas’ Sand Dollar, Nigeria’s eNaira, and Jamaica’s JAM-DEX. Venezuela’s “Petro,” supposedly stabilized by oil reserves, went bust in 2023 amid corruption scandals.
Now U.S. states want in on the action, and Rothbard is probably spinning in his grave. Crypto-anarchists like him dreamed of private currencies disciplining the state. Instead, states are cosplaying crypto, and it is going to get messy.
Some state stablecoins, such as Wyoming’s forthcoming WYST Stable Token, promise one-to-one backing with dollars and Treasury bills. Some plan to tie value to commodities. Other so-called Stablecoins are not really pegged to anything.
At their best, these dollar-backed tokens resemble the U.S. dollar under the gold standard. Back then, you could literally swap paper for metal, until President Richard Nixon ended gold convertibility in 1971. Likewise, nothing really stops any issuer, including Wyoming, from breaking its peg in this same way.
At their worst, so-called stablecoins are just volatile cryptocurrencies dressed up with a “stable” label. Algorithmic tokens tried to guarantee steadiness through code alone. TerraUSD, once an $18 billion darling, collapsed overnight in 2022 when confidence cracked. It was “stable” until suddenly it was not.
Yet stablecoins have real appeal. A $200 remittance should arrive as $200, not $188 after fees. Traditional transfers cost about 6 percent globally, says the World Bank. Blockchain payments can clear in minutes for pennies, which explains their popularity in places like Venezuela, where remittances topped $5.4 billion last year.
But adoption has been slow. The Bahamas’ Sand Dollar launched in 2020 and reached 100,000 wallets by 2022. Impressive, but still under 0.1 percent of currency in circulation. If a national project with strong government backing struggles, state experiments face steeper odds.
The U.S. Constitution adds some domestic friction. Article I, Section 10, Clause 1 (the “Contracts Clause”) flatly bars states from issuing money. Missouri tried in the 1830s, and the Supreme Court struck it down in Craig v. Missouri. Wyoming’s workaround is to insist its token is not “money” at all, just a digital voucher for dollars in a vault. But if it functions like money, courts may decide it is money.
Federal law muddies things further. The GENIUS Act sets rules for private stablecoin issuers, but state treasurers claim their “digital vouchers” sit outside that statute. That theory is certain to be tested.
Globally, the picture is sobering. Instead of a coherent financial order, we are getting a patchwork of different tokens sold under the same label: “stable” coin.
So how do you decide whether to accept payment in WYST or JAM-DEX? You cannot judge a stablecoin by its name. Evaluate each one by asking three questions:
First, who redeems the token? If it is a government with a history of fiscal shortcuts, be careful.
Second, how transparent and secure are the reserves? Dollars and Treasuries held off-budget build trust; political IOUs do not.
Third, does the system plug into real-world payments? The Sand Dollar shows that without banks and merchants, even a sound design withers.
Most state and sovereign tokens fail at least one of these tests. If Nigeria or even Texas owes you money, it might be worth waiting for that wire transfer after all.
The reality is that we will see both federalism and fraud: stablecoins that deliver faster, fairer payments and those that collapse under their own hype. The conundrum is clear. In a world where money and code are merging, new risks abound. Telling the difference between genuine innovation and a bad Bitcoin knockoff is not just smart. It is essential.
