Stablecoins might be the most ironically named innovation of the cryptocurrency era, at least in the eyes of many Washington regulators and policymakers.
These digital currencies promise to maintain their value, which is generally pegged to a government currency like the dollar or euro, by relying on stable financial backing like bank reserves and short-term debt. They are exploding in popularity because they are a practical and cheap way to transact in cryptocurrency. Stablecoins have moved from virtual nonexistence to a more than $120 billion market in a few short years, with the bulk of that growth in the past 12 months.
But many are built more like slightly risky investments than like the dollars-and-cents cash money they claim to be. And so far, they are slipping through regulatory cracks.
The rush to oversee stablecoins — and the industry’s lobbying push to either avoid regulation or get on its profitable side — might be the most important…