Nobel Prize-winning economist Paul Krugman: Stablecoins only serve criminals.

American economist Paul Krugman, who won the Nobel Prize in Economic Sciences in 2008, argues that stablecoins have no practical value. In an article dated May 30 titled “Digital Corruption Takes Over DC”, Krugman commented:

"Stablecoins do not serve any clearly useful function. They cannot be used to purchase ordinary goods, and there is nothing you can do with stablecoins that cannot be done cheaper and easier through debit cards, Venmo, Zelle, bank transfers, etc."

So, Krugman asked the question: why not simply use the US dollar instead of using tokens "allegedly backed by dollars"?

According to him, the only difference that stablecoins bring compared to traditional payment methods is anonymity — which he calls a "value feature" for criminals who want to launder money, extort, or trade illegal drugs. Krugman concludes:

"In other words, the only economic reason for the existence of stablecoins is to serve criminal activities."

Paul Krugman

Stablecoin is the technological version of the "beast" bank.

Krugman likens stablecoin issuers to private banks before the American Civil War (antebellum banks) — organizations that were not tightly regulated and often set up for fraudulent purposes. Before the U.S. government printed paper money in 1861, people used gold and silver, or banknotes issued by such private banks for transactions.

Krugman wrote that although antebellum banks played a necessary role in the context of the absence of a national currency, stablecoins today do not serve a similar need. He argues that:

"Just like banknotes before the civil war, stablecoins are tokens issued by private entities with the promise that they are backed by US dollars."

He warned that stablecoins are a form of "shadow bank" (, similar to the institutions that sparked the 2008 financial crisis by evading financial regulations.

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Systemic risk warning from stablecoin

Krugman also criticized the efforts to promote the U.S. stablecoin bill – GENIUS Act, arguing that the lawmakers supporting this legislation may have personal interests involved. He wrote:

“…it will be very difficult for a person to understand something when campaign funding, and even their personal assets, depend on not understanding it.”

He also warned that if there is a wave of users demanding to exchange stablecoin for USD at the same time, issuers will be forced to sell government bonds en masse, causing interest rates to rise and leading to a "wave of flight from public debt," threatening the stability of the entire economy. Krugman emphasized:

"The core issue is that the development and legalization of stablecoins are creating new risks for financial stability — all just to make it easier for criminals to operate."

He concluded that the Congress's consideration of the GENIUS Act shows that Washington D.C. "if not completely controlled by the digital technology sector, has at least been largely bought off."

The crypto community strongly rebuts

Shortly after Krugman's article, Nic Carter — co-founder of the blockchain data platform Coin Metrics and a partner at the investment fund Castle Island Ventures — rebutted on X:

"With a Nobel Prize winner, he ) is extremely ignorant about this topic."

Carter pointed out that over 100 million people are using stablecoins and they will certainly not agree with the assertion that stablecoins have no utility.

Paul "Teddy" Fusaro, Chairman of the cryptocurrency asset management company Bitwise Asset Management, also spoke out in support of Carter, stating that calling Krugman "severely uninformed" is still too lenient.