The value of issued stablecoins was about $1 billion in 2019 and is projected to reach $4 trillion by 2030. Tether and Circle dominate today, and newer entrants are coming from firms like PayPal, Western Union, and Fidelity. In July 2025, Congress responded to the rise of stablecoins with the GENIUS Act, but a deceptively simple question remains: Are stablecoins actually money? In a forthcoming article, we offer an answer that requires considering not only financial regulation but also private law, which the debate over digital assets too often overlooks.

Economists define money by a familiar triad: a medium of exchange, a unit of account, a store of value. But these phrases tell us what money does, not what it is, and say nothing about how something becomes money.

A modern monetary system comprises many forms of money, from coins and notes to bank deposits, checks, digital wallet balances, and money-market shares. As the economist Perry Mehrling has shown, these instruments are not equals but occupy an interlinked hierarchy, each one a promise to pay the layer above it, with public money (coins, notes, and central bank reserves) at the apex of today’s fiat system. Where something lands in that hierarchy depends on how reliably it does money’s job (a quality economists call “moneyness,” which they’ve traditionally explained through economic properties). James Tobin taught that moneyness is a matter of degree, not of kind. Gary Gorton and Bengt Holmström tied moneyness to “information insensitivity,” which is the quality that lets people accept money without investigating its issuer.

Legal scholars have built on what the economists began. Yet, where an instrument sits in that hierarchy is not fixed by economics alone. Each layer is a promise, and a promise is only as good as the law behind it. Dan Awrey’s work on “bad money” and Morgan Ricks’ on money as a public franchise explain how public law manufactures trust. Deposit insurance, central-bank access, supervision, and orderly resolution turn fragile claims into safe, widely accepted money. But, however essential safety may be, it does not exhaust what makes an instrument money.

We develop an original framework in which moneyness depends not only on these public protections but also on a precise private-law infrastructure. Its intensity, we argue, turns on four elements: the nature of the claim (what the holder actually owns, and against whom), safety (confidence the promise will be honored, in performance and in recovery if the issuer fails), discharge capacity (whether handing the instrument over settles a debt), and negotiability(whether it passes free of competing claims and defenses). Deficiency in any one of these elements undermines the instrument’s capacity to serve as money.

Our framework is a tool for assessing any monetary instrument, old or new, and stablecoins are the test case of the moment. At first glance, they look the part. Each token carries a right of redemption: the issuer’s promise to buy it back for a dollar, backed one-for-one by a reserve of safe assets. Stablecoins are efficient, too. Issued on open blockchains rather than the conventional financial system, they move anywhere in minutes for a few cents. Taken together, these traits seem to give stablecoins a high degree of moneyness. Yet, closer scrutiny tells a different story.

Drawing on the issuers’ own terms of service, user agreements, and regulatory filings, our article makes a test case of the market’s two dominant issuers, Tether and Circle. The picture is sobering. In practice, the right to redeem is conditional and revocable, a privilege the issuer can suspend. Indeed, most stablecoin holders cannot even exercise it. Tokens are typically bought not from the issuer but on secondary markets. This means that an issuer’s contracts run only to a small cohort of vetted institutional accounts, leaving millions of people with no privity and no direct claim. The terms of service push nearly every risk onto holders while shielding issuers from liability. And the backing is not theirs either. The reserves that stand behind the coins belong to the issuer. Holders own no property interest in them. If an issuer fails, stablecoin holders rank as ordinary unsecured creditors, not owners of the backing assets they were promised.

The GENIUS Act addresses some of these failures and introduces others. Take the redemption right. The act bars issuers from claiming government backing and obliges them to redeem, yet it leaves the claim’s legal nature unsettled. It does not fix whether that duty to redeem runs to every holder or only to the issuer’s direct, pre-approved counterparties. Nor does the law clearly address whether the right to redeem is built into the token or is a separate asset that can circulate apart from it. We argue for holder-protective answers, but the statute does not compel these results.

Safety is no firmer. The act builds it on a narrow-bank model that requires an issuer to back every coin with high-quality liquid assets (chiefly cash and Treasuries) and prohibits lending them out. Thus, safety turns on what the issuer holds, not on any public backstop. Importantly, we note that those reserves sit with custodian banks, so a holder’s safety rests on institutions it never chose. When Silicon Valley Bank collapsed in 2023, more than $3 billion of Circle’s reserves were trapped inside it, and USDC slipped to $0.88. Perhaps worst of all, the act’s insolvency rules contradict each other. One provision pulls the reserves out of a failed issuer’s bankruptcy estate while others still treat them as part of it. And the holders’ “super-priority” for shortfalls in the reserve asset pool backfires: By ranking them ahead of even the trustee and rescue lenders whose fees a bankruptcy must pay first, it can leave no one willing to run the case.

The GENIUS Act is conspicuously silent on the question of whether paying in a stablecoin actually settles a debt (what we call discharge capacity). Nothing requires a creditor to accept one, so acceptance is negotiated transaction by transaction, and nothing fixes when payment becomes final. For a peer-to-peer transfer, no rule says when the payer’s obligation is discharged. Where the payment runs through exchanges or other platforms, the gap is wider. There is no analogue to UCC Article 4A, which for ordinary electronic fund transfers fixes when an intermediary is bound, when the debt is discharged, and who bears the loss if it fails midway. Negotiability, the last element, turns on a question left open above: whether the right to redeem is merged with the token or stands apart from it. Cash passes from hand to hand cleanly. Whoever takes cash in good faith keeps it. A stablecoin is only half there. The token itself travels clean—under UCC Article 12, whoever obtains control of it, in good faith, for value takes it free of any competing claim. But at present the right to redeem is a separate asset, governed by the rules for assigning contractual claims. This is the very opposite of negotiability. Under strict nemo dat—no one can give what he does not have—and first-in-time priority, a transferee takes the redemption right burdened by every defense and competing interest that arose before. Until the right to redeem is welded to the token itself, the shell circulates like money while the value inside it may not be like money.

From a broader perspective, how much moneyness stablecoins ought to possess, if any, is a normative and political judgment for lawmakers and regulators. That inquiry is distinct from the descriptive question our article sets out to answer. Should they decide in favor of more moneyness, the article identifies the five required interventions, each closing one of the gaps that our framework exposes. Three go to safety: Let qualifying issuers hold reserves at the Federal Reserve rather than with private custodians, as the Bank of England is weighing; create industry-funded insurance functionally similar to the Securities Investor Protection Corporation; and replace the act’s tangled insolvency provisions with a perfected security interest in the reserves under UCC Article 9, thereby giving holders a property right of certain priority whose treatment in bankruptcy is well understood. One goes to discharge: a finality rule treating transfer of control as discharging the payer’s debt peer-to-peer, with an Article 4A-style regime for intermediated payments. The last goes to the claim and negotiability: Unequivocally tokenize the redemption right so that controlling a coin carries the right to redeem it. This would fuse the coin and the promise into a single asset under one body of law.

A common thread runs throughout our article—public and private law must be wedded. Financial regulation too often fixes on prudential requirements, disclosure, and licensing while ignoring the contract and property rights that are essential to the operation of money. This lesson reaches beyond money. Across finance, from payments to investments, instruments rest on private-law foundations as much as public ones, and getting both right will only matter more as innovation accelerates.

Christopher K. Odinet is a professor and Mosbacher Research Fellow at Texas A&M University School of Law. Andrea Tosato is a professor at Southern Methodist University’s Dedman School of Law. Yesha Yadav is the Milton R. Underwood Chair, an associate dean, and a professor at Vanderbilt University Law School. This post is based on their article, “The Moneyness of Stablecoins,” forthcoming in the Yale Law Journal and available here.