A coin without a sovereign behind it is a curiosity; a coin without a check upon its issuers is a hazard. That observation, ancient as it is, applies in full measure to the present debate over private digital currencies — the stablecoins, as they are now called — and the proposals to bring them under federal supervision.

The American dollar is more than a unit of trade. It is an instrument of the public faith, redeemable in obligations the United States itself stands behind. Its acceptance abroad — the privilege we colloquially call reserve status — is a fortune our citizens inherit from the patient honoring of debts across two centuries. To allow that fortune to be diluted by the unregulated issuance of dollar-denominated tokens, by entities whose reserves no public officer has examined, is to gamble a national asset against private convenience.

I am not, by temperament, an enemy of useful instruments. The merchant's bill of exchange was once a novelty and is now indispensable. There is no reason, in principle, why a digital token redeemable for dollars cannot serve as a swift settlement instrument for international commerce — provided the redemption is real, the reserves are auditable, and the issuer is bound by the same law that binds every other custodian of public trust.

The proposed legislation would do most of what prudence requires: federal charter for issuers, regular examination of reserves, plain disclosure to holders, and the unambiguous treatment of these tokens as the obligations they actually are. What it must also do — and what the present draft does only haltingly — is settle the question of jurisdiction. A stablecoin issued under a permissive state regime, used in commerce across the union, undermines any federal standard the Congress troubles to set. The example here is the antebellum bank notes, which I worked with the federal authorities at length to discipline; the same lesson applies.

The deeper question is who, in the end, stands behind a dollar. If it is the United States, the dollar carries the weight of two centuries of public faith. If it is a private firm in a permissive jurisdiction, the dollar carries only that firm's solvency. The citizens, foreign and domestic, who hold these instruments are entitled to know the difference; and the public, on whose name they trade, is entitled to insist that the difference be plain.

The Congress should pass the legislation, with the federal preemption tightened. The convenience is real. The hazard, unregulated, is realer.