FIN310 • Session 4: Crypto, Stablecoins & Digital Payments

1) What is “Crypto” (in one slide)?

Cryptoasset = a digital token on a distributed ledger (blockchain). Some aim to be money (e.g., Bitcoin); others power apps, games, or financial rails.
Blockchain = shared database that many computers maintain. New entries are accepted via a consensus rule (e.g., proof-of-work or proof-of-stake).
Why people care: open access, programmable payments/finance, 24/7 settlement, cross-border speed, new business models — with risks (volatility, hacks, fraud, leverage).

Families (very simplified)

Type	Examples	What for?
Payment/Store of value	Bitcoin	Peer-to-peer value transfer, scarce supply narrative
Smart-contract platforms	Ethereum, Solana	Programmable apps/DeFi/NFTs
Stablecoins	USDC, USDT	Dollar-like token for trading and payments

You’ll see where these connect to money aggregates and policy.

What Is Web3? HTTP, Stablecoins, NFTs & How Web3 Apps Work

Start here for a practical explanation of how ordinary websites, digital wallets, blockchain networks, smart contracts, stablecoins, and NFTs connect.

Open the Web3 lesson on YouTube

2) Keys, Wallets & Security — “Not your keys, not your coins.”

Public vs. private key

Public key / address — where others can send assets (like an email address).
Private key — proves you can move the asset (like the password). Never share it.
Signatures — you sign a transaction with your private key; the network verifies with your public key.

Wallet types

Custodial (exchange holds keys) — easier UX, platform risk.
Self-custody (you hold keys) — more control, more responsibility.
Hardware wallets — keys in a device that stays offline; phish-resistant.

Security basics: strong passphrases, beware phishing, 2FA, test small amounts first.

2b) Self-Custody & Safety — No helpdesk on-chain

Core realities

Finality: most crypto transfers are irreversible.
No bank recourse: losing a private key / seed phrase usually means losing the asset.
Attack surface: phishing, fake apps, malware, SIM-swap, malicious smart contracts.

Protection checklist

Hardware wallet for meaningful balances; keep the seed phrase offline (never cloud/email).
Multisig or social recovery for shared/treasury funds.
2FA + allow-listing if using custodial exchanges; withdraw to known addresses only.
Verify contract addresses on the issuer’s official site; avoid random links.
Test sends first; keep software/firmware updated; beware airdrops and “support” DMs.
Stablecoin specifics: read redemption terms, issuer disclosures, and proof-of-reserves/attestations.

Rule of thumb: custody risk ↓ as operational discipline ↑ (hardware, backups, procedures).

3) Bitcoin — Mining, Issuance & Supply

How mining works (proof-of-work)

Miners bundle transactions into a block and compete to find a valid hash. First to solve earns block reward + fees.
Issuance halves \~every 4 years (“halving”) → a capped supply of 21 million BTC by design.
Costs: electricity + hardware → economic floor for large miners.

Why people hold BTC

Scarcity narrative (fixed cap), portability, censorship-resistant settlement.
But: price volatility, regulatory shifts, and technological risks.

We focus on concepts; this is not investment advice.

3b) Bitcoin vs. USD Stablecoins — What’s the difference?

Dimension	Bitcoin (BTC)	USD Stablecoins (USDT/USDC/…)
Goal / Design	Decentralized, scarce digital asset; peer-to-peer cash vision; “digital gold” narrative.	Track $1.00; payment/settlement rail with dollar-like price.
Price behavior	Free-floating, volatile.	Pegged to $1 via reserves + redemption; low volatility if reserves/liquidity hold.
Backing	No issuer; value comes from consensus & scarcity (code/economics).	Fiat-backed (cash/T-bills/MMFs) or crypto-collateralized; issuer promises redemption.
Supply policy	Capped 21M; issuance halves \~4y (proof-of-work).	Elastic: minted/burned vs. dollars deposited/redeemed with issuer.
Who runs it?	Open network of miners/nodes; no company in charge.	Issuer/company or DAO + custodians; subject to legal terms and regulators.
Security base	Proof-of-work hashpower; highly censorship-resistant.	Trust in issuer reserves, banking partners, and smart-contract design.
Best use cases	Long-term holding, censorship-resistant transfers, diversification thesis.	Payments, trading collateral, 24/7 settlement, cross-border dollar rails.
Key risks	Volatility; regulatory climate; custody mistakes.	Reserve quality/liquidity; de-peg/run risk; counterparty/legal risk; smart-contract risk.
M1/M2 linkage	Buying BTC with deposits reduces bank deposits; not counted in M1/M2.	Tokens not in M1/M2; deposits can shift to issuer reserves (T-bills/MMFs or bank deposits).

Why many people like Bitcoin

Programmed scarcity (21M cap) and predictable issuance.
Neutral, permissionless network with global settlement.
Self-custody possible; no reliance on an issuer.

Trade-off: price swings are large; it’s not a stable unit of account.

Why many prefer stablecoins for payments

Dollar price stability for invoices, payroll, and trading.
Fast settlement across exchanges and borders; composable with crypto apps.
Familiar accounting (denominated in $).

Trade-off: you trust the issuer + banking stack; read disclosures.

Bitcoin Games

📈 Bitcoin Supply Game ⛏️ Bitcoin Mining Game

Tip: If your LMS blocks iframes, keep the buttons above so students can open the games in a new tab.

🎥 Quick explainer on Stablecoins — watch this first

4) Stablecoins — What, Why, How

What is a stablecoin?

A token designed to track a reference (usually the U.S. dollar). Users like the “crypto-speed” of transfers with less price volatility.

Why people use them

Fast, low-friction settlement across exchanges and borders.
Bridge between traditional dollars and crypto apps.
Sometimes higher yield on reserve assets (indirectly, via issuers’ holdings).

How they keep the peg (models)

Model	Backing	Notes
Fiat-backed	Cash, bank deposits, T-bills, MMFs	Redeemable $1 in/$1 out with the issuer. Needs audits, liquidity, risk controls.
Crypto-collateralized	On-chain collateral (e.g., ETH)	Over-collateralized; can be volatile; uses smart-contract rules/liquidations.
Algorithmic	Rules/market incentives	No (or partial) collateral; historically fragile under stress.

4a) Who Makes Stablecoins & Who Profits?

Who creates them?

Fiat-backed issuers (companies like Tether, Circle, Paxos, etc.) mint/burn tokens against dollars (or T-bill/MMF cash) held with banks/custodians.
Crypto-collateralized protocols (e.g., MakerDAO/DAI) mint tokens against on-chain collateral, with over-collateralization + liquidations.
Payment brands (e.g., PayPal’s PYUSD via Paxos) integrate stablecoins into existing user networks.

How do issuers earn money?

Interest on reserves (“the float”): cash/T-bill/MMF income while tokens circulate.
Fees: issuance/redemption, network/spread, institutional services.
Scale effects: larger supply → larger interest income (minus hedging/custody/audit costs).

Founders/shareholders profit like any fintech: revenue – expenses; no “mining rewards.”

Do early inventors get rich?

They can, but via equity in the issuing company or protocol tokens, not by printing money. The economic value comes from trust, compliance, banking rails, distribution and risk management.

Student-life lens

Using a top-tier USD stablecoin for tuition transfers or international family support can be cheaper/faster—but read the issuer’s terms and your country’s rules.
For campus clubs/treasuries: prefer multisig, publish the receiving address, and keep a fiat runway in a bank account.

4b) Can I Create a Stablecoin & Get People to Use It?

Reality checklist (fiat-backed)

Form a compliant entity; hire counsel for KYC/AML, money transmitter/licensing requirements in relevant jurisdictions.
Secure banking & custodians willing to hold reserves (cash/T-bills/MMFs).
Write/audit the smart contracts (mint/burn/blacklist/upgrade policies).
Publish frequent attestations (and ideally audits) about reserves.
Line up market makers, exchanges, and wallets for distribution/liquidity.
Design redemption SLAs, fees, and playbooks for stress events.

Short answer: yes, but it’s a fintech/regulatory project first, then a smart-contract project.

Crypto-collateral model (on-chain)

Over-collateralize with liquid assets; build oracle feeds; implement liquidation engines.
Expect higher capital costs and potential de-peg during stress; governance/risk is everything.

Avoid “algorithmic” designs that rely on reflexive mint/burn loops without hard collateral—those have repeatedly failed.

Will anyone use mine?

People adopt the coin that has the best redemption, transparency, and integrations.
Payments is a network-effects game: merchants, wallets, and exchanges matter more than code elegance.

4c) Popular USD Stablecoins (high level)

Token	Type	Issuer/Manager	Typical Reserves	Redemption	Notes
USDT	Fiat-backed	Tether	Cash, T-bills, MMFs (mix evolves; see attestations)	KYC’d customers via issuer	Largest by market cap; widely used on exchanges.
USDC	Fiat-backed	Circle (Centre)	Cash & short-dated U.S. Treasuries (segregated accounts/funds)	KYC’d customers via issuer	Heavy institutional/FinTech integrations.
DAI	Crypto-collateralized (hybrid)	MakerDAO	On-chain collateral + real-world assets (indirect T-bill exposure via custodial wrappers)	On-chain mint/redeem mechanisms	Over-collateralized model with liquidations.
PYUSD	Fiat-backed	PayPal (issued by Paxos)	Cash & U.S. Treasuries	PayPal/Paxos per terms	Payments-focused integrations.
USDP / GUSD	Fiat-backed	Paxos / Gemini	Cash & U.S. Treasuries	Issuer redemption for KYC’d users	Smaller, regulated-issuer models.

Always check the latest attestations, reserve breakdowns, and terms on the issuer’s official site before relying on a token for payments or treasury.

USDT Peg History (live)

Live chart via TradingView (USDT/USD). Source reference: Tether (USDT) on CoinMarketCap .

UST (TerraClassicUSD) — Post-Peg Price (live)

Former algorithmic “stablecoin” that de-pegged in 2022. Shown for comparison only. Reference: USTC on CoinMarketCap.

UST (TerraUSD) Peg Break — What students should know

UST was an algorithmic “stablecoin” that tried to hold $1 using mint/burn with LUNA — no hard dollar collateral.

What happened (May 2022): UST lost its $1 peg and crashed to cents; LUNA supply hyper-inflated during the attempted defense.
Scale of loss: Tens of billions in market value were wiped out across UST + LUNA; many retail holders suffered near-total losses.
Why it failed: Confidence shock → redemptions → reflexive “death spiral.” With no cash/T-bill reserves, there was nothing solid to meet outflows.

Lesson: Treat algorithmic or under-collateralized “stablecoins” as high risk. Prefer fully-backed tokens with transparent reserves (cash/T-bills/MMFs), frequent attestations, and clear 1:1 redemption terms.

Source (for the screenshot above): CoinMarketCap “TerraClassicUSD (USTC)” price — static image for teaching.

What happened to LUNA?

Terra used an algorithmic peg: traders could swap 1 UST ↔ $1 of LUNA. When UST lost its peg in May 2022, redemptions minted huge amounts of LUNA, crashing its price and triggering a death spiral.

UST de-pegged → fell from $1 to cents.
LUNA hyper-inflated (supply exploded) → price collapsed to near-zero.
Chain pauses; many exchanges suspended or delisted trading.

Aftermath: The original chain became Terra Classic (token LUNC, stablecoin USTC). A separate Terra 2.0 launched with a new LUNA (no algorithmic stablecoin).

Lesson: Algorithmic/under-collateralized “stablecoins” can fail catastrophically. Prefer fully-backed tokens with transparent cash/T-bill reserves, attestations, and clear 1:1 redemption terms.

Current status: Terra Classic (LUNC) typically trades at fractions of a cent due to the hyper-inflated supply after the 2022 unwind. Check a live price site for the latest quote.

4d) Practical Stablecoin Safety Lab

No real money • No wallet connection

Watch the lesson, then practice the decisions a real user must make. These simulations use imaginary dollars and do not connect to a blockchain.

🎥 Watch first

How to Use Stablecoins Safely

Learn where people obtain stablecoins, when a Web3 wallet is necessary, how private keys work, how to count overseas-transfer fees, where to seek help, and what may happen if an issuer fails.

Open the safety lesson on YouTube

Lab 1 — Fake Stablecoin Transfer

Your family wants to send you money. Complete the safety check before the imaginary transfer.

Wallet type Stablecoin Sender’s network Receiver’s network Amount ($) Safety step

Choose the wallet, token, networks and safety step; then check the transfer.

Lab 2 — International Fee Calculator

Compare the complete cost—not only the visible blockchain fee.

Amount sent ($) Bank/wire fixed fee ($) Bank FX spread (%) Stablecoin purchase spread (%) Network + withdrawal fee ($) Cash-out + local FX cost (%)

Bank/wire cost—

Stablecoin cost—

Change the assumptions to see which route delivers more money.

Lab 3 — Stablecoin Trouble Center

Select the problem and identify the safest next action.

What happened?

Use official support channels only. No legitimate helper needs your private key or recovery phrase.

Lab 4 — Redemption-Run Test

This simplified model asks whether immediately liquid reserves can meet a sudden redemption wave.

Immediately liquid reserves: 80% Redemption demand: 40% Market confidence: 85%

Move the sliders and stress the issuer.

Classroom model only: real outcomes also depend on asset quality, maturity, custody, market depth, operational capacity and legal redemption rights.

5) Stablecoins & the Money Supply (intuition)

Are stablecoins in M1/M2?

Generally, no. U.S. monetary aggregates count currency & deposits held by the public; on-chain tokens are not included.
But where reserves sit matters: if customers swap bank deposits for a dollar stablecoin and the issuer buys T-bills or institutional MMFs, bank deposits can fall (affecting M2 composition).
Redemptions reverse the flow: stablecoins destroyed → dollars returned to bank deposits.

Think of stablecoins as a payment wrapper around traditional assets (cash/T-bills). The wrapper itself isn’t counted in M1/M2; the backing assets are in traditional buckets.

Simple flow examples

Buy USDC with checking → your deposit ↓; issuer reserves ↑ (often in T-bills/MMFs). M1/M2 can dip if deposits leave retail buckets.
Redeem USDC → token burned; deposit back to bank → M1/M2 can rise (deposits up).
Use USDC cross-border → may not change U.S. aggregates directly but increases dollar rails abroad.

5a) Stablecoin Simulator + Guided Lesson

Lesson Helper Stability Score: —

Model Type Collateral Ratio (Reserves ÷ Supply)

Current: 100%

Trust / Transparency (audits, disclosures)

Current: 90%

Liquidity Depth (venues, rails)

Current: 80%

Fees (bps)

Redemption Freeze Bank / rail delays

Pick a setup and click “Explain This Scenario”.

Evidence (plain-English): Fiat-backed with full, high-quality reserves, frequent attestations, deep liquidity, live redemptions, and low fees tends to keep par best; fractional/algorithmic designs are historically fragile.

Use the playground on the right; then set the same conditions on the left and click Explain for a verdict.

5b) Interactive — Stablecoin Flow & Aggregates

Pick an activity on the left. Arrows show a directional change (Up/Down/—) in U.S. aggregates based on a stylized balance-sheet flow.

Activities

Result (arrows reflect M1/M2 logic)

MB

—

M1

—

M2

—

Choose an activity.

Assumption toggle: Issuer holds T-bills/MMFs Issuer holds plain bank deposits

Note: MB (currency + reserves) usually unchanged by private asset swaps; loan creation/repayment is what changes deposits at the source.

5c) The GENIUS Act — America’s Payment-Stablecoin Law

Updated September 5, 2026

🎥 FIN310 lesson with Aya

The GENIUS Act & Stablecoins Explained: Should Students Use Stablecoins?

Begin with this student-focused lesson on the law, stablecoin benefits and risks, bank deposits, Treasury demand, and when a checking account remains the safer choice.

Open the FIN310 lesson on YouTube

🎥 Additional perspective

What the GENIUS Act Means for the Crypto Industry

Use this short industry overview as a second perspective before studying the law’s issuer, reserve, consumer-protection and implementation rules below.

Open the video on YouTube

The headline

The Guiding and Establishing National Innovation for U.S. Stablecoins Act became Public Law 119-27 on July 18, 2025. It created the first federal regulatory framework specifically for payment stablecoins. The law does not make every token risk-free or turn a stablecoin into legal tender, a government guarantee, or an FDIC-insured bank deposit.

Who may issue?

Only a qualifying permitted payment stablecoin issuer may issue under the U.S. framework.
The framework provides federal and qualifying state regulatory pathways.
Issuers are subject to Bank Secrecy Act, anti-money-laundering and sanctions obligations.

What backs the token?

100% reserve backing with highly liquid permitted assets, including U.S. dollars and short-term Treasury securities.
Monthly public disclosure of reserve composition.
Risk management, liquidity and redemption requirements; risky reserve assets such as corporate stock are not permitted backing.

What protects holders?

Marketing cannot falsely imply U.S.-government backing, legal-tender status or federal deposit insurance.
Payment-stablecoin holders receive priority claims to reserves if an issuer becomes insolvent.
Issuers must be able to comply with lawful orders, including freezing, seizing or burning tokens when legally required.

Where are the rules now?

During 2026, Treasury, FinCEN and the OCC have been developing implementing regulations.
Treasury identifies January 18, 2027 as the expected effective date for the licensing restriction on U.S. issuance.
A later restriction affecting service providers’ offering of unlicensed payment stablecoins is scheduled for July 18, 2028.

Class check: Does the GENIUS Act make a stablecoin as safe as money in an FDIC-insured checking account?

No. The Act strengthens reserves, disclosures and supervision, but stablecoin users can still face issuer, operational, cybersecurity, network, wallet, fraud, liquidity and temporary de-pegging risks. Federal deposit insurance does not apply to the payment stablecoin itself.

Primary sources: Public Law 119-27 · GENIUS Act fact sheet · Treasury’s August 2026 implementation update · OCC proposed rule

5d) New Payment Rails — Same “Digital” Label, Different Money

The important question is not only How fast does it move? Ask: Whose liability is the money, who can use it, and what law protects it?

🎥 FIN310 comparison with Aya

Checking Accounts vs. Tokenized Deposits vs. Stablecoins | JPMD Explained

Compare ordinary checking deposits, JPMorgan’s institutional tokenized-deposit model, and payment stablecoins before using the table below.

Open the comparison lesson on YouTube

Payment rail or product	What moves?	Who can use it?	What makes it different?
Dollar stablecoin Examples: USDC, USDT	A token that is a liability of a nonbank or bank-affiliated permitted issuer and is backed by reserves.	Retail or institutional users, depending on the token, wallet, platform and jurisdiction.	Can move across supported blockchain networks 24/7; exposes users to issuer, wallet and network risks.
JPM Coin / JPMD Kinexys by J.P. Morgan	A tokenized commercial-bank deposit: a claim on J.P. Morgan, not a general retail stablecoin.	Eligible institutional clients.	JPM Coin, with ticker JPMD, is available on Base for near-instant, 24/7 institutional settlement.
Kinexys Blockchain Deposit Accounts	Commercial-bank deposit balances recorded on J.P. Morgan’s blockchain-based deposit ledger.	Approved corporate and institutional clients.	Supports real-time cross-border and programmable treasury payments while remaining inside the bank-deposit system.
FedNow	Ordinary bank-deposit money transferred between participating banks through a Federal Reserve service.	Customers of participating banks and credit unions—not a direct Fed app.	Payments settle within seconds, 24 hours a day, every day. FedNow is not a stablecoin or CBDC.
RTP network	Ordinary bank-deposit money settled through The Clearing House’s private real-time network.	Customers of participating financial institutions.	Instant, final bank-account payments with rich invoice and reconciliation messages, 24/7/365.

Do we need a stablecoin for every fast payment?

No. FedNow and RTP can deliver instant domestic bank-to-bank payments without blockchain. Stablecoins may add value when users need blockchain programmability, global reach or interoperability with digital-asset markets. Deposit tokens such as JPMD combine blockchain features with a regulated bank liability, but access is currently institutional rather than general retail.

Primary sources: J.P. Morgan’s 2026 Kinexys update · JPM Coin/JPMD launch · Federal Reserve FedNow FAQ · RTP network

5e) Can Stablecoins Help Reduce the U.S. National Debt?

Short answer: they may lower financing costs at the margin, but they do not erase the debt.

GENIUS-compliant issuers may hold short-term Treasury securities as reserves. More stablecoin use can therefore create additional demand for Treasury bills. Stronger demand may support bill prices and modestly lower yields, reducing federal interest expense. But the Treasury still owes the principal, and easier financing can even make continued borrowing easier. The debt falls only when the government retires more debt than it issues.

1
User buys a $1 stablecoin

2
Issuer receives the dollar

3
Issuer buys a Treasury bill for reserves

4
T-bill demand rises; yields may fall

5
Treasury may pay slightly less interest

How stablecoins could help

Broaden global demand for dollar assets and short-term Treasuries.
Improve Treasury-market liquidity and potentially reduce bill yields.
Lower interest expense when maturing debt is refinanced or new debt is issued.
Strengthen global use of the dollar, supporting the Treasury investor base.

Why this is not a debt solution by itself

Buying a Treasury bill finances the government; it does not forgive what the government owes.
The annual deficit—spending minus revenue—remains the main driver of new borrowing.
Interest savings reduce debt only if policymakers do not offset them with additional spending or tax reductions.
Stablecoin growth may shift deposits away from banks, creating other funding and financial-stability trade-offs.

Illustrative interest-savings calculator

This is a classroom illustration—not a forecast. It assumes the yield effect applies to the selected amount for one full year.

Stablecoin-funded Treasury demand: $500 billion Possible yield reduction: 10 basis points

Illustrative annual interest saving: $0.50 billion

Formula: Treasury demand × yield reduction. Example: $500 billion × 0.10% = $0.50 billion per year. Actual yield effects depend on issuance, market conditions, investor substitution and how persistent demand is.

How could this contribute to actual debt reduction?

Require safe, liquid reserves and credible redemption so stablecoin demand for Treasury bills is durable rather than run-prone.
Use the broader investor base to reduce borrowing costs without taking excessive refinancing risk.
Combine those interest savings with smaller primary deficits through spending and revenue decisions.
Apply the savings to deficit reduction. Without step 3, stablecoins mainly make debt easier or cheaper to finance.

Primary sources: Treasury on stablecoin demand for Treasury bills · Treasury statement on the GENIUS Act · Treasury Fiscal Data: deficit and debt

5f) Class Discussion — Should a University Accept Stablecoins for Tuition?

Case: An international student owes $25,000

The student’s family faces bank-transfer delays, foreign-exchange costs and a tuition deadline. The university is considering accepting one approved dollar stablecoin through a regulated payment processor. The processor would verify the payment, attach it to the student invoice and automatically convert the stablecoin to dollars. Should the university offer this option?

How the payment could work

1
University issues a dollar invoice

2
Processor quotes approved token and network

3
Student sends from a verified wallet

4
Processor confirms and converts to dollars

5
Student account receives a receipt and credit

Possible advantages

24/7 payment and faster confirmation, especially across borders.
Potentially fewer correspondent-bank delays and lower transfer costs.
A dollar-pegged amount avoids Bitcoin-style price volatility during payment.
Blockchain reference data can improve invoice matching and audit trails.
Automatic conversion lets the university receive dollars rather than speculate on tokens.

Possible disadvantages

A wrong address or network can make a transfer difficult or impossible to reverse.
Wallet theft, scams, sanctions screening, issuer freezes and cyber outages remain possible.
The token itself is not federally deposit-insured and may temporarily lose its $1 peg.
Network, conversion and processor fees may eliminate the apparent savings.
Refunds, financial-aid returns, accounting, custody and consumer complaints require new procedures.
Using a digital asset to pay for services is a disposition that can create U.S. tax reporting obligations.

Minimum safeguards for a campus pilot

Use a regulated payment processor and only approved tokens, issuers and blockchain networks.
Convert immediately to U.S. dollars; do not use tuition funds for crypto speculation.
Show the exact dollar amount, exchange rate, all fees and payment-expiration time before the student sends.
Require invoice identification, wallet screening and sanctions/AML controls while collecting only necessary data.
Publish clear rules for mistaken transfers, refunds, de-pegging, outages and who bears network fees.
Keep ACH, card, wire and other accessible alternatives. Stablecoin payment should be optional.

Discussion questions

Would the benefit be greater for an international student than for a domestic student who already has access to ACH, FedNow or RTP?
Who should bear the loss if the token de-pegs between the student’s purchase and the university’s conversion?
Should the university accept only GENIUS-compliant stablecoins after the law becomes effective?
Should the university ever hold part of the payment in stablecoins, or convert 100% immediately?
Does this improve financial access—or move payment, fraud and technology risks from banks to students?

Instructor guide: a balanced conclusion

A limited, optional, processor-based service could help some international students if the university receives dollars immediately and clearly assigns fees and error risk. For most domestic students, instant bank rails may provide the same speed with fewer wallet, tax and consumer-protection complications. The decision should compare the entire payment process—not just the blockchain transaction fee.

Primary sources: IRS digital-asset reporting · FTC guidance on irreversible crypto payments and scams · GENIUS Act consumer safeguards

6) CBDC (Central Bank Digital Cash) vs. Dollar Stablecoins — Why/Why not?

Fed & CBDC (very short)

The Fed has explored a U.S. CBDC and says it would require clear authorization and broad public support.
Design trade-offs: privacy, programmability, bank intermediation, resilience, and cybersecurity.

Reading: Fed CBDC page; NY Fed innovation/research pilots.

Why some U.S. voices back stablecoins (and not a CBDC)

Private-sector speed & global reach without creating a direct Fed-to-consumer product.
Dollar soft power: regulated dollar tokens abroad can expand dollar rails.
CBDC concerns: government wallet/privacy worries; potential crowd-out of bank deposits.

Campaign-season messaging often frames crypto as innovation/jobs; positions vary by official and can change.

7) De-dollarization: Does crypto help or hurt the dollar?

Two forces at once

Dollar-pegged stablecoins abroad can reinforce dollar usage (if most tokens are USD-pegged and backed by U.S. assets like T-bills).
Non-USD rails (other fiat-pegs, CBDCs, or commodity-pegs) could diversify away from the dollar in some corridors.

Net effect depends on issuance mix, regulation/trust, and cross-border adoption patterns.

8) Good Official Links (reference)

United States

Global

9) Macro: Does a Stablecoin Raise Inflation or M2?

Money aggregates mechanics (U.S.)

Buying a fiat-backed stablecoin with your bank deposit reduces deposits at your bank; the issuer places reserves in bank deposits or T-bills/MMFs.
Tokens themselves are not in M1/M2. Reserves may sit outside M1 (e.g., T-bills/MMFs). Net, it’s a composition shift within dollar claims.
So stablecoins don’t “print new dollars”; inflation depends on macro policy/credit/velocity, not the token wrapper.

Banking impact

Large shifts into stablecoins/MMFs can drain bank deposits (“disintermediation”), nudging banks to pay more on deposits or rely more on wholesale funding.
Issuers holding T-bills earn interest (float). That income used to accrue to banks; now some accrues to issuers and, indirectly, to users via lower fees.

De-dollarization & dollarization

Outside the U.S., USD stablecoins can increase dollar usage (informal dollarization) by making $ rails accessible on phones.
A credible euro/other stablecoin could chip away at USD use at the margin, but the dollar’s network (trade, finance, commodities) is large.

Net effect today: stablecoins mostly extend the reach of dollars rather than replace them.

10) Global Competition & Policy Snapshot

U.S.

Regulatory stance is evolving; prudential standards focus on reserves, disclosures, and redemption.
The Fed has expressed interest in safe, well-regulated dollar tokens but has not launched a retail CBDC; private stablecoins fill part of the gap.

Europe

EU’s MiCA framework creates licensing and reserve/white-paper rules for “e-money tokens.” Expect more EUR-stablecoins on compliant rails.
Could they take U.S. market share? Possibly in EU venues and trade with euro invoices, but USD network effects remain strong globally.

Other regions

Some countries encourage USD stablecoins for remittances; others restrict them.
Many central banks test CBDCs; a U.S. “digital dollar” is debated, but private stablecoins currently dominate crypto-dollar payments.

Bitcoin vs. a “digital dollar”
Bitcoin is decentralized & scarce (21M cap) with no issuer—good for censorship-resistant saving, but volatile. A “digital dollar” (CBDC or stablecoin) is a dollar wrapper—price-stable for payments, but depends on the issuer/regulator and has different privacy/censorship trade-offs.

Politics & headlines (plain English)

Supporters argue stablecoins keep the dollar competitive on the internet and can reduce fees.
Opponents worry about runs, consumer protection, and bank funding. A retail CBDC is controversial (privacy/government reach); some politicians back private stablecoins instead.

12) Quick Quizzes — Session 4

True/False • Auto-graded

⛏️ Session 4 — Bitcoin Mining & Supply (Quiz 1)

Covers PoW mechanism, difficulty, block rewards & fees, halving schedule, and the 21M cap.

Open Quiz 1

🪙 Session 4 — Stablecoins & Money Supply (Quiz 2)

Covers fiat-backed vs. crypto-collateralized models, reserves/redemption, peg risks, AML/KYC, and directional M1/M2 effects.

Open Quiz 2

Tip: Keep this page open while taking the quizzes—answers are explained immediately on each question.

13) Homework

REQUIRED

Part A — Short Essay (≤200 words)

Prompt:
Your university is considering accepting an approved dollar stablecoin for tuition through a processor that immediately converts the payment to U.S. dollars. Write a short recommendation answering:

Should the university offer stablecoin tuition payments? Explain one important benefit and two risks.
Would the answer differ for domestic and international students?
Name two safeguards from the GENIUS Act or the campus-pilot checklist that should be required.
Explain why greater stablecoin demand could lower Treasury borrowing costs but would not automatically eliminate the national debt.

REQUIRED • CURRENT NEWS

Part B — Are You Ready to Use a Bank-Issued Stablecoin?

Read: Reuters (September 1, 2026) — Goldman Sachs, BofA and others plan to issue dollar stablecoin together in 2027

News context: A group of 21 financial institutions—including Goldman Sachs, Bank of America, Citi, and Deutsche Bank—plans to create a jointly issued U.S.-dollar stablecoin, with a launch targeted for early 2027. The plan brings regulated banks into a market currently led by nonbank issuers.

Bank-Issued Stablecoins: Innovation or Financial Risk?

Watch before writing: This video explains my cautious personal view, including potential benefits and risks. You may agree or disagree. Your grade depends on how well you use evidence and course concepts to defend your own position.

Open the bank-issued stablecoin lesson on YouTube

Write 150–200 words answering all four questions:

Do you support bank-issued stablecoins? Explain why or why not.
Are you personally ready to use one? If yes, name the first purpose for which you would use it. If no, explain what would need to change first.
For your chosen purpose, would a stablecoin be better than a checking account, debit card, Zelle, or another familiar payment method? Compare speed, fees, convenience, and protection.
Identify one important risk—such as fraud, loss of a private key, issuer failure, de-pegging, a wrong-network transfer, or unclear customer support—and name one safeguard you would require.

There is no required “yes” or “no” answer. Your grade depends on using evidence from the article and course concepts to defend your position.

OPTIONAL • Term Project-Friendly

Part C — Hands-on: Campus Test Token (Stablecoin Simulation)

Important: This activity creates a transferable ERC-20 test token, not a real stablecoin. It has no dollar reserves, $1 redemption promise, price-stabilization mechanism, audit, or regulated issuer. Never sell it, fundraise with it, or represent it as money.

Open Remix — no wallet or faucet needed
- Go only to the official site: remix.ethereum.org.
- In File Explorer, select “New File,” name it CampusTestToken.sol, and paste the contract below.
- For the main activity, use Remix VM, an in-browser practice blockchain with pre-funded imaginary accounts.

Compile the test token

In the Solidity compiler, choose version 0.8.20 (or any ^0.8.x) and compile.
A green check mark means compilation succeeded. Do not deploy code you do not understand.

// SPDX-License-Identifier: MIT
pragma solidity ^0.8.20;
/**
 * Campus Test Token (simple ERC-20 learning demo)
 * - Owner (deployer) can mint and change owner.
 * - Anyone can transfer.
 * - Anyone can burn their own tokens.
 * - Decimals = 6 (dollar-like: 1.000000)
 * NOT A STABLECOIN: no reserves, redemption, or $1-price mechanism.
 * Classroom simulation only. Not audited. Never use real money.
 */
contract CampusTestToken {
    string public name;
    string public symbol;
    uint8  public immutable decimals;
    uint256 public totalSupply;
    mapping(address => uint256)                     private _balances;
    mapping(address => mapping(address => uint256)) private _allowances;
    address public owner;
    modifier onlyOwner(){ require(msg.sender == owner, "not owner"); _; }
    event Transfer(address indexed from, address indexed to, uint256 amount);
    event Approval(address indexed owner, address indexed spender, uint256 amount);
    event OwnershipTransferred(address indexed oldOwner, address indexed newOwner);
    constructor(string memory _name, string memory _symbol, uint8 _decimals){
        owner = msg.sender;
        emit OwnershipTransferred(address(0), msg.sender);
        name = _name;
        symbol = _symbol;
        decimals = _decimals; // e.g., 6 for $-style 1.000000
    }
    function balanceOf(address a) public view returns (uint256) { return _balances[a]; }
    function allowance(address a, address s) public view returns (uint256) { return _allowances[a][s]; }
    function transfer(address to, uint256 amount) public returns (bool) {
        _transfer(msg.sender, to, amount); return true;
    }
    function approve(address spender, uint256 amount) public returns (bool) {
        _approve(msg.sender, spender, amount); return true;
    }
    function transferFrom(address from, address to, uint256 amount) public returns (bool) {
        uint256 allowed = _allowances[from][msg.sender];
        require(allowed >= amount, "insufficient allowance");
        if (allowed != type(uint256).max) {
            _allowances[from][msg.sender] = allowed - amount;
            emit Approval(from, msg.sender, _allowances[from][msg.sender]);
        }
        _transfer(from, to, amount); return true;
    }
    function mint(address to, uint256 amount) public onlyOwner {
        require(to != address(0), "mint to zero");
        totalSupply += amount; _balances[to] += amount;
        emit Transfer(address(0), to, amount);
    }
    function burn(uint256 amount) public {
        uint256 bal = _balances[msg.sender]; require(bal >= amount, "insufficient");
        _balances[msg.sender] = bal - amount; totalSupply -= amount;
        emit Transfer(msg.sender, address(0), amount);
    }
    function transferOwnership(address newOwner) public onlyOwner {
        require(newOwner != address(0), "zero owner");
        emit OwnershipTransferred(owner, newOwner); owner = newOwner;
    }
    function _transfer(address from, address to, uint256 amount) internal {
        require(to != address(0), "transfer to zero");
        uint256 bal = _balances[from]; require(bal >= amount, "insufficient balance");
        _balances[from] = bal - amount; _balances[to] += amount;
        emit Transfer(from, to, amount);
    }
    function _approve(address a, address s, uint256 amount) internal {
        require(s != address(0), "approve to zero");
        _allowances[a][s] = amount; emit Approval(a, s, amount);
    }
}

Deploy instantly in Remix VM
- Open Deploy & Run Transactions → set Environment: Remix VM.
- Constructor args:
  - name: Campus Test Dollar
  - symbol: tCUSD
  - decimals: 6
- Click Deploy. Remix VM executes immediately—there is no wallet approval and no real gas fee.
Mint imaginary tokens
- Copy the address of a second Remix VM account.
- Using the deployer account, call mint(<secondAccount>, 1000000) to create 1.000000 tCUSD.
- Call balanceOf(<secondAccount>). The result should be 1000000 base units.
Practice a transfer
- Switch Remix to the second account and send some units with transfer(<thirdAccount>, amount).
- Use balanceOf to verify both balances. Explain why 500000 base units equals 0.500000 tCUSD.
Optional advanced extension — publish on Sepolia
- Only after the Remix VM activity works, install MetaMask, display test networks, select Sepolia, and obtain faucet ETH from a reputable testnet faucet.
- In Remix, choose Environment: Browser Extension, confirm MetaMask shows Sepolia, and deploy. Never use Mainnet or real ETH.
- Never share a seed phrase or private key. Ignore anyone offering “support” through direct messages.
Turn-in (what to submit)
- Core Remix VM track: 2–4 screenshots showing deployment, a mint transaction, a transfer, and the resulting balances.
- Optional Sepolia extension: public testnet contract address and a block-explorer transaction link.
- One or two paragraphs: What worked? What was confusing? Why is this token not a true stablecoin? Name one requirement needed before a real issuer could credibly promise $1 stability.

14) Ask Maggie — Stablecoins & Digital Payments

50 questions • Searchable • Click to reveal answers

Have a question? Search by keyword or choose a topic. These are fixed, professor-approved course answers—not live AI and not personalized investment, legal or tax advice.

1. What is a stablecoin?

A stablecoin is a digital token designed to maintain a stable value relative to a reference asset, usually one U.S. dollar. A dollar stablecoin is mainly a payment and settlement instrument; it is not designed to rise in price like a speculative investment.

2. How can one token stay close to $1?

A credible fiat-backed issuer accepts dollars, issues tokens, and allows eligible users to redeem tokens for dollars. If the market price moves away from $1, minting and redemption create an arbitrage incentive that can pull the price back—provided users trust the reserves and redemption process.

3. What do minting and burning mean?

Minting creates new tokens when an issuer receives qualifying reserve assets. Burning permanently removes redeemed tokens from circulation when the issuer returns dollars to the redeemer. Proper mint-and-burn controls help keep token supply aligned with reserves.

4. What normally backs a fiat-backed dollar stablecoin?

Backing may include cash, bank deposits, short-term Treasury securities and other highly liquid permitted assets. Reserve quality, custody, maturity and transparency matter because the issuer must be able to meet redemptions at or near $1.

5. How is a stablecoin different from Bitcoin?

Bitcoin has a market-determined price and a capped issuance rule; its value can move sharply. A dollar stablecoin targets $1 and normally depends on an identifiable issuer, reserves and redemption. Bitcoin is often held for scarcity or speculation; stablecoins are more suitable for dollar-denominated payments.

6. Is a stablecoin the same as a bank deposit?

No. A bank deposit is a liability of a bank and may receive FDIC insurance within applicable limits. A payment stablecoin is a separate issuer’s digital-asset liability backed by reserves; the token itself is not federally deposit-insured.

7. Why are algorithmic stablecoins riskier?

An algorithmic token may depend on trading incentives or another volatile token rather than a full pool of dollar-like reserves. If confidence falls, the stabilization mechanism can enter a downward spiral. The collapse of TerraUSD illustrated that a name containing “stable” does not guarantee stability.

8. Can a fully backed stablecoin still de-peg?

Yes, at least temporarily. Market liquidity, banking disruptions, redemption delays, cyber incidents or doubts about reserves can push the trading price away from $1. Strong backing and reliable redemption reduce risk but do not eliminate every operational problem.

9. How does a stablecoin issuer make money?

The issuer can earn interest on reserve assets such as Treasury bills while token holders usually receive no interest from the token itself. The issuer may also charge service, issuance or redemption fees. Revenue must cover compliance, custody, technology, audit and liquidity costs.

10. Are stablecoins included in M1 or M2?

The token wrapper is not currently a direct component of the Federal Reserve’s M1 or M2 definitions. However, buying or redeeming stablecoins can shift balances among bank deposits, Treasury bills and money funds, changing the composition of measured money.

11. What does GENIUS stand for?

It stands for the Guiding and Establishing National Innovation for U.S. Stablecoins Act. The law created a federal regulatory framework for payment stablecoins in the United States.

12. When did the GENIUS Act become law?

It was signed on July 18, 2025, as Public Law 119-27. During 2026, Treasury, FinCEN, the OCC and other responsible agencies have been developing implementing regulations.

13. Is the full GENIUS Act framework already effective?

Implementation is still underway as of September 4, 2026. Treasury identifies January 18, 2027 as the expected date when a person generally may not issue a payment stablecoin in the United States without an appropriate federal or state license; later service-provider restrictions are scheduled for July 18, 2028.

14. What is a permitted payment stablecoin issuer?

It is an issuer authorized under the federal framework or a qualifying state framework, depending on its charter and size. The regulator supervises reserve, liquidity, redemption, risk-management, reporting and compliance obligations.

15. What does 100% reserve backing mean?

For each dollar of payment stablecoins outstanding, the issuer must maintain at least an equivalent value of qualifying reserve assets. It does not mean every reserve dollar sits as paper currency; permitted highly liquid assets can include short-term Treasury securities.

16. What reserve information must issuers disclose?

The Act requires monthly public disclosure of reserve composition. Large issuers also face audited-financial-statement requirements, while regulators can require additional reporting. Disclosure helps users evaluate whether tokens are fully and safely backed.

17. Are GENIUS-compliant stablecoins FDIC-insured or legal tender?

No. The law prohibits misleading claims that payment stablecoins are U.S.-government obligations, federally insured or legal tender. Regulation can improve protection without converting a private token into government money.

18. What happens to holders if an issuer fails?

The GENIUS Act gives permitted payment-stablecoin holders priority claims to the reserve assets in an issuer insolvency. That improves their legal position, but recovery can still involve delay, legal administration and possible operational costs.

19. Why can an issuer freeze or burn a user’s tokens?

Permitted issuers must comply with lawful court, sanctions and law-enforcement orders. The law requires technical capability to seize, freeze or burn payment stablecoins when legally required. This supports compliance but also means the token is not censorship-resistant like some decentralized assets.

20. Does the GENIUS Act make every stablecoin safe?

No. It creates stronger rules for permitted payment stablecoins, but users can still face wallet theft, fraud, network congestion, smart-contract bugs, issuer outages, liquidity stress and temporary de-pegging. Students should check the issuer, reserve reports, redemption rights and approved network.

21. What are JPM Coin and JPMD?

JPM Coin is J.P. Morgan’s tokenized commercial-bank deposit product; its USD token uses the ticker JPMD. It is available to eligible institutional clients for near-instant 24/7 settlement, including use on Base. It is not a general retail stablecoin.

22. How is JPMD different from USDC or USDT?

JPMD represents a deposit liability of J.P. Morgan and is restricted to approved institutional clients. A general payment stablecoin is an issuer token backed by a separate reserve pool and may circulate more broadly. The legal claim, access rules and risk protections differ.

23. What is a Kinexys Blockchain Deposit Account?

It is an institutional bank-deposit account recorded on J.P. Morgan’s blockchain-based payment ledger. Approved clients can use it for real-time, cross-border and programmable treasury transactions while the underlying balance remains commercial-bank deposit money.

24. What is FedNow?

FedNow is a Federal Reserve instant-payment service for participating banks and credit unions. It lets financial institutions settle customer payments within seconds, every day and at any hour. Customers access it through their financial institution, not through a Federal Reserve retail app.

25. Is FedNow a stablecoin or a U.S. CBDC?

No. FedNow is payment infrastructure that moves existing bank-deposit money between financial institutions. It does not create a token, replace cash or give consumers accounts at the Federal Reserve.

26. What is the RTP network?

RTP is a private real-time payment network operated by The Clearing House. Participating financial institutions use it for immediate, final bank-account payments 24/7/365, with rich messages that can help match invoices and payments.

27. Do instant payments require blockchain?

No. FedNow and RTP provide instant domestic bank-to-bank transfers without a public blockchain. Blockchain becomes more relevant when users want token programmability, global availability or direct interaction with digital-asset markets.

28. Does “instant” mean a payment can always be reversed instantly?

No. Instant-payment systems emphasize immediate settlement and funds availability; settled payments may be final. Return-request procedures can exist, but a sender should verify the recipient and amount before submitting the transfer.

29. What is a programmable payment?

It is a payment triggered or routed automatically when specified conditions are met—for example, releasing funds when an invoice is approved. Programming can improve treasury operations and reconciliation, but faulty code, bad data or poor access controls can automate mistakes too.

30. Could stablecoins pull deposits away from banks?

Yes. If customers exchange bank deposits for stablecoins and issuers place reserves mainly in Treasury bills, retail deposits can leave the banking system. Banks may respond by paying more for deposits, reducing lending or using other funding; the full effect depends on where issuers keep reserves.

31. Why do stablecoin issuers buy Treasury bills?

Treasury bills are short-term, liquid, dollar-denominated assets that can earn interest while backing redemptions. They fit the need for safe reserve assets better than long-term or volatile investments and are expressly relevant under the GENIUS framework.

32. Can stablecoin growth lower Treasury yields?

It may lower yields at the margin if issuers become durable additional buyers of Treasury bills. Greater demand raises bond prices relative to what they otherwise would have been, which lowers yields. The magnitude is uncertain because other investors, issuance and monetary conditions also change.

33. Can stablecoins eliminate the national debt?

No. When an issuer buys a Treasury bill, the government receives financing but still owes the principal. Stablecoins can make borrowing cheaper or easier; they do not cancel the government’s obligation.

34. What is the difference between the federal deficit and federal debt?

A deficit is the amount by which federal spending exceeds revenue during a period. Debt is the accumulated stock of outstanding federal borrowing. Repeated deficits generally add to debt, while sustained surpluses can allow net debt repayment.

35. How could lower Treasury yields actually help reduce debt?

Lower yields can reduce interest expense as securities are newly issued or refinanced. Debt improves only if those savings reduce the deficit rather than finance additional spending or tax reductions. Fiscal choices remain essential.

36. If $500 billion of Treasury financing costs 10 basis points less, what is the annual saving?

Ten basis points equals 0.10%, or 0.001. The classroom calculation is $500 billion × 0.001 = $0.50 billion, or $500 million, for one year. This is an illustration, not an estimate of the actual market effect.

37. Is financing the debt the same as repaying it?

No. Financing provides buyers for Treasury securities and supplies the government with borrowed funds. Repayment reduces outstanding obligations without replacing them with equal or greater new borrowing.

38. Could a stablecoin run disrupt Treasury markets?

Potentially. Very rapid redemptions could force issuers to sell reserve assets, including Treasury bills, at the same time. High-quality short maturities, liquidity requirements and orderly redemption plans are meant to reduce this risk.

39. How might dollar stablecoins support the dollar globally?

They make dollar-denominated payments and savings accessible on digital networks across borders. If the tokens are trusted and backed by dollar assets, greater use can reinforce demand for dollars and Treasuries. It can also raise sanctions, sovereignty and local-currency concerns abroad.

40. Do stablecoins automatically increase M2 or cause inflation?

No. Purchasing a fully backed stablecoin usually rearranges existing dollars among deposits and reserve assets rather than creating unbacked new purchasing power. Inflation effects depend on credit, spending, production, monetary and fiscal policy, and velocity—not simply on putting dollars inside a token wrapper.

41. How could a student pay tuition with a stablecoin?

The university or its processor would issue a dollar invoice, specify the approved token and network, receive a verified transfer, convert it to dollars and post the payment to the student account. A clear invoice reference and receipt are necessary for reconciliation.

42. Why might stablecoin tuition payments help international students?

They may reduce correspondent-bank delays, enable 24/7 payment and sometimes lower cross-border transfer costs. The benefit depends on the family’s local on-ramp, foreign-exchange spread, network fee and legal access; in some countries the total cost may still be high.

43. Would a domestic student gain the same benefit?

Often less. A domestic student may already have inexpensive ACH, FedNow, RTP, card or bank-transfer options without needing a wallet or crypto tax records. The university should compare the entire cost and consumer-protection process.

44. What happens if a student uses the wrong wallet address or network?

The transfer may be lost or difficult to recover because blockchain transactions are usually irreversible. The university should use an invoice-specific payment page, support only clearly identified networks and encourage a small test transfer when appropriate.

45. Can a student charge back a stablecoin tuition payment?

Normally not in the same way as a credit-card payment. A refund must follow the university’s and processor’s procedures, compliance checks and approved return address. Clear refund rules are essential before accepting payment.

46. Who bears the loss if the stablecoin de-pegs during payment?

That depends on the university’s contract and the processor’s price-lock policy. A sensible system states when the dollar value is fixed, how long the quote lasts, and whether the student, processor or university bears short-term price risk.

47. Are stablecoin tuition payments always cheaper?

No. Add the purchase spread, foreign-exchange charge, blockchain fee, processor fee and conversion cost. A transfer with a low network fee can still be more expensive than ACH or an institutional cross-border payment service.

48. Could paying tuition with a stablecoin create a tax-reporting issue?

Yes. Under current U.S. IRS guidance, using a digital asset to pay for services is a disposition that can create a reportable gain or loss—even if a stablecoin stayed close to $1. Students should keep records and consult current tax guidance for their circumstances.

49. What safeguards should a university require?

Use a regulated processor; approve specific issuers and networks; screen wallets; disclose every fee; convert promptly to dollars; protect student data; reconcile invoice references; and publish outage, mistake, de-peg and refund procedures. Traditional payment alternatives should remain available.

50. Should universities accept stablecoins for tuition?

A limited optional service may help some international students if a regulated processor immediately converts the token to dollars and the risks and fees are transparent. For most domestic students, instant bank rails may offer similar speed with fewer wallet, tax and refund complications. The strongest answer compares access, total cost, safety and operational responsibility.

Current primary references: GENIUS Act · Treasury implementation update · JPM Coin/JPMD · FedNow · Deficit and debt · IRS digital assets. Answers reflect the September 4, 2026 course-page update.