Wyoming announces Frontier, a government-backed stablecoin

Starting next month, those fatigued by purchasing things with paper money or credit cards can swap their dollars for a new digital currency backed by the Wyoming state government.

Wyoming Gov. Mark Gordon on Tuesday announced the upcoming release of Frontier Stable Token, an alternative to currencies backed by traditional, centralized payment systems. The offering will make Wyoming, a state of some 590,000 residents, fewer than Seattle, the first public-sector organization to issue a blockchain-based stabletoken, a type of cryptocurrency backed by cash or assets that’s designed to be less volatile than the likes of bitcoin or Ethereum, which frequently make exponential leaps or stumbles in value.

And while the governor and those on the commission governing the state’s new token speak in the same grand vocabulary of most cryptocurrency proponents, details on the precise goals of the state’s innovation are vague. (Members of the Wyoming Stable Token Commission did not immediately respond to requests to be interviewed for this article.)

LayerZero Labs, a company that will issue the tokens across seven blockchains, explains in marketing materials that Wyoming’s token has the oversight advantages of a government-backed currency, along with the “instant, low-cost digital payments that work 24/7 across borders” that digital currencies are known for.

When repeatedly asked onstage during a blockchain conference in Washington, D.C., last March about the token’s potential uses or benefits, Gordon’s responses ranged from idealistic — “this country is formed on capitalism” — to oblique — “Wyoming is a place people come to innovate. We don’t like regulation very much.”

Upon being prompted a third time for his favorite prospective use of the upcoming token, Gordon, who before becoming governor spent seven years as the state’s treasurer, supposed that it could be used for settlements, such as when out-of-state providers purchase Wyoming’s coal- or natural gas-powered energy. (Wyoming is the nation’s fourth largest energy provider, with about two-thirds of its energy shipped to the West Coast.)

Or maybe, he suggested, it could be used by companies paying to build new data centers that power generative artificial intelligence platforms. (Unlike notoriously power-hungry proof-of-work cryptocurrencies like bitcoin, Wyoming’s token uses a proof-of-stake cryptographic proofing method, which the state claims requires an amount of energy equivalent to browsing the internet.)

But one point Gordon did make clear was that he didn’t want the rest of the world to gain the edge over the United States on a hot new technology: “Not that a little state like Wyoming can make all the difference in the world, but we sure can start the migration of the investment in our bonds back into our country.”

As with Texas’ “strategic” bitcoin reserve, a $10 million cache of cryptocurrencies that the state legally can not touch, enticing investors to build new businesses in the state seems to be near the top of both governors’ agendas. There are things that digital currencies do better than traditional payment systems — the transactions are faster, the fees are generally cheaper and some users seem to enjoy using a decentralized platform that eschews the need of a bank to organize transactions.

But cryptocurrency’s failure to evolve beyond a speculative asset or a means of hiding shameful or illegal activity may be because today’s banks are reliable and fast enough for most people.

“There is no use case. It is not solving any problem,” said Bill Maurer, a cultural anthropologist at the University of California, Irvine who studies the technologies behind financial exchanges. “It is taking advantage of the hype cycle around stablecoins and crypto in general that we’ve seen since Trump got reelected.”

The Trump family has, by one accounting, earned more than $2.3 billion from various digital asset schemes since he entered the White House last January. But in addition to his personal enrichment and its fanfare, the president is encouraging new legal frameworks that encourage crypto adoption. Most notable was last month’s GENIUS Act, which the New York Times described as the government giving its seal of approval to stablecoins.

In Wyoming, the token could do some good. The state is required by law to hold 102% of the token’s holdings in cash and short-duration treasuries to ensure liquidity. And any dollars generated by interest are funneled into a fund for the Wyoming School Foundation. But even stablecoins aren’t completely stable — and if yields decline, what then?

Maurer, who’s also dean of the School of Social Sciences at UC Irvine, said he “won’t lose any sleep” over the prospect of Wyoming’s stablecoin, which bears the ticker FRNT, upsetting the financial markets because he doesn’t think there’s much demand. But if such digital assets do take off, he said, it would create problems after people started emptying their bank accounts. The cash that banks leverage against loans would no longer be available, cramping the economy.

So if market disruption is unlikely, Maurer’s chief concern is aesthetic: Wyoming’s token has a “terrible” name. In the world of finance, he said, the name Frontier harkens back to the era of wildcat banking in the mid-19th century, when unregulated railroads and banks issued their own paper currencies, “supposedly backed by gold reserves, but in actuality often backed by nothing.” Institutions that went bust before the federal government passed the National Bank Act in 1863 sometimes trailed hundreds of thousands of dollars in notes, leaving their credulous patrons holding worthless simulacrums of real money.