Seigniorage:
Seigniorage /ˈseɪnjərɪdʒ/, also spelled seignorage or seigneurage (from the Old French seigneuriage, “right of the lord (seigneur) to mint money”), is the difference between the value of money and the cost to produce and distribute it. The term can be applied in two ways:
- Seigniorage derived from specie (metal coins) is a tax added to the total cost of a coin (metal content and production costs) that a customer of the mint had to pay, and which was sent to the sovereign of the political region.
- Seigniorage derived from notes is more indirect; it is the difference between interest earned on securities acquired in exchange for banknotes and the cost of producing and distributing the notes.
“Monetary seigniorage” is where sovereign-issued securities are exchanged for newly-printed banknotes by a central bank, allowing the sovereign to “borrow” without needing to repay. Monetary seigniorage is sovereign revenue obtained through routine debt monetization, including expansion of the money supply during GDP growth and meeting yearly inflation targets. [Wikipedia]
Noted in the article “Stablecoin,” Wikipedia:
Seigniorage-style coins utilize algorithms to control the stablecoin’s money supply, similar to a central bank’s approach to printing and destroying currency. Seigniorage-based stablecoins are a less popular form of stablecoin.[9]
Significant features of seigniorage-style stablecoins are:
- Adjustments are made on-chain,
- No collateral is needed to mint coins,
- Value is controlled by supply and demand through algorithms, stabilizing price.
Basis was one example of a seigniorage-style coin.
This, in turn, was noted in “Crypto companies, on defense in Washington, scramble to assemble a lobbying machine,” Tom Newmyer, WaPo:
Financial regulators are not waiting to act. A Treasury Department-led group this month urged lawmakers to give bank regulators new authority to crack down on a type of digital token called stablecoins, arguing that left unchecked, their skyrocketing growth could threaten the broader economy. Separately, the Federal Reserve and other key regulators recently completed a review aimed at coordinating their approach to the industry. The agencies have not produced the findings yet.
