Savers are “consumers” that give up present consumption for future consumption. Here, the key word here is consumption. Therefore, savings must be looked at through the lens of a consumer product as opposed to an investment product. To do this correctly, savings products must be developed that make savings easy to access across the whole wealth range of a consumer base. Consumers of savings must have vehicles and structures to save large, small, and micro amounts.
When comparing the US savings rate to other countries, the US fails. In 2024 the personal savings rate was 3.8%, which is lower than the long-term average of 8.56%, and lower than most of the developed world.
The US needs legislation that promotes savings through blockchain and tokenization, NOW. Blockchain and tokenization can make this right.
The US has revolutionized savings through legislation before. First, the Employment Retirement Income Security Act of 1974 (ERISA) created the designated retirement savings account, the IRA. Second, May Day 1975, the day fixed commission on stock trading was abolished, lowered the commission costs on stock trading. Lowering the cost of trading and allowing money to be put away for retirement on a tax deferred basis were a winning combination.
The US government can do it again, if they want to.
Blockchain and tokenization should be the pillars of a new savings regulation. Here are a couple of things that should be done or considered.
First, regulators must stop fighting crypto wallets and embrace them. Realize that they are useful and here to stay. Crypto enthusiasts may bristle at the idea of inviting regulators into the crypto space, but they are needed. Legislation and regulation can create confidence on behalf of the consumer. And, in the end, savers are consumers, and consumers need some sort of protection. The more consumer protection, the more confidence. The more confidence, the more consumption.
Second, regulations must promote diversification of savings. Presently, 99% of stable coins, a key plank in a crypto savings plan, are in US dollar. This is too much, and it is dangerous. Tokenization knows no borders or boundaries, so it is reasonable to craft US policy that allows consumers to save in currencies like the Mexican Peso, Euro, UK Pound, and others. Diversificaiton of savings is key.
Third, regular savings plans, “contractual plans” must be encouraged by regulators. Savings, or consumption of savings products, must become a habit. Blockchain is perfect for fostering a habit among a lot of people, because it facilitates transactions for large to small amounts of money. A regulation that allows for a limited amount of savings to be tax free also makes sense. The amounts involved can be small because the goal of regulation is to foster the habit of savings.
To enact good legislation, regulators must reach out to crypto and tokenization players. The regulatory concepts should spring from those who are involved in the industry. Collaboration will create better regulations.
In the end, we all must realize that savers are more consumers than investors. Savings products are sold and consumed. Presently, there is ample legislation promoting healthy consumption of many consumer products. There should be healthy regulations in the savings space too.
This blog is for educational and informational purposes only, covering general market trends, industry developments, and asset features. Nothing herein is investment advice, a solicitation, or a recommendation to buy or sell any assets. Etherfuse and its guests may hold stakes in some or all of the assets discussed.
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