Two votes.

AB500, a bill that would have allowed for the licensure and regulation of payments banks, should have been a slam dunk. Sponsored by Assembly Speaker Steve Yeager (D-Las Vegas) and amended by Secretary of State Cisco Aguilar, it certainly didn’t lack institutional or political support. Proponents of the measure, including the Retail Association of Nevada, claimed the bill would lower costs for businesses and consumers, all while potentially bringing hundreds of millions of dollars of new revenue for the state budget.

Neither Yeager nor the bill’s supporters were quiet about what they hoped the bill would achieve, either. Yeager highlighted it in one of his interviews with Nevada Newsmakers, wrote an op-ed about the bill for the Las Vegas Review-Journal and received follow-up coverage from the Review-Journal toward the end of the session.

Yet, despite receiving the sponsorship of the most powerful member of the Assembly, the enthusiastic support of a major lobbying and fundraising organization and a nontrivial amount of attention from the press, it fell two votes shy — not once, but twice — of even reaching the Senate.

What happened? Did the Assembly speaker forget how to push his bill through his house?

To the bill’s credit, it sought to address a real problem. According to a recent Forbes Advisor survey, fewer than 10 percent of Americans primarily pay for purchases with cash. Instead, we mostly use credit or debit cards. Card transactions, however, aren’t cheap, in no small part because every party involved in each transaction needs to recover the costs to process that transaction — while, of course, collecting a tidy profit. 

The bank that issued us a given credit card wants their piece, as does the merchant’s bank that acquires the payment. Between the two are the card networks, such as Visa, MasterCard, Discover and American Express, that provide the financial and infrastructural glueware necessary to ensure our bank and any given merchant’s bank will successfully talk to each other. Additionally, payment processors — companies such as PayPal and Square that are responsible for securely bringing transactions from merchants to card networks — don’t work for free, either.

Those credit card machines you see in stores? Those aren’t free, either. If your credit card gives you “points,” guess what? Somebody’s paying for those as well — and it's not your issuing bank. Oh, and if you think two people using the same payment processor can just send money directly to each other without involving all of the intermediaries (and all of the associated fees) listed above, don’t count on it.

That’s why, according to the National Retail Federation, merchants across the country paid more than $172 billion last year in card swipe fees. If every American paid those fees instead, each of us would be out nearly $500.

The pain doesn’t end there. Accepting payments through a card processor requires entrepreneurs to stick to lines of business that card networks are legally permitted or otherwise comfortable providing support for. Since cannabis remains illegal at the federal level, for example, the industry’s access to traditional banking services — including credit card processing — remains limited. Those providing escort services, gambling or prostitution also tend to find themselves on each network’s restricted industries list.

Gambling? Cannabis? Prostitution? It’s a miracle Nevadans are permitted to use credit cards at all.

It’s no surprise that Nevada’s lawmakers — to say nothing of their donors — were interested in doing something about it.

It wasn’t enough to want to do something, though. Lawmakers also needed to find and attract entrepreneurs willing to provide card processing services at lower costs to Nevada’s businesses — without them, the best the Legislature could meaningfully do is write a sternly written resolution.

So who did Yeager find? Well … let’s just say a legislator doesn’t go into session with the bill supporters he wants. Instead, he goes in with the bill supporters he has.

To introduce AB500, Yeager brought a motley crew of fintech entrepreneurs supporting the bill, such as Simon McLoughlin (CEO of Uphold, a UK-based company that specializes in stablecoin-based payment solutions), Adam Shapiro (partner in the Klaros Group, a financial services-focused investment firm) and failed congressional candidate Greg Kidd. Joining them in support were representatives from Cliq, an Orange County, California-based card processor, and The Sandbox, a blockchain-based metaverse platform where, and I quote verbatim, “your NFTs come to life in unique Experiences.”

***

I’m not going to repeat what I’ve written about blockchains, cryptocurrencies and non-fungible tokens (NFTs) here — suffice it to say that I’m not a fan. The best that I can say about them is that they give those with computer science degrees and libertarian-leaning sensibilities (such as myself) an opportunity to learn from first principles (a fancy academic-sounding phrase that means “the hard way”) why modern financial regulations and systems exist.

I have not, however, had the opportunity to write about stablecoins.

Broadly speaking, stablecoins are cryptocurrencies (-coins) that are ostensibly backed by something so they retain a fixed (stable-) value. Sometimes that something is dollars — the other 72.4 percent of the time is anyone’s guess. Sometimes that something is an algorithm (a fancy academic-sounding phrase that means “a recipe with math”).

How do you base a stable store of value on an algorithm? That’s the neat thing — you don’t.

If this all sounds like a recipe for learning the same lessons the financial industry learned during the Great Depression, only at internet-speed, you are incorrect. Though the Great Depression was caused, in part, due to the collapse of the gold standard — a standard based on an actual physical substance that Nevadans still remove from the ground on an industrial scale — the gold standard was an actual internationally recognized standard with rules and expected norms of behavior.

Stablecoin-backed financial systems, by contrast, combine the failed logic of the gold standard with the speed of one of the slowest database technologies ever deployed at scale and the security of an unmoderated internet forum to create innovative financial products that can be innovatively hacked and drained of value.

Say what you want about gold, at least it’s heavy.

Given all of that, you can understand why entrepreneurs such as Silvergate and Signature Bank would want to build complicated financial systems used by millions of people on top of them. I can’t, mind you, but maybe you can. You’re built differently.

Oh, did I mention that blockchains are designed to provide a tamperproof log of all transactions written to them? Surely you wouldn’t mind if every card transaction you’ve ever made was stored for posterity and publicly searchable on the internet.

***

Whether you agree or disagree with my cynically bearish opinion on blockchain-based products, it’s difficult to argue that this is the year Democrats would want any of their measures to be publicly supported by the cryptocurrency business community.

Cryptocurrency businesses, and the tech right more generally, have made it a point to go all in on President Donald Trump. Meme coins were released for Trump and his wife — Trump’s meme coin was recently used as a vehicle to sell access to the president. Coinbase, a cryptocurrency exchange, sponsored Trump’s birthday parade. Vice President JD Vance was invited to speak at a cryptocurrency conference in Las Vegas.

Oh, and let’s not forget that Elon Musk — the man whose fortune single-handedly turned a cryptocurrency that was founded as a joke more than a decade ago into a potential “currency of Earth” — used that same fortune to get Trump elected.

Despite the seeming bipartisan comity driving forward the GENIUS Act — a Senate bill that seeks to legitimize the use of stablecoins in the nation’s financial systems — cryptocurrency is increasingly coded as a conservative cultural product that’s used to fund Republican political operations. For example, Robert Beadles uses the millions he made speculating in cryptocurrencies to regularly fund Republican campaigns in Washoe County.

If you were a Democratic lawmaker, especially one who received a Franklin Project mailer during your election campaign, would you vote to empower your opposition to skim money off of every card transaction in the state?

As if that weren’t enough, the state’s Financial Institutions Division, which is responsible for regulating banks and other financial institutions in Nevada, openly opposed AB500. According to an unsolicited fiscal note submitted by the agency, the division expected to need nearly $4 million each year plus 16 additional positions to begin to develop the regulations necessary to monitor the payments banks created under AB500. 

Additionally, the head of the agency testified during a committee hearing that she expected it would take at least four years for the new staff to receive the level of training needed to effectively regulate the new class of institutions created under the bill.

If state regulators didn’t openly oppose the bill … 

If more traditional financial institutions spoke in favor of AB500 — or at least fewer crypto-based institutions … 

If many Democrats didn’t conclude that the reason they lost to Trump in 2016 was because President Barack Obama didn’t come out hard enough against the financial innovators who gambled people’s mortgages away in 2008 … 

Without individually asking the Democratic members who broke ranks against their speaker — including nearly every Democrat elected from Northern Nevada — why they ultimately declined to support the bill, we’ll never know for sure why Yeager’s bill failed.

Perhaps they concluded that, just as you can judge a man by his enemies, you can judge a bill by its friends.

David Colborne ran for public office twice. He is now an IT manager, the father of two sons, and a recurring opinion columnist for The Nevada Independent. You can follow him on Mastodon @[email protected], on Bluesky @davidcolborne.bsky.social, on Threads @davidcolbornenv or email him at [email protected]. You can also message him on Signal at dcolborne.64.