Hello Celo Community 
,
My name is Ezechiel (or Zeke for short) and I lead the public sector research and development efforts for cLabs.
The implosion of TerraUSD (UST) has sent shockwaves throughout the crypto market, as well as the broader financial system. As we start to think about what this means for Celo and the potential impact of cStables issued on the network, I have been heartened by the level and thoughtfulness of discourse on the Celo Forum. The discussions around both the Proof of Deposit proposal and the Upcoming CGP have been particularly timely and important given current events, and I would encourage everyone to check them out.
I would also like to share an idea I have been thinking about for quite a while that could help bolster public confidence in the stablecoin market and would love feedback from this amazing Celo Community. Specifically, I want to talk about the idea of creating a stablecoin insurance program that could be modeled after the Federal Deposit Insurance Corporation (FDIC) in the U.S.
Perspective and Motivation
I certainly understand that the idea of creating a federal stablecoin insurance program might seem implausible and perhaps anathema to the Web3 ethos. Before diving into the details of this idea, it might be helpful to better understand my background and the perspective I have on cryptocurrencies.
I am not a “crypto native”. In fact, although I would typically be classified as “Gen X”, it’s likely most people here might refer to me as a “boomer”! 
Importantly, most of my career has been spent working for or with central banks around the world. During the Great Financial Recession, I was working at the Federal Reserve Bank of New York, where we were constantly trying to come up with new policies and programs to help blunt the economic crisis that was unfolding. Although it’s fair to say that not everything we did was successful, we believed that “the best idea wins” – no matter who proposed it or where it came from.
Indeed, that’s why I joined cLabs to help work on Celo – I believe that Celo’s mobile-first blockchain solution is the best idea and I think stablecoin technology is the future of money. Unfortunately, there is still a lot of confusion about stablecoins among the general public (and especially with regulators) – and the recent collapse of UST has only exacerbated the situation. But if we think of UST as having experienced a “run” similar to what banks experience when people lose confidence in them, then applying the concept of deposit insurance to the stablecoin market might not be such a crazy idea and could help bolster confidence in stablecoins, including those issued on Celo.
Outline of a Stablecoin Insurance Program
Although I’m planning to publish an article shortly with more details on my idea, I wanted to at least share an outline here that will hopefully start to generate some debate about the usefulness (or not) of this idea.
Optional and Risk-Based
Similar to deposit insurance, the program could be managed by an entity like the FDIC in the U.S. and the idea would be that any provider that wanted to issue a stablecoin covered under the insurance program would need to specifically opt-in and provide documentation on the stablecoin’s stability mechanism, reserve portfolio, etc. Each stablecoin would be evaluated based on its specific risk profile and assigned to a corresponding risk classification.
Tokenizing Insurance
The FDIC, or similar institution, could issue a Stablecoin Insurance Token (or SIT) and only allow access to SITs to stablecoin providers that have completed a risk assessment. The price of each SIT would be based on the risk classification assigned to the stablecoin. [Note: although it’s impossible to know right now what those prices would be, the current fees for deposit insurance, which might serve as a helpful guide, can typically range from 10-60 basis points]
Building a Reserve
The money collected from the sale of SITs could be placed in a Stablecoin Investment Fund (again similar to the Deposit Insurance Fund) to maintain public confidence and resolve failed stablecoin projects that participated in the program. Those stablecoins that decide not to join would be ineligible, thus helping to mitigate potential moral hazard problems.
Limiting Exposure
Ideally, the program would be structured to protect ordinary consumers, and not “crypto whales”. Thus, there would likely be a cap imposed. Although there are still lots of questions that need to be answered, it’s likely that in the beginning such an amount could be kept relatively low (such as $500-1,000) and still be effective.
Feedback Requested
One of the things I love about this community is the passion people have for Celo, and the willingness to offer honest, thoughtful feedback. And I’d certainly love to hear your thoughts and constructive feedback on this idea. I will be sharing more details later, but in the meantime, please feel free to join the debate. Thanks!