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Regulators should treat stablecoins like banks

economist.com

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Re: Regulators should treat stablecoins like banks

#41

Post by IG_Semmelweiss »

toomuchtodo wrote: post #27
gruez wrote: post #22

Earlier quoted context omitted.

>Because you can print whatever adults in the room decide need to be printed to hold the economy up. You cannot do this with a deflationary digital asset, nor one tied to smart contracts. Sounds like a feature to me. Printing money is effectively a socialized loss for everyone who's holding the currency.

A currency is a socioeconomic compact between capital and labor, intermediated by subject matter experts (ie the central bank) and government. > Sounds like a feature to me. Printing money is effectively a socialized loss for everyone who's holding the currency. The economy functioning is of greater benefit to the whole than the value to currency hoarders (remember, it's a currency, it's meant for exchange not for va…

>>>>> The economy functioning is of greater benefit to the whole than the value of currency hoarders maintaining its value. If you want to preserve wealth, own things you expect people to trade their time or capital for into the future.

Retirees on a fixed income; immigrants, the poor, and people with no access to credit would like to have a word with you

Re: Regulators should treat stablecoins like banks

#42

Post by user-the-name »

jyu wrote: post #29

Paypal is not a licensed bank. Square, whose IPO was 11/19/2015, only got their bank license in 2020. Why should cryptocurrency be under the purveyance of banking regulations? Cryptocurrency is pulling back the iron curtain and revealing the real Wizard of Oz when you consider unequal regulatory treatment and unequal enforcement efforts. Remember BOA robosigning fake mortgages and commiting widespread fraud? Remember…

PayPal should also be a licensed bank.

Problem solved.

Re: Regulators should treat stablecoins like banks

#43

Post by FabHK »

simmerup wrote: post #4
MattGaiser wrote: post #2

> With estimated leverage of 383-to-1, Tether would be unable to honour all its tokens after losses of just 0.26%—a safety cushion that regulators would never allow at a bank. So even if they are telling the truth, it is still on the edge.

So if 0.26% of tether is withdrawn into currency the coin would collapse? Am I reading that right?

I don't think that's the right way to read it.

Currently, all the holders of tether could ask for dollars, and they'd all get them, and there'd even be 0.26% of the original balance left. (Under quite some assumptions, namely that they could sell the commercial paper at the value at which they hold it in their accounts.)

However, if the value of their assets would shrink, say, by 1%, their equity would be wiped out, and they'd not have enough dollars to satisfy their liabilities. Then, if people would start demanding their dollars, the last 1%-0.26% = 0.74% of tether holders would get nothing, because there'd be nothing left.

That could trigger a good old bank run - you don't want to be among that last percent of bag holders, so better take out your dollars now while they still have some.

Re: Regulators should treat stablecoins like banks

#44

Post by emn13 »

chroem- wrote: post #31
toomuchtodo wrote: post #17

Earlier quoted context omitted.

Which, if it were to fail (which is exceptionally unlikely), is backed by the US Treasury and the Federal Reserve. EDIT: Walking back to first principals, why can't the USD fail? Because you can print whatever adults in the room decide need to be printed to hold the economy up. You cannot do this with a deflationary digital asset, nor one tied to smart contracts.

> Walking back to first principals, why can't the USD fail? Because you can print whatever adults in the room decide need to be printed to hold the economy up. You cannot do this with a deflationary digital asset, nor one tied to smart contracts. The practical implication of solving large scale bank failures with mass currency printing is hyperinflation. You would only get your money back in nominal terms, but its pu…

The fed has expanded money supply to react to shocks before, and there was no hyperinflation. Even if clearly at some point, given enough money-printing, inflation would result, there's no reason to assume it's some binary thing; either hyper-inflation ala zimbabwe or normal inflation. It's more likely you'd see gradual inflation, and that the amount of money printed influences how much inflation results - so assuming that any expansion of the money supply is reasonable, and not egregious.

Frankly, if banks start failing to the extent that FDIC is not only necessary on a large scale but even possibly unsustainable, I kind of doubt that a bit of inflation is going to be the worst of our worries.

Re: Regulators should treat stablecoins like banks

#45

Post by shadowgovt »

chroem- wrote: post #31
toomuchtodo wrote: post #17

Earlier quoted context omitted.

Which, if it were to fail (which is exceptionally unlikely), is backed by the US Treasury and the Federal Reserve. EDIT: Walking back to first principals, why can't the USD fail? Because you can print whatever adults in the room decide need to be printed to hold the economy up. You cannot do this with a deflationary digital asset, nor one tied to smart contracts.

> Walking back to first principals, why can't the USD fail? Because you can print whatever adults in the room decide need to be printed to hold the economy up. You cannot do this with a deflationary digital asset, nor one tied to smart contracts. The practical implication of solving large scale bank failures with mass currency printing is hyperinflation. You would only get your money back in nominal terms, but its pu…

It is the differences between the US and Weimar Germany / Zimbabwe that make it possible for the US to print its way out of most problems.

Other national governments didn't stuff Z$ into their armored-up national mattresses to bolster against the collapse of their local currency, and there wasn't an IMF holding debts denoted in Reichsmarks to create a demand for them internationally.

Re: Regulators should treat stablecoins like banks

#46

Post by colordrops »

dangerlibrary wrote: post #37
jyu wrote: post #29

Paypal is not a licensed bank. Square, whose IPO was 11/19/2015, only got their bank license in 2020. Why should cryptocurrency be under the purveyance of banking regulations? Cryptocurrency is pulling back the iron curtain and revealing the real Wizard of Oz when you consider unequal regulatory treatment and unequal enforcement efforts. Remember BOA robosigning fake mortgages and commiting widespread fraud? Remember…

It is extremely unclear what, if anything, you are arguing for or against, other than that banks have recently done some bad things. It seems like you might be against regulating stablecoins as banks, but you also appear to be arguing for harsher punishments for banks that misbehave? Or something?

It's pretty clear that the argument is that the government is hypocritical and unequal in treatment of establishment players vs cryptocurrency.

Re: Regulators should treat stablecoins like banks

#47

Post by toomuchtodo »

IG_Semmelweiss wrote: post #41
toomuchtodo wrote: post #27

Earlier quoted context omitted.

A currency is a socioeconomic compact between capital and labor, intermediated by subject matter experts (ie the central bank) and government. > Sounds like a feature to me. Printing money is effectively a socialized loss for everyone who's holding the currency. The economy functioning is of greater benefit to the whole than the value to currency hoarders (remember, it's a currency, it's meant for exchange not for va…

>>>>> The economy functioning is of greater benefit to the whole than the value of currency hoarders maintaining its value. If you want to preserve wealth, own things you expect people to trade their time or capital for into the future. Retirees on a fixed income; immigrants, the poor, and people with no access to credit would like to have a word with you

Have the word with me. That's what cost of living adjustments (social security or other systems) & prudently investing a lifetime of retirement savings (in a safe mix of investments to support both growth and safety) and improved underwriting and funding for those folks (respectively) is for. It's not an issue with the currency, that's not what currencies are for.

If you're expecting the value of a currency to never change, you are asking a fish to climb a tree.

Re: Regulators should treat stablecoins like banks

#48

Post by CryptoPunk »

toomuchtodo wrote: post #27
gruez wrote: post #22

Earlier quoted context omitted.

>Because you can print whatever adults in the room decide need to be printed to hold the economy up. You cannot do this with a deflationary digital asset, nor one tied to smart contracts. Sounds like a feature to me. Printing money is effectively a socialized loss for everyone who's holding the currency.

A currency is a socioeconomic compact between capital and labor, intermediated by subject matter experts (ie the central bank) and government. > Sounds like a feature to me. Printing money is effectively a socialized loss for everyone who's holding the currency. The economy functioning is of greater benefit to the whole than the value to currency hoarders (remember, it's a currency, it's meant for exchange not for va…

>>A currency is a socioeconomic compact between capital and labor, intermediated by subject matter experts (ie the central bank) and government.

Currency is an asset with a particular use-case. Its consumers do not enter into some elaborate agreement (compact) in order to use it. They use it because it's useful.

Currency predates the government:

https://www.sciencedaily.com/releases/2021/05/210506174103.h...

It arose as an emergent property of market interaction, i.e. distributed processes, not centralized authorities.

EDIT, responding to below:

No, the distributed processes of the market are a collective intelligence that vastly outperforms any single entity at the task of effectively managing the money supply.

See Selgin's articles on free banking:

https://www.alt-m.org/2015/07/29/there-was-no-place-like-can...

Re: Regulators should treat stablecoins like banks

#49

Post by xyzzy123 »

jyu wrote: post #29

Paypal is not a licensed bank. Square, whose IPO was 11/19/2015, only got their bank license in 2020. Why should cryptocurrency be under the purveyance of banking regulations? Cryptocurrency is pulling back the iron curtain and revealing the real Wizard of Oz when you consider unequal regulatory treatment and unequal enforcement efforts. Remember BOA robosigning fake mortgages and commiting widespread fraud? Remember…

Crypto, right now, is to finance as fantasy football is to football

Paypal and Square aren't banks... but they are regulated under securities law and the things they do are not nearly as crazy as the things that the "real" banks do with money behind the scenes.

I think that's cool; the regulations are there for a reason. The regulations are there because they underpin the promises made by society. Like, you put stuff in your 401k and you get to retire one day. That's a big promise and the paperwork is justified.

Regulation is a sort of "guard labour" which society puts in place to ensure the system is legible, or comprehensible on some level. It doesn't work too well, but it's the best we've got.

I'd be OK with a world where there is "regulated" crypto and "unregulated" crypto, and on the unregulated sort you can lose all your money and that's fine and maybe nobody goes to jail. But the regulated money can't cross over into that place (e.g. GME can't make huge bets on it, you know your retirement funds won't end up there by stealth).

Re: Regulators should treat stablecoins like banks

#50

Post by user-the-name »

JumpCrisscross wrote: post #7
simmerup wrote: post #4

Earlier quoted context omitted.

So if 0.26% of tether is withdrawn into currency the coin would collapse? Am I reading that right?

> if 0.26% of tether is withdrawn into currency the coin would collapse If 0.26% of Tether is withdrawn, it would need to start liquidating assets. That will, most of the time, be fine. Commercial paper is exceedingly liquid. But sometimes, the liquidation will prompt a price fall. This is a fire sale. That, in turn, prompts more redemption, as holders of Tether grow concerned about its stability. This is a bank run.…

> Commercial paper is exceedingly liquid

If it is not complete junk. Which there is good reason to believe Tether's is, and zero willingness from their side to show it isn't.

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