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Regulators should treat stablecoins like banks

economist.com

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Re: Regulators should treat stablecoins like banks

#161

Post by legutierr »

JumpCrisscross wrote: post #149
legutierr wrote: post #146

Earlier quoted context omitted.

There is a framework for this kind of regulation in place already, in the form of money transmitter licensing. Coinbase, for instance, is licensed as a money transmitter in 40+ states, and relies on those licenses to do business in most of the United States, including with regards to the issuance of USDC, per my understanding. Paypal also operates in the United States under this licensing scheme. The rigor of money t…

> banking regulators already have sufficient legal authority to craft stablecoin regulations if they want to—and the operational capacity to enforce those regulations Yes? The article is calling on them to use that capacity to clarify how those rules apply to stablecoins. Nobody is calling for new legislation.

I mention new legislation to underline that the specific authority to regulate non-bank stablecoin issuers already exists under state law, specifically.

And while the article doesn't call for new legislation, some people are advocating for new federal legislation to give federal regulators the authority to regulate non-bank stablecoin issuers, which is an authority that they currently do not have, generally speaking. I certainly wouldn't say that "nobody" is calling for new legislation. For example:

https://www.coindesk.com/new-crypto-bill-in-us-congress-is-t...

OP commented that the OCC would need to change its rules in order to allow more entities to obtain bank charters, and the focus of the article seemed to be on national bank regulators (without explicitly drawing a distinction). Rather than focusing at the federal level, the focus should be placed on standardizing state regulation and educating state regulators as to the powers and obligations they already have.

Re: Regulators should treat stablecoins like banks

#162

Post by jellicle »

FabHK wrote: post #43
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So if 0.26% of tether is withdrawn into currency the coin would collapse?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?

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,…

Can anyone "take out" dollars at all? Tether is a bank with a deposit window but no withdrawal window.

If Tether ceased operations tomorrow, just abandoned USDT and walked away with all the cash, what happens?

Re: Regulators should treat stablecoins like banks

#163

Post by emn13 »

IG_Semmelweiss wrote: post #91
toomuchtodo wrote: post #47

Earlier quoted context omitted.

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…

>>>>> That's what cost of living adjustments (social security or other systems) Isnt that also... Insolvent? >>>> prudently investing a lifetime of retirement savings Would you deem people that invested on bonds of the US govt, GM, that they invested prudently? >>>>If you're expecting the value of a currency to never change, you are asking a fish to climb a tree. Change implies movement in both directions. Yet what w…

While I'm sure you have a point that some people are getting shafted by lack of inflation compensation, what does that imply for stablecoins vs. conventional banks and/or central banks?

That issue could occur in any system with expanding money supply, and you want a system in which the money supply expands in some sync with the economy, because otherwise it's attractive to just hoard paper (or crypto, or whatever) wealth and not invest.

In any case, isn't this primarily a political problem (or where the issue is private: a problem of a poorly phrased or one-sided contract)?

Re: Regulators should treat stablecoins like banks

#164

Post by tedunangst »

csomar wrote: post #89
arcticbull wrote: post #75

Earlier quoted context omitted.

It simply is not. Retail banking customers are able to withdraw 100% of their balances and have been for almost 100 years thanks for the existence of the FDIC. Nobody has lost a single dollar to a bank run since the FDIC was instituted after the Great Depression. Even in 2008 when WaMu went under. Not one dollar. All retail banks in the United States are backstopped by the FDIC and the FDIC is backstopped by the fede…

FDIC guarantees up to $250k and also kicks in after the bank goes under. I'm guessing it should take some time (a few years?) until the FDIC reimburses the people who lost money.

It's been 12 years since 2008. Who's still waiting for their check from FDIC?

Re: Regulators should treat stablecoins like banks

#165

Post by emn13 »

short_sells_poo wrote: post #148
bufferoverflow wrote: post #139

Earlier quoted context omitted.

What's the point of that? Using cryptocurrencies frees you from the possibility of your funds being frozen or seized or even detected/associated with you. GBPCoin would be no different from using GBP on a bank account.

Using cryptocurrencies prevents your funds being frozen or seized until a couple of masked men come around and beat it out of you with a $5 wrench. Eventually, somewhere, you have to spend money or take delivery of goods or services rendered. I don't think you can buttress that.

And I hope most of us don't want to live in the hypothetical society where courts and lawmakers have zero sway over the rich. We complain enough about how untouchable they are already; why would we want to increase that? If a court or law has no way to freeze or redirect funds, that's a bug, not a feature.

Re: Regulators should treat stablecoins like banks

#166

Post by tedunangst »

FabHK wrote: post #43
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?

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,…

What's their interest rate exposure? If rates go up 0.5%, what's their paper worth?

Re: Regulators should treat stablecoins like banks

#167

Post by smaryjerry »

marcosdumay wrote: post #150
beiller wrote: post #126

Earlier quoted context omitted.

I don't think this is an oracle problem. I watch reviews online for products I want to buy. Seems to work fine. But let's say now legal action is threatened for any negative reviews. What happens to the trust now of online reviews?

It's more than that. Do you read reviews paid by you or by the seller of the product they are reviewing?

I think the rating system he referred to was supposed to be independen.

Re: Regulators should treat stablecoins like banks

#168

Post by jcranmer »

vkou wrote: post #151
SilasX wrote: post #137

Earlier quoted context omitted.

Yes, that is a valid distinction to make, if the arguments/concerns around Tether were merely "hey, let's make sure regular banking regulation extends to this organization as well, to make sure it's all going in tip-top shape". But that's not why people bring up the figures. They're acting like it's inherently shady to have less than 100% (or 3, or whatever) cash reserves for something that ostensibly "has your money…

> They're acting like it's inherently shady to have less than 100% (or 3, or whatever) cash reserves for something that ostensibly "has your money on demand", and such a scheme is inherently unsustainable, even though this is exactly what banks do.[1] This is not correct. Just because banks are fractional reserve, doesn't mean that they don't have enough assets to cover their deposits. It means that they don't have l…

> [1] The nature of their fraud is that they are grossly overvaluing their illiquid assets. Because they have never undergone an audit, they can get away with this - they can claim that their illiquid assets are worth , with no third party oversight.

Indeed, the attestations (not audits!) that they have the money backing it even explicitly have the note on them that the assets are marked at cost of purchase, instead of mark-to-market.

Re: Regulators should treat stablecoins like banks

#169

Post by sorbits »

xur17 wrote: post #94
Zamicol wrote: post #74

Firstly, Tether is rat poison. Unfortunately, newcomers to the space identify "stable coins" = "tether" or wrongly assume that other stablecoins share similar mechanisms. There are many alternatives that operate radically differently in the nascent space. DAI is immensely exciting. Stablecoins like DAI are interesting experiments that could powerfully create new online economies. Blockchains like Ethereum are current…

> Blockchains like Ethereum are currently far more transparent than the state-sponsor US monetary system. I hope to live in a society where economic experiments can be executed, new lessons learned, and transparency maintained. If stablecoins are persecuted, the need for cryptographic zero-knowledge proofs will allow these systems to continue with far less transparency. This is the part that excites me about Ethereum…

> By definition, a lot of the projects on Ethereum are a LOT more transparent than the traditional finance world

The important stuff is not transparent. For example, how do you know that Tether is backed by real USD? That Binance isn’t manipulating prices via wash trades? That the promises made about various coins are being upheld? etc.

Crypto is reliving the era of https://en.wikipedia.org/wiki/Wildcat_banking

> With most of the traditional finance world, it's all very grey and hidden

What specifically are you referring to with “traditional finance”?

Re: Regulators should treat stablecoins like banks

#170

Post by [deleted] »

SilasX wrote: post #11
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.

Banks are now required to have 0% of deposits as cash.[1] It’s funny whenever people start to get outraged at seeing fractional reserve banking in any context besides where we’ve ignored it and accepted it. [1] Citation for those who missed this development: https://www.eidebailly.com/insights/articles/2020/4/federal-...

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