Earlier quoted context omitted.
> DeFi tries to break any chains to opaque companies and have all actions happening transparently and auditable on-chain How can you create anything of value¹ by limiting yourself to on-chain transactions? If value is created, the transaction would cover something happening in parallel, and your transparency does not extend to that. ¹ I do not consider lotteries or similar zero-sum games as value creation, but those…
You can create value by for example connectind lenders and borrowers. The money could be used in real economy, albeit does not happen too much yet today. For example, developing nation export companies can get a dollar loan with better terms they would get from their local corrupted bank.
Regulators should treat stablecoins like banks
211–220 of 224 posts
Re: Regulators should treat stablecoins like banks
#212Earlier quoted context omitted.
I understand the point you're making, but I'd like to add that even if you accept that potentially stablecoins might avoid some problems a (politically tainted) central bank has, the issue isn't merely one of accepting that possibility, it's also one of lack of evidence and novelty. Having a bunch of private actors potentially run a huge experiment in which the economic fallout will not be born by them if it goes sid…
>>Having a bunch of private actors potentially run a huge experiment in which the economic fallout will not be born by them if it goes sideways is entirely unreasonable The experiment is entirely opt in, with no one being affected that does not choose to be.
Re: Regulators should treat stablecoins like banks
#213Earlier quoted context omitted.
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) we…
I actually dont know enough about stablecoins to opine. They may be fraud for all i know. My issue was with the casual dismissal of inflation as some kind of necessity for a functioning economy. My point is that is a priviled worldview of a typical elite that has never experienced poverty or real inflation in the flesh. Dismissing it as some kind of magic drug with annoying side effects shows lack of empathy for real…
Additionally, note that the money supply is ever growing - faster than inflation because the economy is growing. Now, there are apparently extra factors to consider here, including concepts like the velocity of money, which mean that money supply isn't trivially linked 1-to-1 to the economy's expansion and inflation. I'm no expert on the matter, to be clear, but that's my impression trying to search even for refutations of that stance - if your impression of commonly held expert opinion is different, it'd be interesting to compare links to check whether our media bubbles differ somewhere.
We cannot rule out that stablecoins might serve us well. But just because we have imperfect information does not mean all possibilities are equally risking; the risks from conventional monetary policy (including variations such as modern monetary theory) are simply much better understood because we have examples and history to learn from. The original article makes the case that stablecoins aren't really all that novel as a financial instrument (even though their technical underpinnings might be), and the argument appears sound to me (a non expert) and the source reliable (with a reputation at risk were their analysis clearly wrong).
As such, why should we ignore risks we understand, and take on additional risks we don't understand? At issue here isn't really the fact that it's a cryptocoin, but rather how it functions in the financial market. The article explicitly calls out that the technical implementation may have benefits, and a knee-jerk ban could be overzealous.
The issue is essentially financial, not crypto related, and I don't see any clearly open questions that might argue for allowing unregulated stablecoins, let alone a refutation of the premise that stablecoins have risks.
Posing questions makes it sound like we should wait and see; but we should not wait to answer those questions given what we do know. Policy could _always_ be better informed in the future; that does not mean delay is _always_ the best choice.
Re: Regulators should treat stablecoins like banks
#214Earlier quoted context omitted.
But why was there bad debt on the market ? Yes the defense mechanisms couldnt work since they were interdependent, but I saw a hairdresser on tv talking of how she used to flip 600k houses before the crisis, makes me think she s also part of the problem by failing to obey general accounting principles (dont borrow what you cant repay just because market goes up). And no, saying natural idiocy in the citizenry is to b…
> But why was there bad debt on the market ? This is my point, the focus on bad debt is like obsessing over the last snowflake that fell before the avalanche. The bad debt didn't cause the avalanche, the underlying structure of credit default swap contracts between the banks did. They were all writing each other checks that they couldn't cash. If the underlying problem of unaccounted-for credit default swaps didn't e…
Re: Regulators should treat stablecoins like banks
#215Earlier 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.
>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.
Add the saying goes, "bad money drives out good." In this case it probably means that crypto coins will mostly be held as an asset while national currencies are used for most transactions. Looking around, that certainly appears to be what is happening.
Re: Regulators should treat stablecoins like banks
#216Earlier quoted context omitted.
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?
https://tether.to/fees/ claims that fiat withdrawal is possible, with a fee of "The greater of $1,000 or 0.1%".
Re: Regulators should treat stablecoins like banks
#217Earlier quoted context omitted.
> But why was there bad debt on the market ? This is my point, the focus on bad debt is like obsessing over the last snowflake that fell before the avalanche. The bad debt didn't cause the avalanche, the underlying structure of credit default swap contracts between the banks did. They were all writing each other checks that they couldn't cash. If the underlying problem of unaccounted-for credit default swaps didn't e…
Doesn't all insurance work like this though? Insurance companies can pay for individual losses, but are bankrupt if everybody loses at once.
Re: Regulators should treat stablecoins like banks
#218Earlier quoted context omitted.
> stop advocating that people be treated like children Stablecoins are money market funds. Those initially came about due to regulatory limits on deposit-account interest rates and risk thresholds. They nearly took out the real economy in 2008. Stablecoins are recreating that structure, guaranteeing a peg against a portfolio of risky assets inextricably tied to the mainline financial system. (This is a summary of the…
>>They nearly took out the real economy in 2008. No they didn't. The government nearly took out the real economy. In the decade before the financial crisis, regulatory pressure was used to force banks to issue more subprime mortgages. This article from 2000 warns of the consequences: https://www.city-journal.org/html/trillion-dollar-bank-shake... Government sponsored enteprises, which underwrite 50% of the entire US…
> Wall Street has its own version: Its Big Lie is that banks and investment houses are merely victims of the crash. You see, the entire boom and bust was caused by misguided government policies. It was not irresponsible lending or derivative or excess leverage or misguided compensation packages, but rather long-standing housing policies that were at fault.
> Indeed, the arguments these folks make fail to withstand even casual scrutiny. But that has not stopped people who should know better from repeating them.
https://www.washingtonpost.com/business/what-caused-the-fina...
Re: Regulators should treat stablecoins like banks
#219Earlier quoted context omitted.
The ratings are in the report linked by OP. Vast majority A-2 or better (S&P).
And many are self-determined and put into (S&P) terms, because they aren't otherwise rated. Tether has outright lied numerous times in the past, and have been caught doing so. Why would you believe their attestation when they won't allow audits?
Re: Regulators should treat stablecoins like banks
#220Then, finally, we could be rid of these ridiculous things and on to the next ridiculous thing.