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> To address risks to stablecoin users and guard against stablecoin runs, legislation should require stablecoin issuers to be insured depository institutions, which are subject to appropriate supervision and regulation, at the depository institution and the holding company level. > To address concerns about payment system risk, in addition to the requirements for stablecoin issuers, legislation should require custodi…
We've seen that card played before.
All these coins are proven to be worthless. When speculation is making everyone money, the money isn't worth much. Edit: Love the immediate fear downvote. No one wants to hear their gold is really just shiny dirt.
More importantly: we _HAVE_ to understand the market dynamics here. What's going on is very human and very important to realize.
Matt Levine from Bloomberg has a very simple explanation: the cryptocoin world has discovered "senior debt vs junior debt", and are using this concept to create stablecoins.
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The issue is, the rest of the world _REMEMBERS_ 2008, and what happened the last time we relied upon the senior/junior debt split. The concept is simple:
Junior debt is high-risk. Senior debt is low-risk. Through the use of structuring your economy around this concept, your junior debt "supports" senior debt.
A stable-coin, is simply the senior-debt on some other cryptocoin.
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Lets take BTC for example. Lets say I want to "create" a stablecoin out of BTC, despite its widely varying valuation. Lets say I set up a senior set of notes: it stays at $1 as long as BTC stays above $10,000.
But what about all the "risky part" ? Well, someone out there in the world wants to bet it all on the risky part. When BTC rises from $10,000 to $50,000, they want to make $40,000 with $0 investment. Because the "senior" guy already took the risks for $10,000 and below, I can now offer the "rest of the gains" to the junior guy, who can play with all the values of BTC above $10,000 (except, without having to pay any money in the first place).
When BTC goes up to $20,000, the junior guy spent $0 and made $10,000. Senior guy still has $10,000.
When BTC goes up to $50,000, junior guy now has $40,000 and senior guy has $10,000.
This sounds hypothetical, but its in fact very similar to how the stablecoin TITAN / IRON was structured, with Titan as the "senior" stablecoin and Iron as the junior.
Now just wrap it all up in a smart contract, maybe tie the concept to Ethereum (or whatever other cryptocoin suits your fancy), and you too can reinvent senior/junior debt structures and pretend you're a genius.
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You see? Senior is "just" the stablecoin guy. Junior is the WSB idiot who might lose all of his money.
Or in other terms: your CDO of CDOs is truly and 100% secure. You may have a pile of shit, but you can extract stable values out of it.
Or at least, so went the theory of 2008 housing crisis, CDOs, and CDSes and all that. We know where that went however.
It hasn't even been 13 years and everyone's forgotten about the underlying assumptions that broke the market in the 00s.
All these coins are proven to be worthless. When speculation is making everyone money, the money isn't worth much. Edit: Love the immediate fear downvote. No one wants to hear their gold is really just shiny dirt.
That social credit, and money, and everything we hold dear and true is just narrative we've crafted around ourselves to cope with the uncaring void that is the cosmos.
So -- my guess -- people are probably going to keep thinking that things are valuable so long as everyone else around them does. And technically everything can be reduced to nothing more than a set worthless human brain farts.
Edit: except for your values of course. Whoever you are, your values are certainly meaningful, and your life is a story that really matters.
This is good. The backing of stablecoins is a very real issue. As the Treasury points out, there's a very real possibility of a run. Two stablecoins have crashed so far, SafeDollar SDO, and $TITAN. They went all the way to zero. Can Tether survive a net outflow? Probably not. They don't have the collateral. Dai is really a derivative of Etherium. Dai is backed by Etherium at 150%. So value in Dai is at risk if the pr…
Is Dai similar to Gemini's GUSD stable coin? It too is backed by Etherium. I think Gemini is paying 8 or 9% APR for holding. Where is that money coming from? Are they loaning out for a higher rate than that?
>Dai is a stablecoin cryptocurrency which aims to keep its value as close to one United States dollar (USD) as possible through an automated system of smart contracts on the Ethereum blockchain. [...] Dai is created from an overcollateralized loan[.]
Anyone else find it bizarre that the solution to slow payments might turn out to be distributed ledgers based on proof of work? It feels like the last thing you'd expect - especially since we're starting from a position of managing money through trusted centralised authorities. It's actually really weird we can't settle payments in seconds already.
Earlier quoted context omitted.
> there is no central issuing authority; Dai is minted in exchange for Ethereum (and other cryptocurrencies), not fiat currencies Its not fiat-stable, which is probably their focus. fiat-stable coins are basically crypto bank notes: https://en.wikipedia.org/wiki/Banknote Also, > a future where reality is determined by computer code and people are but players in the script. Corporations are "things" in a legal sense -…
The 9th Circuit ruled that source code is protected under the First Amendment in the Bernstein case, which legalized the export of cryptography. If you just publish the contract and don't have any ongoing administration, I would think that gives you a pretty strong legal defense.
Earlier quoted context omitted.
> Stable Coins will be bank notes What do you call an institution that takes deposits and lends them out, such as by buying ""commercial paper"" that Tether repeatedly talks about? A bank. (Or possibly a money market fund)
You call it a 0% interest money market fund. You do not call it a bank. A bank does something entirely different: create 'bank loans'. A non-bank does not have the ability to create bank loans.
I agree with you, broadly, though I have to comically point out that Tether was absolutely also originating loans.
This is good. The backing of stablecoins is a very real issue. As the Treasury points out, there's a very real possibility of a run. Two stablecoins have crashed so far, SafeDollar SDO, and $TITAN. They went all the way to zero. Can Tether survive a net outflow? Probably not. They don't have the collateral. Dai is really a derivative of Etherium. Dai is backed by Etherium at 150%. So value in Dai is at risk if the pr…
> The real question is what happens in the next recession. Well, there was a recession just last year and the stock market / BTC market went crazy. The real question is what happens in the next market downturn (specifically the cryptocoin market downturn, since these "stablecoins" look like they're "stable" only because of assumptions underlying the cryptocoin markets). The cryptocoin markets don't necessarily match…
Ultimately this is because central banks are in the driver's seat for asset prices these days. It's been trending that way since the Greenspan Put in the 90's. The economic fundamentals matter, but not as much as the monetary policy backdrop; after all, if there's more cash chasing the same number of shares, it can't help but drive up stock prices. Similarly, low borrowing rates reduce the equity risk premium, drive up growth valuations, etc.
So really, the real test for crypto is when the monetary policy regime shifts. But to be honest with you, I don't see that happening. Maybe inflation finally forces the issue -- but then there's the fact that inflation will drive flight to alternative assets anyway.