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Report on Stablecoins [pdf]

home.treasury.gov

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Re: Report on Stablecoins [pdf]

#71

Post by cinquemb »

the_optimist wrote: post #58
pjc50 wrote: post #9

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.

> A non-bank does not have the ability to create bank loans.

A decentralized derivatives protocol can lend its credit balance (and fractions of its stablecoin balance, if it exists at all at the point when a position is opened) to a decentralized liquidity pool when there is demand by end users to open a position (ex. a user can deposit frax to buy options/forwards/interest rate swaps/etc against a liquidity pool while the exchange allows the pool to borrow collateral into existence [and destroyed when the users position is closed, modulo the type of derivative the user bought]) without the liquidity pool providing all or any the collateral to back the position if it ends up moving against the liquidity pools exposure.

Such a protocol can also issue debt against their stablecoin flows in accordance the protocol code, that can also float on a dex at a premium or a discount and also be used as collateral in other decentralized stable coins that allow for differing collateral underlying (like some decentralized credit/debt backed stablecoins out there now, or allow themselves to be collateralized by any combination of ERC20 underlying).

Re: Report on Stablecoins [pdf]

#72

Post by agotterer »

Animats wrote: post #47

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…

This is why I'm excited about Djed (https://djed.xyz). Input Output Global (creator of Cardano) has been researching stable coins and drafted a pretty extensive white paper on their solution (https://eprint.iacr.org/2021/1069.pdf). The white paper also include a mentions for how they will prevent bank runs.

Re: Report on Stablecoins [pdf]

#73

Post by null_object »

dragontamer wrote: post #62
dexwiz wrote: post #49

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.

The downvotes are because "worthless" is hyperbolic and unhelpful. Clearly, the coins have value because someone out there feels like paying money for them. 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 us…

> 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.

You used a lot of words to describe a Ponzi scheme.

Re: Report on Stablecoins [pdf]

#75

Post by silentsea90 »

dexwiz wrote: post #49

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.

There's a canonical toxic response to this = HFSP. I don't like that because we're all still learning. I hope you see how the money printer is making scarce assets outside of Govt manipulation more valuable. The Bitcoin rabbit hole goes deep. You're right in that stablecoins might actually be worthless in the long run since they're backed by USD which might be worthless in due course of time. Zoom out of the day to day movement - we're in price discovery stage where nothing makes sense in the short term.

Re: Report on Stablecoins [pdf]

#76

Post by dragontamer »

null_object wrote: post #73
dragontamer wrote: post #62

Earlier quoted context omitted.

The downvotes are because "worthless" is hyperbolic and unhelpful. Clearly, the coins have value because someone out there feels like paying money for them. 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 us…

> 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. You used a lot of words to describe a Ponzi scheme.

I'm describing a CDO scheme. Its important to remember the difference. Ponzi is a very, very different structure.

CDOs do well as long as the underlyings don't crash beyond a certain value. The "junior" guys have lots of risk (and they _WANT_ the risk and enjoy it). The "senior guys" think they're safe.

Indeed: senior/junior is roughly how we split up fiat dollars: banks do this with our money all the time (under tight regulations of course, to ensure that the banks are following the rules). Senior/junior can work, but in practice... someone out there will want to cheat the system. At that point, it all comes crashing down.

Regulating the heck out of banks to ensure that no one cheats is a big part of the solution.

Re: Report on Stablecoins [pdf]

#77

Post by yokem55 »

Animats wrote: post #47

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…

150% is the minimum amount of collateral. If the USD value of your locked eth falls below that 150% threshold relative to your DAI denominated debt, a liquidator will pay off your debt and take your collateral.

So, a conservatively managed Maker CDP's regularly are collateralized to the tune of 300% if not more.

Re: Report on Stablecoins [pdf]

#78

Post by paulgb »

sschueller wrote: post #18

If the US would just provide its own stable coin it would kill all other USD stable coins and there would be no more issues. Who would want tether if you can get government backed USD stable coins?

> Who would want tether if you can get government backed USD stable coins?

People who wanted to hold USD outside of the US's jurisdiction, for one. I suspect this is one reason that apparently “more legitimate” stablecoins haven't caused huge Tether outflows.

Re: Report on Stablecoins [pdf]

#79

Post by yashap »

Aaronstotle wrote: post #43
robmerki wrote: post #12

Tether and other pose a critical systemic risk to all cryptocurrency. Anything to increase trust/transparency with stablecoins is a big with for crypto.

Tether absolutely poses a large risk to crypto. If companies do issue stablecoins, they should have links to third-party attestations that verify proof of reserves like Circle (USDC) does. Tether could end all of their "FUD" if they ever published such a report. Circle's reporting: https://www.circle.com/en/usdc#transparency (edited to change audits --> attestations)

IMO “FUD” about Tether will never end, because it’s a fairly clear scam. The fear/uncertainty/doubt around it is not due to an easily remedied lack of transparency, the lack of transparency is just an attempt to disguise the scam.

I see Tether heading towards collapse, not legitimacy, and any actual increase in transparency would just hasten the collapse.

Re: Report on Stablecoins [pdf]

#80

Post by dustingetz »

Animats wrote: post #47

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…

Risk is that a tether run causes all of crypto to collapse, not just USDT. How many actual dollars are in the system? Everything real has been exfiltrated through electricity bills, taxes and early adopters selling, the entire crypto economy is a hollow shell, leveraged on retail deposits.
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