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Report on Stablecoins [pdf]

home.treasury.gov

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Re: Report on Stablecoins [pdf]

#251

Post by anonporridge »

adamc wrote: post #203
swader999 wrote: post #196

Earlier quoted context omitted.

You could make the same claim about any kind of money though. Whose to say the USD or GOLD or CAD or tree bark is real money? A productive asset is an entirely different thing. It's not easy to convert an asset for instance or walk across a border with it. People make the fundamental mistake thinking these things are investments, they aren't, it's just currency or forex speculation that we are doing here.

In the case of the USD, the existence of a powerful government with a variety of powers (including coercive ones). Nothing is guaranteed in life, but it is orders of magnitude different from a digital currency offered by private individuals.

Yes, the USD is backed by the most absurd proof of violence the world has ever seen. No organization of human civilization has ever been able to summon as much death and despair as the United States.

However, most of the ability of the United States to execute such power is centralized in Washington D.C. and New England. Centralization brings immense efficiency, but also vulnerability. Those geographic regions are a potential target that takes a lot of energy to defend. Why do you think the 9/11 terrorists chose New York and D.C.?

Meanwhile, China just fully outlawed cryptocurrency and mining, and it was a minor hiccup in the network. Bitcoin's hash rate as already recovered. The price has doubled. It's stronger than it's ever been.

That's what makes bitcoin such a potentially powerful store of value. It's security mechanism is incredibly anti-fragile. There's no throat anyone can choke. It's also globally available and permissionless, so it accepts everyone and anyone without judgement. These traits are powerful, in a different way than the power that backs the USD.

That's why bitcoin matters.

Re: Report on Stablecoins [pdf]

#252

Post by bduerst »

webinvest wrote: post #208
neaanopri wrote: post #173

Fed should make a commitment NOT to bail out crypto people under ANY circumstances!

They might one day bail out the banks that use Ripple (XRP)… as well as the banks that don’t use it. Bitcoin was literally created due to bailouts. Just read the genesis block of Bitcoin.

Ripple has a lot of "partner" banks, not actual users. They're notorious for hamming that up:

https://www.forbes.com/sites/jasonbloomberg/2019/03/01/is-ri...

Re: Report on Stablecoins [pdf]

#253

Post by icelancer »

TomSwirly wrote: post #194
spir wrote: post #182

Earlier quoted context omitted.

Crypto "expert" here. We will have a catastrophic crash, it's normal and natural. But, the tech is here to stay and is 100x better than existing solutions. Crypto is changing the world, one crash at a time :)

> 100x better than existing solutions. And after ten years, there isn't one actual application of cryptocurrencies except for speculation and crime.

I've responded to several commenters who say this with my real world examples, the most notable of which are paying people in Venezuela to do work for me when most mainstream forms of monetary exchange are nearly impossible in/out of that country.

Re: Report on Stablecoins [pdf]

#254

Post by vineyardmike »

dustingetz wrote: post #80
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.

I want to preface this by saying I don't own crypto and I think its often full of scams (eg. squid coin). But it has some real potential and isn't always as bad as it seems.

Tether is a real risk, I agree.

> 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.

Yeah, but that's not untrue for banks. Conceptually, a bank's job is to store money for depositors. That has a real cost, so theoretically you should have to pay for banking service. We know that banks make that money back from lending the money with interest (profiting off interest). This lending behavior is theoretically possible for individuals to do while skipping banks, but it is not practical at scale. So, basically depositors "pay" with opportunity cost - and since the world fiat currencies have inflation, this is essentially paying the devalued difference of money.

Crypto is similar... it costs real money to maintain the deposits - aka POW to secure the ledger. Instead of lenders' interest paying the cost, it is paid by deflation by depositor by more currency being circulated. Not too different than fiat-at-banks.

Crypto also is potentially more egalitarian since anyone can mine (at a small scale at least) to potentially make some small income, and certain complex financial actions can be done for "free-ish" in contracts (conditional swaps/lending, escrow, multi-sig transactions).

Re: Report on Stablecoins [pdf]

#255

Post by md2020 »

sub7 wrote: post #143

From a Coinbase exec: "Tether is a ticking time bomb. Whenever it goes off, it'll be a 70-80% market correction for 2-3 years" Crypto continues to help nobody and achieve nothing in the real world. This administration has been criminally slow in shutting it down, lobby is strong.

Spoken like somebody who knows nothing about crypto

Re: Report on Stablecoins [pdf]

#256

Post by lamontcg »

BoiledCabbage wrote: post #224
lamontcg wrote: post #140

Earlier quoted context omitted.

Tether can survive a net outflow because Tethers aren't redeemable in that way. If you show up with 1M USDT, they won't give you $1M USD. It'll have to collapse on exchanges with more sellers than buyers, and to determine how that happens you need to actually understand what specific mechanism underlies how the peg is maintained. I suspect Tether is all crypto-backed debt issuance which is denominated in real $USD wh…

Tether will collapse the same way that Squid Game Coin collapsed - extremely quickly. Assuming a power distribution of coins across accounts, it's likely that 99% of tether accounts don't meet the 100,000 $USDT threshold to cash out. If you have a coin, where 99% of people/accounts aren't allowed to cash out that reeks of scam. You can come up with tons of smoke to disguise it, and the whole "well you have to sell on…

I think its very clear by now that if it were that simple it would have already happened.

And yes, the fact you can't cash out directly shows that it is a scam, yet counterparties are willing to continue to do business with them. That again suggests that the mechanism isn't that simplistic.

And I don't doubt that Tether will collapse very quickly, but I don't think Tether is the det cord that sets off the collapse. Tether is the ricketty-ass foundation that causes the entire building to slide over and take out multiple downtown city blocks of collateral damage. The det cord is going to simply be a bubble followed by a panic collapse in the price. The blasting charges that then go off will be a bunch of major exchanges and counterparties to Tether going under. Then Tether implodes as a mechanism for the contagion to spread and wipe out pretty much everyone else.

Re: Report on Stablecoins [pdf]

#257

Post by BoiledCabbage »

Tenoke wrote: post #237
BoiledCabbage wrote: post #224

Earlier quoted context omitted.

Tether will collapse the same way that Squid Game Coin collapsed - extremely quickly. Assuming a power distribution of coins across accounts, it's likely that 99% of tether accounts don't meet the 100,000 $USDT threshold to cash out. If you have a coin, where 99% of people/accounts aren't allowed to cash out that reeks of scam. You can come up with tons of smoke to disguise it, and the whole "well you have to sell on…

I've cashed out way less USDT, just not through Tether themselves. Comparing it to Squid Game which you can't even sell to others is ridiculous.

While I assume I know what you did, rather than go with that, describe how you cashed out and I'll explain how I believe that supports why it's ultimately a scam.

Re: Report on Stablecoins [pdf]

#259

Post by [deleted] »

jbusma wrote: post #241
arcticbull wrote: post #218

Earlier quoted context omitted.

That's not quite correct, although I understand your sentiment. When you own a share of Square (or Visa, or PayPal) each time a transaction takes place on their network, a portion of that transaction (revenue minus costs) accrues to the company - and by extension increases the intrinsic value of your share. The transaction revenue is spent on furniture, on R&D, on employees and on buffing up their cash position. As a…

As a holder of crypto, you are both a customer and an owner. You pay a fee for each transaction you send, just like any other service. b However, your holdings increase in value the more other people use the same chain because the value of the entire ecosystem needs to scale proportionally to the value people are attempting to transact across it. Financial systems, like social networks, and most businesses coming out…

[deleted]

Re: Report on Stablecoins [pdf]

#260

Post by RustyConsul »

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…

The thing that is working slightly in the background to ensure net outflows don't happen is during time of downward volatility, stablecoins is what the prudent crypto investor is transitioning into and stores his wealth until they are ready to buy again.
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