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Report on Stablecoins [pdf]

home.treasury.gov

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Re: Report on Stablecoins [pdf]

#531

Post by arcticbull »

humaniania wrote: post #516
arcticbull wrote: post #400

Earlier quoted context omitted.

Ah I see. The point I was making is that since it brazenly doesn't have backing and it openly gets to choose who is allowed to redeem, a run would be very hard to actually start. The exchanges themselves are incentivized to backstop the pegs (up to a point) out of their own capital to ensure their own survival. Beyond that, you are correct of course!

Assuming that the unlicensed exchanges have the capital to process withdrawals. In other unregulated industries the people operating the gray market platforms are almost always embezzling money and not keeping customer funds in segregated accounts. If the exchanges spend money propping up Tether they won't have it available for withdrawals.

Exchanges make money hand over fist, they keep non-trivial basis points from a nice simple MySQL transaction. The question is: is the net outflow from the USDT peg into USD more than the revenue they are bringing in?

Re: Report on Stablecoins [pdf]

#532

Post by arcticbull »

stickfigure wrote: post #523
arcticbull wrote: post #306

Earlier quoted context omitted.

This is intuitive but wrong, in three ways. (1) Domestically, the US Army does not enforce law or make sure the dollar is the "coin of the realm." That would violate Posse Comitatus act. US domestic law enforcement enforces laws, domestically - including legal tender laws. I agree you can apportion some of the strength of the US dollar to its legal system, which makes sense, as the currency is an emergent property of…

Counterfeit USD is a small, inexpensive problem because of US military might. The biggest guy in the playground never actually needs to fight. Imagine for a moment the world suddenly adopted the Nicaraguan Córdoba as the common reserve currency. How long before it gets printed everywhere? Who is going to stop it? And how far do you think Nicaragua's AML/KYC regime would actually reach? Iceland's currency wouldn't wor…

> Counterfeit USD is a small, inexpensive problem because of US military might. The biggest guy in the playground never actually needs to fight.

[citation needed]

> Imagine for a moment the world suddenly adopted the Nicaraguan Córdoba as the common reserve currency. How long before it gets printed everywhere? Who is going to stop it? And how far do you think Nicaragua's AML/KYC regime would actually reach?

Why would any state on earth illegally print Nicaraguan money when they can instead print their own legally? What's the goal? Is this really the easiest path to achieve that goal?

> Make no mistake, "cut off from the entire world financial system" requires the threat of violence.

It really doesn't. In this case the carrot is way bigger than the stick.

Re: Report on Stablecoins [pdf]

#533

Post by arcticbull »

stickfigure wrote: post #526
bubbleRefuge wrote: post #352

Earlier quoted context omitted.

He is right in the figurative sense that the government's power to tax and spend in its own fiat currency is what drives demand for the currency. W. Mosler, one of the founders of MMT, has this allegory: If we are in a room full of people with a single exit and I am blocking the exit with a gun in my hand and tell you you need one my business cards to exit the room, then my business card has value.

Sure, but the issue is not demand but supply. Enforcing the scarcity of USD requires a large military. Enforcing the scarcity of BTC merely requires electricity.

It merely requires massive amounts of electricity and e-waste vastly disproportional to its benefit and proportional to its price. Don't mince words.

Re: Report on Stablecoins [pdf]

#534

Post by arcticbull »

swader999 wrote: post #515
arcticbull wrote: post #240

Earlier quoted context omitted.

Its network doesn't create value, it extracts value. $60M per day, $21B per year. > The fact it can't be debased as easily as fiat currencies is not a tangible thing but it does compel interest in it. That is not a benefit to a currency, quite the opposite. A deflationary currency would likely lead to a deflationary spiral, savaging the job market [1] It also leads to a monetary system that cannot adjust to a changin…

Maybe you are stuck on the track that there has to be a winner. There doesn't have to be a single monetary system. There can be several. And bitcoin has real utility in a lot of valid scenarios. Not having a central authority is interesting and appealing to many. Deflationary by nature makes it an excellent store of value.

> And bitcoin has real utility in a lot of valid scenarios.

Let's just wait I'm sure OP will deliver even a single one that isn't crime, regulatory capture or gambling.

> Not having a central authority is interesting and appealing to many.

Lots of counterproductive things are appealing to lots of people. Rolling coal is appealing to lots of people. Not getting vaccines is appealing to lots of people. That doesn't mean the benefits outweigh the costs socially, and it doesn't mean that it should be legal.

> Deflationary by nature makes it an excellent store of value.

And that makes it an awful currency. The fact it's a negative-sum MLM which creates no value whatsoever while creating the illusion of wealth is what makes it an awful asset. There's nothing left.

Re: Report on Stablecoins [pdf]

#535

Post by arcticbull »

swader999 wrote: post #513
arcticbull wrote: post #466

Earlier quoted context omitted.

Is that actually a real statistic about horses? That's fascinating. I wouldn't build a currency on it though ;) Step right up to Horsecoin, fastest horse gets the block!

It's true for any endeavor that falls on the bell curve that only has one winner. And this analogy ignores the fact that mining rigs win every day just by pooling their efforts

I'm not sure that has any bearing on my comment though.

Re: Report on Stablecoins [pdf]

#536

Post by lemmonii »

arcticbull wrote: post #387
dcolkitt wrote: post #371

Earlier quoted context omitted.

You can easily short Tether on DeFi platforms that can’t be locked down.

Not really, and you shouldn't try. The highest recorded price for 1 USDT was $1000 at a centralized exchange, and do you really trust your counter-party in a DeFi transaction not to get flash-loaned into oblivion or to rely on a bad oracle? [1] You also have to post crypto collateral which may get rekt alongside a Tether collapse. Who even knows what that might look like? The only way to win is not to play. [1] http:…

The only realistic way to short tether is to take a DeFi Tether loan and use some other stablecoin (You must trust that it's peg will hold longer than USDT's) as collateral.

Re: Report on Stablecoins [pdf]

#537

Post by josefrichter »

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…

Just a correction: there have been far more stable coin crashes, there was a time not so long ago when every week one of them crashed. There’s dozens, or more likely hundreds, of stablecoins out there.

Re: Report on Stablecoins [pdf]

#538

Post by pcwalton »

panarky wrote: post #479
tuesdayrain wrote: post #434

Earlier quoted context omitted.

>I’ve been shorting a few bitcoin-related public companies on the theory that in a run on Tether they will have to liquidate large bitcoin holdings I doubt a run on tether would even cause a 50% drop in BTC price. Hope your account doesn't blow up when Bitcoin inevitably reaches 1 million per coin ;)

Either markets work or they don't. Sure, in the short term, unregulated markets can be manipulated. But Tether's been around more than seven years, more than enough time for the "smart money" to profit by obliterating them. You can sell Tether on Coinbase for U.S. Dollar deposits to your bank account. The fact that Tether maintains its 1:1 peg to the dollar is a signal that maybe all the smart guys who have been conf…

> But Tether's been around more than seven years, more than enough time for the "smart money" to profit by obliterating them.

> The fact that Tether maintains its 1:1 peg to the dollar is a signal that maybe all the smart guys who have been confidently predicting its imminent and inevitable failure for the last seven years might be missing something.

Bernie Madoff claimed that his scam started in 1991, though in reality it was probably much earlier. It didn't collapse until 2008.

Even in the cryptocurrency space, Mt. Gox took five years to collapse.

Re: Report on Stablecoins [pdf]

#539

Post by swader999 »

dragontamer wrote: post #341
octodog wrote: post #323

Earlier quoted context omitted.

Invidiual stocks collapse all the time. Selling down large positions is a real problem that institutional investors face and they plan for a haircut on the list price when doing so.

Sure, but the stock collapses are always correlated to income issues Either expectations of future income, or present circumstances.

The stock market can be priced in BTC and I think this maybe shows that a currency and a stock contract for ownership are fundamentally different. You can't put your money to work in a currency, you just speculate that it might rise in value and have higher conversion rates in the future.

Stocks are also used like a currency in mergers which seems odd but is practical in some circumstances.

Stocks and currency can both become most valuable as TP or wall paper.

The wilds swings in exchange rate is typical of any new currency, even the USD in its early years.

Re: Report on Stablecoins [pdf]

#540

Post by EGreg »

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…

I used to think it was backed by Ethereum and overcollateralized with oracles. But now I hear it’s backed by USDC … LOL

I kind of preferred the algorithmix approach !

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