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Why you’d issue a branded stablecoin

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Re: Why you’d issue a branded stablecoin

#31

Post by krrishd »

lottin wrote: post #30
krrishd wrote: post #25

Earlier quoted context omitted.

The theory, at least, is that everyone would eventually be incentivized to move deposits out of the banking system and into this. (I am not sufficiently expert here to comment on the odds of an outcome like that)

Considering that stablecoins don't pay interest to the holder, I don't know why anyone would be incentivised to move their funds into stablecoins.

USDC gets me 4% on Coinbase, and USDB and other Bridge-issued custom stablecoins also give the customer rewards that they can pass onto the holder (thanks to MMF/similar cash equivalents behind the scenes etc).

But yes - this is why banks want to prevent stablecoin issuers from being allowed to grant rewards

Re: Why you’d issue a branded stablecoin

#32

Post by user34283 »

dzink wrote: post #5

(For those of us who remember what runs on a bank with your savings in it feel like) What if any protection is there, that you will be able to withdraw your money when a massive dunk in Bitcoin crashes a bunch of major holders and you want your savings back?

People who ask such questions aren't stupid enough to be in crypto.

It's easy to unravel the entirety of crypto:

Who is willing to spend any money for crypto? It's the same people who want to profit from reselling crypto at a higher price.

That's all there is to it. If you understand this, you also understand why the system eventually has to fail, leaving holders with trillions in losses that funded the profits people took out of the system.

Re: Why you’d issue a branded stablecoin

#33

Post by krrishd »

user34283 wrote: post #32
dzink wrote: post #5

(For those of us who remember what runs on a bank with your savings in it feel like) What if any protection is there, that you will be able to withdraw your money when a massive dunk in Bitcoin crashes a bunch of major holders and you want your savings back?

People who ask such questions aren't stupid enough to be in crypto. It's easy to unravel the entirety of crypto: Who is willing to spend any money for crypto? It's the same people who want to profit from reselling crypto at a higher price. That's all there is to it. If you understand this, you also understand why the system eventually has to fail, leaving holders with trillions in losses that funded the profits peopl…

I think there is plenty of counter-evidence in how this is being approached:

- The obvious: these are stablecoins, whose value is pegged to and 1:1 backed by fiat currency / is not capable of the cliche pump&dump dynamics of other crypto tokens.

- To the extent that (eg. today) they are coupled to a network like ETH or Solana (whose holders stand to gain) - both Stripe and Circle are building L1 blockchains right now whose native gas tokens are stablecoins, and are therefore also decoupled from any of the bagholder stuff. Merits of those chains aside: the big players want to further eliminate that dynamic and are putting their money where their mouth is.

- Stripe (and other legitimate fintechs) want to use stablecoins specifically because they legitimately make cross-border payments much easier, and because there is serious/earnest usage emerging. SWIFT actually does suck (not just to the cliche engineer-who-wants-better-APIs way, but even a banking professional would tell you), international payments are more unsolved than you think outside of a few fintechs who are basically just managing massive ledgers + a ton of liquidity around the world.

(In short: I think your take is something that may have made more sense 5-10 years ago, when Stripe themselves ditched crypto for the reasons that it didn't work for anything useful and was primarily a means of gambling)

Re: Why you’d issue a branded stablecoin

#34

Post by choppaface »

ArtTimeInvestor wrote: post #9

This is how I understand the uprising of stablecoins, let me know if I am wrong: One of the best businesses is to offer this service: Give me your money, I'll give it back to you later. Because then you can lend out that money to someone who offers this service: Give me your money, I'll give it back to you later. Plus some interest. You now have a business which, at almost no cost, generates money. The interest offer…

Yes but two other considerations:

1) Assume the buyer/seller holds capital from sources that the majority of the market considers “illicit” and/or is legally sanctioned and/or physically frozen or restricted. Aka the capital can never be called (or at a discount that is unknowable) or the transaction could be later legally reversed or nullified by one or more legal entities. But of course the StableCoin market maker fails to communicate this risk. Therefore the real value of either side of the trade could be zero despite the non-zero StableCoins being transferred. Thus that’s not really a “trade” because there are hidden substantial risks.

2) Along the lines of Matt Levine “Stablecoin treasury strategy?” Consider that the buyer is a publicly listed company, and they fundraise based upon purchase of the digital asset. Then you are doing what most banks consider is not trading but fueling speculation (and normally you can’t expose average retail investors to these risks).

The innovation of StableCoins is much less about Capitalism and much more about re-packaging fraud. And given how lax the prosecution of fraud was during the Financial Crisis, there’s a big meta-bet that StableCoin “traders” will never face losses.

Re: Why you’d issue a branded stablecoin

#35

Post by krrishd »

choppaface wrote: post #34
ArtTimeInvestor wrote: post #9

This is how I understand the uprising of stablecoins, let me know if I am wrong: One of the best businesses is to offer this service: Give me your money, I'll give it back to you later. Because then you can lend out that money to someone who offers this service: Give me your money, I'll give it back to you later. Plus some interest. You now have a business which, at almost no cost, generates money. The interest offer…

Yes but two other considerations: 1) Assume the buyer/seller holds capital from sources that the majority of the market considers “illicit” and/or is legally sanctioned and/or physically frozen or restricted. Aka the capital can never be called (or at a discount that is unknowable) or the transaction could be later legally reversed or nullified by one or more legal entities. But of course the StableCoin market maker…

>Assume the buyer/seller holds capital from sources that the majority of the market considers “illicit” and/or is legally sanctioned and/or physically frozen or restricted

This is not feasible legally, and is where your claim falls apart.

From the now-passed GENIUS act [0] which regulates the stablecoin issuer:

- "Permitted payment stablecoin issuers must maintain reserves backing outstanding payment stablecoins on at least a one-to-one basis, consisting only of certain specified assets, including US dollars and short-term Treasuries."

[0]: https://www.lw.com/en/insights/the-genius-act-of-2025-stable...

Re: Why you’d issue a branded stablecoin

#36

Post by mejutoco »

krrishd wrote: post #25
lottin wrote: post #24

Earlier quoted context omitted.

Why would a stablecoin granting yield keep the banking system from working?

The theory, at least, is that everyone would eventually be incentivized to move deposits out of the banking system and into this. (I am not sufficiently expert here to comment on the odds of an outcome like that)

In that case, wouldnt sp500 or vanguard be bigger risks to banks existing?

I think most people think banks make money by holding your money and giving you some interest when they actually make money by bringing money into existance out of nowhere when they issue mortgages.

Re: Why you’d issue a branded stablecoin

#37

Post by krrishd »

mejutoco wrote: post #36
krrishd wrote: post #25

Earlier quoted context omitted.

The theory, at least, is that everyone would eventually be incentivized to move deposits out of the banking system and into this. (I am not sufficiently expert here to comment on the odds of an outcome like that)

In that case, wouldnt sp500 or vanguard be bigger risks to banks existing? I think most people think banks make money by holding your money and giving you some interest when they actually make money by bringing money into existance out of nowhere when they issue mortgages.

I don't see why not - I'm sure the banks (or others more expert than me) would argue for stablecoins being somehow distinct in this regard, but yeah don't know why eg. Vanguard wouldn't also be a credible cause of deposit flight.

(I do vaguely remember reading that banks were concerned about people moving to money-market fund products that had bank-like functionality)

Re: Why you’d issue a branded stablecoin

#38

Post by pjc50 »

ArtTimeInvestor wrote: post #9

This is how I understand the uprising of stablecoins, let me know if I am wrong: One of the best businesses is to offer this service: Give me your money, I'll give it back to you later. Because then you can lend out that money to someone who offers this service: Give me your money, I'll give it back to you later. Plus some interest. You now have a business which, at almost no cost, generates money. The interest offer…

Issuing a branded stable coins of this kind lets you earn carry interest on tbills. Fine. Now, why would anyone buy a branded stable coin that explicitly doesn't promise a return?

(Bonus random question: is a UK premium bond a stable coin?)

Re: Why you’d issue a branded stablecoin

#39

Post by awesome_dude »

user34283 wrote: post #32
dzink wrote: post #5

(For those of us who remember what runs on a bank with your savings in it feel like) What if any protection is there, that you will be able to withdraw your money when a massive dunk in Bitcoin crashes a bunch of major holders and you want your savings back?

People who ask such questions aren't stupid enough to be in crypto. It's easy to unravel the entirety of crypto: Who is willing to spend any money for crypto? It's the same people who want to profit from reselling crypto at a higher price. That's all there is to it. If you understand this, you also understand why the system eventually has to fail, leaving holders with trillions in losses that funded the profits peopl…

Yeah - there's no real advantage to crypto, even less so for a stable coin (it really seems to be someone /trying/ to make crypto look legitimate, with absolutely no reason to buy.

Here's how a buyer of the coin should see it - I have 1 USD and I can put that money into a bank, into my pocket, or under my bed mattress.

If I buy a crypto stable coin.. I can hope that the coin doesn't fall over (as others have), and, uhhhh, that's about it.

The owner of the stable coin might be able to trade it with someone else, for goods or services, but the only reason either party would switch from the fiat currency to the crypto is to avoid regulation, whether that be because the goods/services are controlled, or because the transfer of money is controlled.

Any thought of "investing" the dollar into the "stable" coin is void, because it's a stable coin that's supposedly fixed to the value of the dollar, one goes in... one comes out

Payment of interest for holding the dollar, that's regulated, and the risk of the coin disappearing, or being shut down by the feds means that the reward would have to be high to make it worthwhile (IMO)

Re: Why you’d issue a branded stablecoin

#40

Post by lottin »

krrishd wrote: post #31
lottin wrote: post #30

Earlier quoted context omitted.

Considering that stablecoins don't pay interest to the holder, I don't know why anyone would be incentivised to move their funds into stablecoins.

USDC gets me 4% on Coinbase, and USDB and other Bridge-issued custom stablecoins also give the customer rewards that they can pass onto the holder (thanks to MMF/similar cash equivalents behind the scenes etc). But yes - this is why banks want to prevent stablecoin issuers from being allowed to grant rewards

If I deposit dollars in a savings account I will get paid interest, but that is different from the dollar itself being an interest-bearing asset. I think the same thing applies to stablecoins. Does USDC pay interest to the holder or do I have to make a USDC deposit at Coinbase in order to get paid interest? Also, banks already offer a ton of products that generate yield. I don't see why a product that seems relatively similar to many products that banks already offer would destroy their business... unless such a product is much better than what banks offer, but that doesn't seem to be the case.
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