131–140 of 183 posts
I run ScamStableCrypto. I create a billion ScamStableCoins and claim they are worth $1 each. I give a billion ScamStableCoins to ScamCryptoExchange. ScamCryptoExchange is run by me. ScamCryptoExchange writes an IOU for one billion US dollars and gives it ScamStableCrypto (my right hand gives something to my left hand). I, as ScamStableCrypto, write down in my balance book that I have a billion dollars of Commercial P…
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I believe the U.S. minimum requirement is currently at 10%, but you do remember how bad it all came crashing down 13 years ago, right? So yes, it does matter if we let financial institutions disregard risk in the pursuit of profit, when they are gambling with other people’s money. In the case of Tether though, it’s not a traditional bank that issues interest yielding loans based on the lender’s credit profile. Rather…
The OP just told you it's 0%, and he's right. Reserve requirements have been abolished for the past 2 years, and even before that, banks could easily conjure reserves when they needed. That was the whole point of the QE programs run by the Fed. Edit: another poster linked the actual Fed announcement and it is actually 1 year since the reserve requirement has been lifted.
Changing reserve requirements is part of conventional monetary policy, it is not QE.
As a comparison, USDC reserves are 100% backed by US dollars held in custody accounts, currently 9.3B. https://www.centre.io/hubfs/pdfs/attestation/grant-thorton_c...
One very interesting sentence in that document is the "100'000 USDC token blacklisted" If you ever thought govt-backed cryptos and centralized tokens like USDC were a good idea, ask yourself this: Could a stack of greenbacks ever be "blacklisted" (I mean, people have certainly tried with various "tricks")? One of the nice property of money as we've known it so far was fungibility. With govt-backed (e-dollar) and/or c…
Copying from an older comment of mine (https://news.ycombinator.com/item?id=26812598):
I saw something like this happen when I was younger (this was pre-web, in the 80s or 90s, so I unfortunately haven't been able to find any online references to it): there was a big bank heist, and the stolen banknotes were new notes which hadn't been put into circulation yet. The ranges of their serial numbers were widely distributed by the press, and for instance cashiers at supermarkets were supposed to verify whether the serial numbers of the banknotes they received matched any of these ranges (since the banknotes hadn't been put into circulation, they were treated similar to counterfeit money: they officially didn't have any value). The country's currency has changed since then (it was the hyperinflation times), so that whole banknote series is no longer valid nowadays.
The way this works for the most obvious analogous product I can think of in the financial markets (index ETFs like SPY https://www.ssga.com/us/en/institutional/etfs/funds/spdr-sp-... for instance) is known as the ETF creation and redemption mechanism. For any given ETF there is a pool of participating brokers who are entitled to create or redeem units in the etf with the ETF administrator. So if the price of the ETF gets too high relative to the assets then these brokers can buy the assets in the market and hand them in to the ETF admin who will add those assets to the ETF and give them in return the new units that are created as a result. This has the effect of raising the prices of the constituents and reducing the price of the ETF units (when the broker then sells those new units), bringing the prices back into equilibrium.
Conversely if the ETF units are too cheap, the broker can buy the units in the market and redeem them for the correct proportion of underlying assets (ie exactly the reverse process) bringing the price into balance the opposite way.
It's incredibly important for this mechanism (and the public record of assets in the basket it relies on) to be built in to the process if the price is to be truly tethered. Otherwise the tether is just an illusion and in the ETF world, ETFs which didn't have this type of mechanism went completely haywire and became defunct.
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At this kind of scale, I don't think there's such a thing as plain "cash" free of any counterparty risk - even just holding it in a bank account has risk attached (and most banks probably don't want an account with that much money in it because that would pose risks to them - they have the exact same problems finding somewhere to put it). US treasuries and AAA-rated bonds and commercial paper are about the best you c…
I remember reading about some folks who wanted to open a bank that wouldn't make any loans, but rather just take store all their deposits as excess reserves at the federal reserve. They would take a few basis points for themselves, but offer their customers a way to have truly cash deposits that earned some interest with the absolute minimum amount of counter-party risk. The Federal Reserve didn't approve them to do…
The deposit rate that customers expect is higher than the rate they would get for storing liquidity with the fed so their spread is already negative. That means there already isn't anything for them to "take a few basis points for themselves" out of.
The Fed pays 10bps IOER or IORR rates https://www.federalreserve.gov/monetarypolicy/reqresbalances...
CDs are paying about 45bps eg https://www.salliemae.com/banking/certificates-of-deposit/?d...
So on a gross basis this plan already loses them 35bps before any costs they have themselves. If they actually planned to do this and the fed didn't approve the plan, it's because it's not economically viable not because it somehow posed a threat to the system.
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Sounds like fantasy. Whatever they wrote you the IOU for also comes out of your book, so your balance is $0. Doesn’t work like that.
Tether released a statement of assets . They said nothing at all about liabilities.
https://tether.to/wp-content/uploads/2021/04/tether-assuranc...
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I simply don't understand why all this complicated stable coin stuff is even necessary. Why can't exchanges use USD instead of USDT, USDC, BUSD or whatever? There are trading pairs for other currencies like EUR, GBP, AUD, BRL, RUB. Why can't we have USD trading pairs?
Real fiat currencies come with much heavier regulation if you want to get money in and out of the traditional banking system. Also, if you want to move money between exchanges or banks you'd have to use the regular transfer methods like ACH, SWIFT, SEPA, which oftentimes are not as fast and cheap as sending USDT between exchanges. That makes it much harder to exploit arbitrage opportunities and drives up the spread o…
I'd recommend reading https://www.kalzumeus.com/2019/10/28/tether-and-bitfinex/ (Tether: The Story So Far; by Patrick McKenzie aka patio11)
Basically, the US requires money-transmitting entities to know who they're working with (https://en.wikipedia.org/wiki/Know_your_customer). When you open a bank account, the bank has to validate your ID. Even if you're opening it online, they have systems that ask you questions to validate your ID.
If you're trying to create a non-tracked/anonymous system, you ultimately lose access to the US banking system (and probably the banking systems of a lot of other rich countries).
I'd say that it's not just "heavier regulation". That makes it sound like it's just hoops to jump through or delays in the processing. A big part of it is that banks/money transmitters/fintech need to know who their customers are in a lot of countries. It's not just random stuff like, "they need to fill out these forms, file these reports each week, etc." If you're trying to run an anonymous exchange and possibly profit off money laundering, anonymously transmitting payments for prohibited activities, etc. you don't want a system that requires you to know your customers. You just want to be, "it's crypto - things come in, things go out and it's all anonymous!"
There are companies like Coinbase which are licensed in the US, but Coinbase probably isn't where you'd want to go if you were looking to launder money. If you're looking to launder money, you don't want to go with a company that has been working with regulators. It would be relatively easy for Coinbase to give you USD, but Coinbase also knows who you are and would comply with warrants.
If you're a crypto company that doesn't want to comply with authorities, know your customers, etc. then it might be hard for you to give someone USD. However, it's really easy to give someone USDT - you just put it in your ledger. I can keep a sheet of paper and say "I owe X 100 MyDollars" and say "Every my dollar is backed by a USD in some form". Even if I'm 100% telling the truth, it doesn't mean that I can give you the USD I have in my pocked if you give me a MyDollar. Maybe you don't live near me so I can't give it to you. If I'm cut off from the banking system, I can't just send it to you electronically.
I think the point of "they're fully backed" is the idea that someone who does have access to the banking system will give you 1 USD (or close to it) for 1 USDT even if Bitfinex can't. One could imagine a market where someone would give you $0.90 for 1 USDT and then that person would go to Bitfinex and get the actual USD that backed it (assuming it was actually fully backed). The idea being that Bitfinex might not be able to give you an ACH or wire transfer of your USD, but if you showed up at a bank in Country X with a suitcase, you could get cash.
I'd recommend the post from patio11 more than this comment. I guess the tl;dr is that it's not just heavier regulation, but that the US and many other governments don't allow anonymous money transfers. Banks and fintech need to know their customers so places like Bitfinex get cut off from the system. USDT is an attempt to offer people a way to turn something into a dollar-like thing without having access to the banking system.
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I simply don't understand why all this complicated stable coin stuff is even necessary. Why can't exchanges use USD instead of USDT, USDC, BUSD or whatever? There are trading pairs for other currencies like EUR, GBP, AUD, BRL, RUB. Why can't we have USD trading pairs?
Real fiat currencies come with much heavier regulation if you want to get money in and out of the traditional banking system. Also, if you want to move money between exchanges or banks you'd have to use the regular transfer methods like ACH, SWIFT, SEPA, which oftentimes are not as fast and cheap as sending USDT between exchanges. That makes it much harder to exploit arbitrage opportunities and drives up the spread o…
This is the biggest reason, really: the moment you touch USD you have to comply with know your customer laws, review OFAC sanctions lists, etc. And this doesn't just apply to US-based companies, if you are sending money through the US financial system or handling dollars, this applies.
If you wanted to operate a fully legitimate tethered cryptocurrency, you have to do two things. Firstly you have to make public the basket of holdings backing the currency and secondly you have to bake in an arbitrage mechachanism to ensure the price of the basket and the price of teh currency don't drift too much. The way this works for the most obvious analogous product I can think of in the financial markets (inde…
This is what's so surprising to me. Markets are efficient and rational, right? (;-))
Well, we just learned a great deal. And no matter how you optimistic or pessimistically you value the ~95% of assets backing USDT that aren't cash, we should all agree on one thing: you won't value them 1:1 to the dollar. So why hasn't the peg moved?
The only explanations I can think of: this risk was priced in, which seems a stretch... or that USDT:USD has never been priced based on fundamentals.
As a comparison, USDC reserves are 100% backed by US dollars held in custody accounts, currently 9.3B. https://www.centre.io/hubfs/pdfs/attestation/grant-thorton_c...
What's weird is that a couple of weeks ago Coinbase launched trading in Tether on Coinbase Pro. You would think this exposes them to much risk. I've been scratching my head about why they did it.