Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Regulators should treat stablecoins like banks

economist.com

Post reply on HN
Print view View original

181–190 of 224 posts

Re: Regulators should treat stablecoins like banks

#181

Post by miohtama »

sorbits wrote: post #175
miohtama wrote: post #174

Earlier quoted context omitted.

> The important stuff is not transparent. For example, how do you know that Tether is backed by real USD? That Binance isn’t manipulating prices via wash trades? That the promises made about various coins are being upheld? etc. You are describing so called centralised finance (CeFi) whereas the most high quality Ethereum projects focus on decentralised finance (DeFi). DeFi tries to break any chains to opaque companie…

> DeFi tries to break any chains to opaque companies and have all actions happening transparently and auditable on-chain How can you create anything of value¹ by limiting yourself to on-chain transactions? If value is created, the transaction would cover something happening in parallel, and your transparency does not extend to that. ¹ I do not consider lotteries or similar zero-sum games as value creation, but those…

You can create value by for example connectind lenders and borrowers. The money could be used in real economy, albeit does not happen too much yet today. For example, developing nation export companies can get a dollar loan with better terms they would get from their local corrupted bank.

Re: Regulators should treat stablecoins like banks

#182

Post by vkou »

miohtama wrote: post #181
sorbits wrote: post #175

Earlier quoted context omitted.

> DeFi tries to break any chains to opaque companies and have all actions happening transparently and auditable on-chain How can you create anything of value¹ by limiting yourself to on-chain transactions? If value is created, the transaction would cover something happening in parallel, and your transparency does not extend to that. ¹ I do not consider lotteries or similar zero-sum games as value creation, but those…

You can create value by for example connectind lenders and borrowers. The money could be used in real economy, albeit does not happen too much yet today. For example, developing nation export companies can get a dollar loan with better terms they would get from their local corrupted bank.

Developing nation export companies can already borrow money through international markets. If they are going through the corrupt local bank, it's either because they are forced to by legislature (In which case crypto does nothing for them), or because they have corrupt executives who are getting kickbacks (In which case crypto also does nothing for them.)

Is there an actual problem that this solves?

Re: Regulators should treat stablecoins like banks

#183

Post by scotty79 »

woile wrote: post #159
scotty79 wrote: post #131

Earlier quoted context omitted.

Why are stable coins interesting? It's basically a thing guaranteed by single entity that promises that if the price drops they will buy tether at personal loss. It's as safe as any pre-crypto, single company e-currencies. All of which died. The only thing they have going for them is that they managed to place thrmselves as currency of the crypto market.

Because not all depend on a company buying at personal loss. DAI has a complex mechanism (at least to me). To keep itself oscillating around 1usd. https://en.m.wikipedia.org/wiki/Dai_(cryptocurrency)

DAI looks interesting. What about Binance USD, USD Coin, Terra USD, TrueUSD, Paxos Standard, Fei Protocol, Liquidity USD, Frax, sUSD, USDX [Kava], mStable USD?

How many of those try to do something interesting and how many are just single entity backed coins like Tether?

Re: Regulators should treat stablecoins like banks

#184

Post by passwordreset »

jellicle wrote: post #162
FabHK wrote: post #43

Earlier quoted context omitted.

I don't think that's the right way to read it. Currently, all the holders of tether could ask for dollars, and they'd all get them, and there'd even be 0.26% of the original balance left. (Under quite some assumptions, namely that they could sell the commercial paper at the value at which they hold it in their accounts.) However, if the value of their assets would shrink, say, by 1%, their equity would be wiped out,…

Can anyone "take out" dollars at all? Tether is a bank with a deposit window but no withdrawal window. If Tether ceased operations tomorrow, just abandoned USDT and walked away with all the cash, what happens?

https://tether.to/fees/ claims that fiat withdrawal is possible, with a fee of "The greater of $1,000 or 0.1%".

Re: Regulators should treat stablecoins like banks

#185

Post by FabHK »

tedunangst wrote: post #166
FabHK wrote: post #43

Earlier quoted context omitted.

I don't think that's the right way to read it. Currently, all the holders of tether could ask for dollars, and they'd all get them, and there'd even be 0.26% of the original balance left. (Under quite some assumptions, namely that they could sell the commercial paper at the value at which they hold it in their accounts.) However, if the value of their assets would shrink, say, by 1%, their equity would be wiped out,…

What's their interest rate exposure? If rates go up 0.5%, what's their paper worth?

Commercial paper is usually very short dated (definitely less than a year, average maturity appears to be only 2 months [1]), so if rates move up by a percentage point, the present value of the paper should drop less than 1%, maybe less than 0.2% (if it is very short dated). That's pretty close to their capital though!

[1] https://www.federalreserve.gov/releases/cp/maturity.htm

Re: Regulators should treat stablecoins like banks

#186

Post by marcosdumay »

beiller wrote: post #171
marcosdumay wrote: post #150

Earlier quoted context omitted.

It's more than that. Do you read reviews paid by you or by the seller of the product they are reviewing?

I've kinda lost track of the analogy at this point. I'm surprised I was downvoted so much. I didn't have a strong case to begin with. To try and carry on, if I was paying for product reviews like companies do for the rating agencies, I'd expect them to be even more accurate and impartial! If the companies (reviewees) are paying the reviewers (bribes?), I'd expect them to be crap. But companies are not paying Fitch to…

> But companies are not paying Fitch to rate them are they.

They often are.

A lot of times a large investor pays them to look at a possible investment, and this case is quite ok. But the official ratings they are listed with are set by a third party mandating the company "go pay Fitch to rank you". It's not plain bribery like companies paying reviewers, but it's quite shady.

Re: Regulators should treat stablecoins like banks

#187

Post by ceejayoz »

runeks wrote: post #142
jpmattia wrote: post #28

> It says it will update the figures soon and that it is “fully backed by reserves”. The updated report is here (PDF): https://tether.to/wp-content/uploads/2021/08/tether_assuranc...

Interesting. So almost all of their commercial paper is (allegedly) rated A-2 or higher by S&P.

Not if you read the footnotes.

> Where a rating is unavailable, publicly available industry standard conversion tables have been used to convert ratings from Moody’s or Fitch to the S&P equivalent.

Re: Regulators should treat stablecoins like banks

#188

Post by civilized »

vkou wrote: post #134
JumpCrisscross wrote: post #7

Earlier quoted context omitted.

> if 0.26% of tether is withdrawn into currency the coin would collapse If 0.26% of Tether is withdrawn, it would need to start liquidating assets. That will, most of the time, be fine. Commercial paper is exceedingly liquid. But sometimes, the liquidation will prompt a price fall. This is a fire sale. That, in turn, prompts more redemption, as holders of Tether grow concerned about its stability. This is a bank run.…

> Commercial paper is exceedingly liquid. If Tether actually owned any commercial paper, they'd be the biggest player in the commercial paper space. Nobody's ever heard of them, and they don't own 30 billion dollars of it. What they do own are paper promises from other companies that are controlled by them. Which are worthless. I own a paper promise from my dad to pay me a trillion dollars, that doesn't make me the r…

I take it you don't buy their latest Official Report From An Official Assurance Reporting Company Whose Job Is To Assure Us?

Re: Regulators should treat stablecoins like banks

#189

Post by space_rock »

Zamicol wrote: post #74

Firstly, Tether is rat poison. Unfortunately, newcomers to the space identify "stable coins" = "tether" or wrongly assume that other stablecoins share similar mechanisms. There are many alternatives that operate radically differently in the nascent space. DAI is immensely exciting. Stablecoins like DAI are interesting experiments that could powerfully create new online economies. Blockchains like Ethereum are current…

Algorithmic stable coins have a terrible history of failing. I wouldn't discredit tether, a simple redeemable token, then promote DAI. Also Ethereum contracts have a bad history. Their first launch they got hacked for $150 million USD and then reversed the pseudo decentralised network to try and get that money back

Re: Regulators should treat stablecoins like banks

#190

Post by space_rock »

simmerup wrote: post #4
MattGaiser wrote: post #2

> With estimated leverage of 383-to-1, Tether would be unable to honour all its tokens after losses of just 0.26%—a safety cushion that regulators would never allow at a bank. So even if they are telling the truth, it is still on the edge.

So if 0.26% of tether is withdrawn into currency the coin would collapse? Am I reading that right?

This statement from the Economist is basically a lie. It's like saying people trade Forex leveraged so your cash in hand is leveraged. Tether is leveraged by 3rd parties. Tether is redeemable 1to1
Post reply on HN