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Regulators should treat stablecoins like banks

economist.com

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Re: Regulators should treat stablecoins like banks

#201

Post by mullingitover »

secondaryacct wrote: post #197
mullingitover wrote: post #127

Earlier quoted context omitted.

> It's a little unclear, because (like many things in public policy) there's several putative explanations for what caused the crises, peoples' preconceived notions color which ones they favor, and it's manifestly unclear who is right. I thought 2008's cause was perfectly clear: the banks all sold insurance policies on each other (in the form of credit default swaps) that they couldn't fulfill. When one bank went und…

But why was there bad debt on the market ? Yes the defense mechanisms couldnt work since they were interdependent, but I saw a hairdresser on tv talking of how she used to flip 600k houses before the crisis, makes me think she s also part of the problem by failing to obey general accounting principles (dont borrow what you cant repay just because market goes up). And no, saying natural idiocy in the citizenry is to b…

> But why was there bad debt on the market ?

This is my point, the focus on bad debt is like obsessing over the last snowflake that fell before the avalanche. The bad debt didn't cause the avalanche, the underlying structure of credit default swap contracts between the banks did. They were all writing each other checks that they couldn't cash. If the underlying problem of unaccounted-for credit default swaps didn't exist, the bad debt would've just been another snowflake falling on the ground, essentially.

Re: Regulators should treat stablecoins like banks

#202

Post by intended »

cwkoss wrote: post #109
mdorazio wrote: post #104

Earlier quoted context omitted.

Devil's advocate: 2008 was bad because of regulatory failures (specifically deregulation). Lack of transparency was only part of the problem. So if you want to avoid 2008 in cryptocurrency, the answer would be more regulation, not less.

Was 2008 an issue of lack of regulation or lack of enforcement? I thought it was more about "too big to fail" attitudes preventing enforcement from being fairly applied to the largest participants.

Not sure if it’s not both.

In America, the SEC had been systematic defunded and weakened - over successive administrations.

The argument, in the years before 2008, was that more regulation only holds wealth creator back. Especially when the market self corrects itself.

To suggest otherwise was even nearly un-American.

The SEC policy had adapted to pursue slam dunk cases, ensuring that it’s resources were spent in achieving some form of guaranteed deterrence.

However things like CDOs and the rest were out of its reach.

This leads to the low oversight.

The self correcting aspect of the market was also more mythical than practical.

As a financial analyst we were encouraged to ensure that model predictions were within range of other firms.

Multiples out of range meant that you were likely wrong.

Faith in the market became a shortcut meaning “someone else has done the homework”.

With all the rating agencies beholden to the purchaser of the rating, you start setting up the dominos for 2008.

Re: Regulators should treat stablecoins like banks

#203

Post by [deleted] »

xur17 wrote: post #94
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…

> Blockchains like Ethereum are currently far more transparent than the state-sponsor US monetary system. I hope to live in a society where economic experiments can be executed, new lessons learned, and transparency maintained. If stablecoins are persecuted, the need for cryptographic zero-knowledge proofs will allow these systems to continue with far less transparency. This is the part that excites me about Ethereum…

[deleted]

Re: Regulators should treat stablecoins like banks

#204

Post by philwelch »

miohtama wrote: post #172
mbesto wrote: post #123

Earlier quoted context omitted.

> So if you want to avoid 2008 in cryptocurrency, the answer would be more regulation, not less. To expand on this point. Deregulation with a federal reserve fallback is especially dangerous because it's essentially fake deregulation. When you know that you're too big to fail and the government is going to bail you then your risk to allocate capital effectively becomes zero.

I think the Boeing CEO (or some other airline) was famously quoted for this that they do not need any cash buffers, as the government will always bail them out, no matter what https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3571441 Thus, it’s ok to spend extra cash to stock buybacks and maintain no cash reserves.

I mean, he isn't wrong, is he? If he's wrong, then maybe the next time Boeing needs a bailout, we should make an example of them and not bail them out. If we don't have the balls to do that, why should they have a cash buffer?

Re: Regulators should treat stablecoins like banks

#205

Post by ryan_lane »

runeks wrote: post #145
jpmattia wrote: post #129

Earlier quoted context omitted.

> It could be AAA, it could be BBB- The ratings were in their August report.

The ratings are in the report linked by OP. Vast majority A-2 or better (S&P).

And many are self-determined and put into (S&P) terms, because they aren't otherwise rated.

Tether has outright lied numerous times in the past, and have been caught doing so. Why would you believe their attestation when they won't allow audits?

Re: Regulators should treat stablecoins like banks

#206

Post by ryan_lane »

space_rock wrote: post #191

> 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. 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

Tether's terms of service say they do not have to allow redemption.

Re: Regulators should treat stablecoins like banks

#207

Post by philwelch »

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…

Any economic system works because people choose to believe in it. Specifically, people with guns. For instance, I have US Dollars, and I can exchange US Dollars for goods and services because everyone agrees to let me do so. I don't have them on me though--my bank has a record of how many US Dollars I have, and if they suddenly decide I don't have US Dollars for a sufficiently bad reason, that's some type of embezzlement, and I can go through a process involving highly trained professionals arguing on my behalf in front of someone wearing a black robe, and eventually men with guns will force them to give me my US Dollars back.

Likewise, we also all choose to agree that the owner of a car or a piece of land is whoever holds legal title to that car or piece of land according to some records maintained by some government office. If you think you own my car, and you make a duplicate set of keys and drive away in my car, I can get men with guns to go try to stop you from doing that because the official record says it's my car. But if you're the repo man, and I miss enough car payments, you can get the men with guns to take your side instead of mine, according to a similar process involving trained professionals arguing in front of someone wearing a black robe.

So yeah, the actual value isn't on-chain. What the chain replaces is the system of implicitly trusted institutions keeping records and adjudicating disagreements. Sure, out there in the real world, you have my car, but it's the record keeping that helps the men with guns decide whether to let you keep it or throw you in a cage for the next few years.

Re: Regulators should treat stablecoins like banks

#208

Post by IG_Semmelweiss »

emn13 wrote: post #163
IG_Semmelweiss wrote: post #91

Earlier quoted context omitted.

>>>>> That's what cost of living adjustments (social security or other systems) Isnt that also... Insolvent? >>>> prudently investing a lifetime of retirement savings Would you deem people that invested on bonds of the US govt, GM, that they invested prudently? >>>>If you're expecting the value of a currency to never change, you are asking a fish to climb a tree. Change implies movement in both directions. Yet what w…

While I'm sure you have a point that some people are getting shafted by lack of inflation compensation, what does that imply for stablecoins vs. conventional banks and/or central banks? That issue could occur in any system with expanding money supply, and you want a system in which the money supply expands in some sync with the economy, because otherwise it's attractive to just hoard paper (or crypto, or whatever) we…

I actually dont know enough about stablecoins to opine.

They may be fraud for all i know.

My issue was with the casual dismissal of inflation as some kind of necessity for a functioning economy.

My point is that is a priviled worldview of a typical elite that has never experienced poverty or real inflation in the flesh. Dismissing it as some kind of magic drug with annoying side effects shows lack of empathy for real consequences at the bottom 5th.

Are stablecoins better than central banks? Again, I dont know enough about stablecoins. But surely whatever answer that is out there does not include inflation or central banks as they exist today.

Re: Regulators should treat stablecoins like banks

#209

Post by beiller »

marcosdumay wrote: post #186
beiller wrote: post #171

Earlier quoted context omitted.

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.

I understand what you're saying but ultimately it's still the investors paying Fitch. You can clearly see they have no quid pro quo with the company or product they are evaluating. All your saying is who's invoice the bill appears on but the company is not paying that bill. The investor pays through the acquisition.

Re: Regulators should treat stablecoins like banks

#210

Post by space_rock »

ryan_lane wrote: post #206
space_rock wrote: post #191

> 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. 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

Tether's terms of service say they do not have to allow redemption.

It's still not leveraged as they describe
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