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Why you’d issue a branded stablecoin

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Re: Why you’d issue a branded stablecoin

#41

Post by krrishd »

pjc50 wrote: post #38
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?)

>Now, why would anyone buy a branded stable coin that explicitly doesn't promise a return?

In practice, you're not even buying these (or at least - that is not the presentation). What you're actually doing is making a deposit into a "stablecoin" account at a place like Stripe (who now offers a Stripe Stablecoin Account, denominated in the USDB custom stable), Slash.com, Dakota.xyz, etc. IIRC Mercury is also a design partner of Stripe's blockchain.

When you make that deposit - either from your regular bank account via ACH/wire, or via USDC - it settles into the account as the branded stablecoin. When you send funds out - you're either sending as fiat or as USDC.

In short - you're not proactively "buying" the coin, and in fact - Stripe describes [0] the USDB coin as closed-loop & "not for public sale", and I think the others are the same. You're just depositing your funds into a platform, in order to use them on-platform - and the platform is holding them as a "custom stablecoin."

[0]: https://docs.stripe.com/crypto/stablecoin-financial-accounts...

Re: Why you’d issue a branded stablecoin

#42

Post by user34283 »

krrishd wrote: post #33
user34283 wrote: post #32

Earlier quoted context omitted.

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…

Crypto was never gambling. It's a wealth redistribution scheme.

I don't trust stablecoins that are built on the same technology, by the same actors, and are then used to facilitate most of crypto's trading volume.

I am not convinced of their backing, and I think it likely that together with the crypto collapse stable coin issuers are going to fall like dominos too.

As for Stripe, they announced that their first customer for this is some Argentinian bike importer. We will see if it's that useful a tool in the future. It's not yet the case.

Re: Why you’d issue a branded stablecoin

#43

Post by krrishd »

lottin wrote: post #40
krrishd wrote: post #31

Earlier quoted context omitted.

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 relativel…

>unless such a product is much better than what banks offer, but that doesn't seem to be the case.

I think you're basically correct here. I think the fear of the banks - and why they are insistent on prohibiting stablecoins from generating yield/interest (via the GENIUS act) - is that that doesn't stay true in the long-term, as stablecoins ascend as a cross-border payment/storage rail.

>Does USDC pay interest to the holder or do I have to make a USDC deposit at Coinbase in order to get paid interest?

I believe USDC from Coinbase is framed as "reward", and is downstream of an agreement Coinbase has with Circle to get that "reward" from Circle for all USDC deposits it holds on platform. Other "rates" you can get on centralized stablecoins tend to be similar AFAICT.

Re: Why you’d issue a branded stablecoin

#44

Post by cyphar »

krrishd wrote: post #35
choppaface wrote: post #34

Earlier quoted context omitted.

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 a…

Their point is that if the money held in reserve are proceeds from criminal activity, it is possible for the assets to be seized or frozen by the feds (which would render them no longer backed 1-to-1 even if they were before then). The text of the law you quoted doesn't really change anything.

Re: Why you’d issue a branded stablecoin

#45

Post by krrishd »

cyphar wrote: post #44
krrishd wrote: post #35

Earlier quoted context omitted.

>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 a…

Their point is that if the money held in reserve are proceeds from criminal activity, it is possible for the assets to be seized or frozen by the feds (which would render them no longer backed 1-to-1 even if they were before then). The text of the law you quoted doesn't really change anything.

I see, I misread: that’s interesting. I would assume the issuer would still be liable to resolve the backing, but yeah I could see how that poses systemic risk.

I also don’t think such a risk could realistically remain hidden - this is still going to be heavily regulated and audited, and industry will wise up to the sorts of risk that emerge.

Re: Why you’d issue a branded stablecoin

#46

Post by kikimora »

Zanfa wrote: post #27
krrishd wrote: post #10

Earlier quoted context omitted.

I think this is somewhat reasonable, but with plenty of asterisks / not the "arbitrage" this would imply. There is still a "real", regulated money-holder in the loop - it's just Bridge (the manager of the cash reserves backing the coin - and licensed money transmitter etc etc). Or in the case of USDC - Circle, the "money-holder" / manager of reserves (also has tons of licensed / is very regulated). And the ETH networ…

Everything you're describing makes sense in terms of legal requirements, but none of it seems to require any form of cryptocurrency or stablecoins.

Blockchain guarantees there is no double spend while not having one controlling entity. Legal requirements are there to do exactly the same thing - not let managers mess with other people money.

Re: Why you’d issue a branded stablecoin

#47

Post by kikimora »

salomonk_mur wrote: post #3
hahahacorn wrote: post #2

Seems like a really inefficient way to do points… my CC company gives me 3 points and I eventually redeem them for USD. Is that not the L1 L2 network stuff, but just far less efficient than a DB write?

The story of literally all blockchain-based solutions.

Imagine you do it with PG - add a column “money”, put some numbers into it and issue a ToS guaranteeing money in your db 1-to-1 exchange to USD. Because now you store money amount in your db and can manipulate them at will you have to be a bank. Good luck with that.

Re: Why you’d issue a branded stablecoin

#48

Post by kikimora »

oblio wrote: post #11
krrishd wrote: post #6

Earlier quoted context omitted.

It's a good question - Stripe's Stablecoin Account documentation is good reference here (they denominate balances in USDB, one of these "custom stablecoins" from Bridge): https://docs.stripe.com/crypto/stablecoin-financial-accounts... " It’s always backed one-to-one by the equivalent value of US dollars held in cash and short-duration money market funds at BlackRock. " So while there are other (potentially novel) sor…

Fairly sure money market funds have risks and carry interest (interest = risk). People found that out the hard way in 2008.

This is correct and addressed with diversification. Is money is spread across multiple safe instruments your chances to get in trouble is minimal. If you do get in trouble then your exposure is small too.

Re: Why you’d issue a branded stablecoin

#49

Post by kikimora »

user34283 wrote: post #42
krrishd wrote: post #33

Earlier quoted context omitted.

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…

Crypto was never gambling. It's a wealth redistribution scheme. I don't trust stablecoins that are built on the same technology, by the same actors, and are then used to facilitate most of crypto's trading volume. I am not convinced of their backing, and I think it likely that together with the crypto collapse stable coin issuers are going to fall like dominos too. As for Stripe, they announced that their first custo…

USDC is 1-1 backed, audited and quite transparent. They won’t run with your money for the same reason your bank won’t do it.

Re: Why you’d issue a branded stablecoin

#50

Post by kikimora »

awesome_dude wrote: post #39
user34283 wrote: post #32

Earlier quoted context omitted.

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, u…

Cross border payments with stable coin is way easier and faster than with USD. When crypto is in a bull cycle demand for stable coins raise as short term interest, sometimes up to 50%/year (for a few hours or a day). Stable coins generate yield for their operators, they won’t run with your money due to the same reasons why a bank CEO won’t.
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