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Carolina Cloud pays SOFR on unused prepaid credits

docs.carolinacloud.io

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Re: Carolina Cloud pays SOFR on unused prepaid credits

#41

Post by mnahkies »

dmurray wrote: post #9
bko wrote: post #5

Earlier quoted context omitted.

I've heard about similar regulatory barriers especially in finance so this does not surprise me. A long time ago I remember reading about banks that want to provide incentives for saving that amount to basically lottery tickets. The idea is that people aren't thrilled about a savings account that pays 2%, but if instead they offered a monthly 1 in 50 chance to get 100% return (same expected value, ignore compounding)…

Ireland, like the UK, has a system of Prize Bonds that work exactly like this, administered by the state. The expected return on them is actually quite competitive, depending on your tax situation. Everyone here seems to have got a present of €20 Prize Bonds for a 10th birthday from an aunt or grandmother, yet people from outside are always surprised that such a product can exist.

My return on premium bonds this year (so far) is roughly 3.2% annualised - it's not bad considering that it's tax free, and secured by the government

Re: Carolina Cloud pays SOFR on unused prepaid credits

#42

Post by linohh »

badatnames wrote: post #2

I've looked at doing this in Europe before, interest-bearing completely changes the classification of the prepayment. I didn't dig too deeply, but the general gist was that regulation-wise it really wasn't worth doing for a relatively gimmick-level feature

Which is a good thing. While it may seem strange to regulate these things for good faith actors, it's obvious why it's a great when thinking about bad faith actors.

Re: Carolina Cloud pays SOFR on unused prepaid credits

#43

Post by arcfour »

linohh wrote: post #42
badatnames wrote: post #2

I've looked at doing this in Europe before, interest-bearing completely changes the classification of the prepayment. I didn't dig too deeply, but the general gist was that regulation-wise it really wasn't worth doing for a relatively gimmick-level feature

Which is a good thing. While it may seem strange to regulate these things for good faith actors, it's obvious why it's a great when thinking about bad faith actors.

Yes, I love maximally restricting rights of others for unclear reasons.

Re: Carolina Cloud pays SOFR on unused prepaid credits

#44

Post by linohh »

infecto wrote: post #16
bojangleslover wrote: post #10

Earlier quoted context omitted.

This is interest on credits, not on cash. Once you start paying interest on cash you need a banking license. I think you'd be fine even in Europe paying interest on credits.

Why would you think credits and cash would be treated differently? I am not a EU tax expert but it would be shocking if that’s the case because you could create some pretty interesting schemes if by turning cash into a “credit” meant it was treated entirely different. Maybe that’s the case for the EU but it would be surprising.

Even with credits or tokens or whatever, it's not completely trivial to find the spot where you can accept customers payments in advance and not be subject to financial regulatory frameworks.

Re: Carolina Cloud pays SOFR on unused prepaid credits

#45

Post by infecto »

linohh wrote: post #44
infecto wrote: post #16

Earlier quoted context omitted.

Why would you think credits and cash would be treated differently? I am not a EU tax expert but it would be shocking if that’s the case because you could create some pretty interesting schemes if by turning cash into a “credit” meant it was treated entirely different. Maybe that’s the case for the EU but it would be surprising.

Even with credits or tokens or whatever, it's not completely trivial to find the spot where you can accept customers payments in advance and not be subject to financial regulatory frameworks.

Absolutely agree. I imagine it almost all scenarios it gets tricky and at the very least puts a good bit of burden on the company to define that with regulatory frameworks.

Re: Carolina Cloud pays SOFR on unused prepaid credits

#46

Post by jancsika »

bko wrote: post #5
badatnames wrote: post #2

I've looked at doing this in Europe before, interest-bearing completely changes the classification of the prepayment. I didn't dig too deeply, but the general gist was that regulation-wise it really wasn't worth doing for a relatively gimmick-level feature

I've heard about similar regulatory barriers especially in finance so this does not surprise me. A long time ago I remember reading about banks that want to provide incentives for saving that amount to basically lottery tickets. The idea is that people aren't thrilled about a savings account that pays 2%, but if instead they offered a monthly 1 in 50 chance to get 100% return (same expected value, ignore compounding)…

What's the difference between a regulatory barrier and a Chesterton's fence?

Re: Carolina Cloud pays SOFR on unused prepaid credits

#47

Post by alias_neo »

infecto wrote: post #40
alias_neo wrote: post #38

Earlier quoted context omitted.

I think there was an original "given" which was that in the US, (where I assume this is), these "credits" don't complicate anything nor create any regulatory burden. That's not to say in the EU, or the UK (where I am) the case isn't different; but if it _were_ the same as the US, I can totally see why that's fine. We have loyalty programs, a coffee shop gives you "credit" when you get stamps for your 6th coffee free…

You started by telling me I was overcomplicating it, but I think you also missed the context of the thread. The original post was specifically about why they decided not to do this in the EU because it created additional regulatory overhead. My only point from the beginning has been that this isn’t surprising. If paying interest on prepaid customer balances were legally trivial just because they’re called “credits” o…

> The original post was specifically about why they decided not to do this in the EU because it created additional regulatory overhead

Yes, but I'm not convinced they mean what they're saying, I took that to mean they were trying to do this as _real_ interest.

> If paying interest on prepaid customer balances were legally trivial just because they’re called “credits” or have “no cash value,” companies could structure around those rules very easily

I still stand by my argument, I think it's only "interest" in name; from a banking or financial perspective it isn't. I don't see why it's any different to a company just setting a number in your account. Say I run a SaaS and give you £1000 credit, is that bound by the financial regulations? I don't think so.

If you put a single £10 credit on your balance and I offer to give you "10,000%" "interest" to top it up in credit for my service, I don't think that does either; the wording doesn't suddenly make it covered by financial regulation, it's whether it's _real_ money or not.

Credits on a service, whatever it is, isn't real money, and as long as the ToS doesn't let you turn it into real money, there's nothing complicated to worry about, but if the org _does_ let you turn it into real money, it suddenly becomes covered by financial regulation.

I'm just debating here, I'm not saying I know this to be true, I just think it make sense (to me).

Re: Carolina Cloud pays SOFR on unused prepaid credits

#48

Post by zygentoma »

swiftcoder wrote: post #15
bojangleslover wrote: post #12

Earlier quoted context omitted.

This is correct, if you put in $1000 you could basically run a small dedicated VM in perpetuity.

Just so long as the price of the small dedicated VM doesn't also increase with inflation

Shouldn't a fixed additional amount also care for inflation based price increases indefinitely?

(Maybe not if the inflation greater or equal the interest rate … though I did not do my math here.)

Re: Carolina Cloud pays SOFR on unused prepaid credits

#49

Post by infecto »

alias_neo wrote: post #47
infecto wrote: post #40

Earlier quoted context omitted.

You started by telling me I was overcomplicating it, but I think you also missed the context of the thread. The original post was specifically about why they decided not to do this in the EU because it created additional regulatory overhead. My only point from the beginning has been that this isn’t surprising. If paying interest on prepaid customer balances were legally trivial just because they’re called “credits” o…

> The original post was specifically about why they decided not to do this in the EU because it created additional regulatory overhead Yes, but I'm not convinced they mean what they're saying, I took that to mean they were trying to do this as _real_ interest. > If paying interest on prepaid customer balances were legally trivial just because they’re called “credits” or have “no cash value,” companies could structure…

I think we’re actually debating a narrower point than you think.

I agree that simply calling something “interest” doesn’t magically make it a regulated financial product. My disagreement is with the idea that “can’t be redeemed for cash” is the dispositive test. Regulators generally look at the substance of the arrangement, not just the label.

Also, your £1,000 credit example isn’t really analogous to the original post. If you simply gift me £1,000 of service credits, that’s very different from me prepaying £1,000 of my own money and you then paying me a return based on how long that prepaid balance sits with you.

The original discussion wasn’t “are loyalty points regulated?” It was “why would paying a return on prepaid customer balances create more regulatory work in the EU?” To me, the answer “because regulators care about products that start looking financially deposit-like” seems entirely plausible.

Re: Carolina Cloud pays SOFR on unused prepaid credits

#50

Post by canucktrash669 »

They claim to be 1/3 the price of AWS, so I calculated for fun and it's 8x more expensive than my server auction machine I just got from Hetzner. Which itself is 6x cheaper than on-demand pricing at AWS, but only 3x cheaper than spot. Of course I get free egress. And my RAID1 perf can't be matched by the baseline EBS storage I've used in the comparison.

In any case, they don't seem to really have an edge on AWS unless you have huge egress. What did I miss?

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