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Regulators should treat stablecoins like banks

economist.com

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Re: Regulators should treat stablecoins like banks

#91

Post by IG_Semmelweiss »

toomuchtodo wrote: post #47
IG_Semmelweiss wrote: post #41

Earlier quoted context omitted.

>>>>> The economy functioning is of greater benefit to the whole than the value of currency hoarders maintaining its value. If you want to preserve wealth, own things you expect people to trade their time or capital for into the future. Retirees on a fixed income; immigrants, the poor, and people with no access to credit would like to have a word with you

Have the word with me. That's what cost of living adjustments (social security or other systems) & prudently investing a lifetime of retirement savings (in a safe mix of investments to support both growth and safety) and improved underwriting and funding for those folks (respectively) is for. It's not an issue with the currency, that's not what currencies are for. If you're expecting the value of a currency to never…

>>>>> 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 we are seeing is a clear, pronounced, increasing onedirectional slope

Re: Regulators should treat stablecoins like banks

#92

Post by emn13 »

shadowgovt wrote: post #45
chroem- wrote: post #31

Earlier quoted context omitted.

> Walking back to first principals, why can't the USD fail? Because you can print whatever adults in the room decide need to be printed to hold the economy up. You cannot do this with a deflationary digital asset, nor one tied to smart contracts. The practical implication of solving large scale bank failures with mass currency printing is hyperinflation. You would only get your money back in nominal terms, but its pu…

It is the differences between the US and Weimar Germany / Zimbabwe that make it possible for the US to print its way out of most problems. Other national governments didn't stuff Z$ into their armored-up national mattresses to bolster against the collapse of their local currency, and there wasn't an IMF holding debts denoted in Reichsmarks to create a demand for them internationally.

The whole comparison is specious; there were far more factors at play than "printing money". Central banks print money all the time. It's not just in response to the 2008 crisis; the money supply in 2007 wasn't what it was in 1957 either, right?

At the very least you'd need to quantify exactly how much money over what period of time might be a shock, and what kind other factors play a role. And then, yes, sure - let's not do things quantifiably similar to Zimbabwe or Weimar Germany. But I suspect there's a huge amount of room for most central banks to maneuver between status quo and hyperinflation; merely "some" printing of money isn't going to be a problem.

Indeed there are regularly stories of smaller countries without the kind of reserve status the dollar enjoys that make problematic central bank policies - and even if that has consequences (e.g. Turkey now), that's still a far cry from Weimar Germany or Zimbabwe under Mugabe.

Re: Regulators should treat stablecoins like banks

#93

Post by JumpCrisscross »

namdnay wrote: post #81
gunshai wrote: post #71

>Tether, has issued $62bn-worth of tokens which it says are redeemable for a dollar apiece. But of the assets backing the tokens in March only about 5% were cash or Treasury bills Cash & Cash Equivalents & Other Short-Term Deposits & Commercial Paper: Commercial Paper and Certificates of Deposit2 $30,807,654,349 Cash & Bank Deposits3 $6,282,756,692 Reverse Repo Notes4 $1,000,662,458 Treasury Bills5 $15,279,528,705 Su…

Careful, commercial paper is most definitely not the same as cash or treasury bills. It could be AAA, it could be BBB- Wasn't there a story about an independent audit that was cancelled or something? I remember the weird assertion that they couldn't disclose whose commercial paper they were holding, which I've never heard before

> Careful, commercial paper is most definitely not the same as cash or treasury bills. It could be AAA, it could be BBB-

It could be an IOU from Binance.

Re: Regulators should treat stablecoins like banks

#94

Post by xur17 »

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, and also scares me when I hear talk of "regulation" for the space. By definition, a lot of the projects on Ethereum are a LOT more transparent than the traditional finance world. I can interact with something like DAI, and see exactly what backs it at every second of every day. I have an idea of what would happen if certain assets that backed it dropped too quickly.

With most of the traditional finance world, it's all very grey and hidden. I'm told that there is regulation "protecting me", but in a lot of cases that regulation doesn't really accomplish its goal and instead acts as a moat.

Re: Regulators should treat stablecoins like banks

#95

Post by spiralx »

ogogmad wrote: post #63
dcminter wrote: post #34

Earlier quoted context omitted.

Paypal within the EU is indeed a bank.

Who uses it? Aren't debit cards and online bank transfers more common there?

It made it easy to pay for things from sites that didn't support debit cards and other European-only payment methods. And while bank transfers have been free for years, doing so online or on your phone hasn't necessarily been easy - or even possible - if you're talking about a few years back.

Re: Regulators should treat stablecoins like banks

#97

Post by wbsss4412 »

csomar wrote: post #89
arcticbull wrote: post #75

Earlier quoted context omitted.

It simply is not. Retail banking customers are able to withdraw 100% of their balances and have been for almost 100 years thanks for the existence of the FDIC. Nobody has lost a single dollar to a bank run since the FDIC was instituted after the Great Depression. Even in 2008 when WaMu went under. Not one dollar. All retail banks in the United States are backstopped by the FDIC and the FDIC is backstopped by the fede…

FDIC guarantees up to $250k and also kicks in after the bank goes under. I'm guessing it should take some time (a few years?) until the FDIC reimburses the people who lost money.

Why would you think it should take a few years? The FDIC is deposit insurance that all of the banks pay into, should a single bank go under there’s always plenty of funds available.

Re: Regulators should treat stablecoins like banks

#98

Post by xur17 »

Marazan wrote: post #77
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…

Isn't DAI backed by USDC and Tether in part?

The debt ceiling for Tether is currently set to 0 [0] for dai. And USDC + other stablecoins do partially back it [1].

[0] https://daistats.com/#/collateral

[1] https://dune.xyz/SebVentures/maker---accounting_1

Re: Regulators should treat stablecoins like banks

#99

Post by arcticbull »

csomar wrote: post #89
arcticbull wrote: post #75

Earlier quoted context omitted.

It simply is not. Retail banking customers are able to withdraw 100% of their balances and have been for almost 100 years thanks for the existence of the FDIC. Nobody has lost a single dollar to a bank run since the FDIC was instituted after the Great Depression. Even in 2008 when WaMu went under. Not one dollar. All retail banks in the United States are backstopped by the FDIC and the FDIC is backstopped by the fede…

FDIC guarantees up to $250k and also kicks in after the bank goes under. I'm guessing it should take some time (a few years?) until the FDIC reimburses the people who lost money.

Maintaining faith in the banking sector is of paramount importance to the US, and yes, $250K is the letter but (a) people with more than $250K in a checking account know this and are suitably invested and (b) in the case of WaMu itself, it was simply sold to JPMorgan by the FDIC. They did not even have to draw on the insurance fund.

Re: Regulators should treat stablecoins like banks

#100

Post by emn13 »

shadowgovt wrote: post #57
CryptoPunk wrote: post #48

Earlier quoted context omitted.

>>A currency is a socioeconomic compact between capital and labor, intermediated by subject matter experts (ie the central bank) and government. Currency is an asset with a particular use-case. Its consumers do not enter into some elaborate agreement (compact) in order to use it. They use it because it's useful. Currency predates the government: https://www.sciencedaily.com/releases/2021/05/210506174103.h... It arose…

Correct. The centralized authorities protect the economy against some failure-modes that a distributed process is vulnerable to (currency scarcities, tampering, panics, large-scale theft). They introduce other problems. Whether one thinks they introduce more problems than they fix is pretty much the defining factor on where one stands regarding the utility of fiat currencies.

I understand the point you're making, but I'd like to add that even if you accept that potentially stablecoins might avoid some problems a (politically tainted) central bank has, the issue isn't merely one of accepting that possibility, it's also one of lack of evidence and novelty.

Having a bunch of private actors potentially run a huge experiment in which the economic fallout will not be born by them if it goes sideways is entirely unreasonable. I mean, that's kind of the whole problem with banks and their dodgy behavior, and this is no better; if anything it's even more risky since it's even less well understood and there's even less oversight, and fewer ways even a democratically elected government could intervene should the need and popular mandate arise.

I'm all for running that experiment, but then with proper oversight, accountability, transparency, disaster planning, etc - and as much as possible without the conflict of interest caused by having those running the system own large stakes of it too; that's just asking for shady business.

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