Crypto’s Rapid Move into Banking Elicits Alarm in Washington | Hacker News Reader

Crypto’s Rapid Move into Banking Elicits Alarm in Washington

nytimes.com

14 pointsSkipperCat4 comments

I think a lot of people want to overthink the hell out of financial use cases and come up with a million reasons why bitcoin etc can't do X and can't do Y. This holiday weekend is a great example of a use case crypto absolutely crushes. Move any amount of money to any other account in the world with absolute mathematical certainty in 10-20 minutes for $1.24 USD as of right now whether it's $10 or $2 billion.

The 5% and greater savings rates for crypto and stable coins right now are pretty hard to resist. Crypto lending is also huge allowing people to make secured loans against their invested crypto. This plus the unparalleled ease of moving large sums of money around between systems and 24/7 completely automated banking. Where people are going to put their money is going to change pretty rapidly if this grows further..

I'm still trying to wrap my head around the fact that two 'currencies' can have such divergent rates of return. Either its the arbitrage of a lifetime or a massive Ponzi scheme.

Organizations such as Fidelity and Susquehanna have access to cash at rates much lower than 5%, why then would they need to borrow crypto at that rate? Or, why don't they just leverage a whole bunch of cash, convert it to crypto and lend it out at 5% and make $$$ on the arbitrage?

I'm skeptical, but this whole setup is pretty interesting (and tempting).

I think there is a market for lending crypto but it is harder to do. There is no fed to loan coins from. And no fed to create coins from thin air. They must come from deposits. There is no fed to set base interest rates. The rates are based on the demand for loans in a particular coin vs the supply for the coin. This system may be more equitable than the current one as the people putting money into the system are making an acceptable ROI of 5% or more. It doesn’t seem fair to invest $1000 in a bank, have the bank lend out $900 and give you in return less than 1% interest.

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