Hacker News Reader

Comment by frisco | Hacker News Reader

> To address risks to stablecoin users and guard against stablecoin runs, legislation should require stablecoin issuers to be insured depository institutions, which are subject to appropriate supervision and regulation, at the depository institution and the holding company level.

How does this interact with the concept of algorithmic stablecoins? Not every stablecoin is simply backed by deposits.

View on HN

> How does this interact with the concept of algorithmic stablecoins? Not every stablecoin is simply backed by deposits.

Relegated to a footnote (just like Jeffery Snider at Alhambra Partners talks a lot of the typical chatter by frbny et al wrt the (euro)dollar system gets relegated to footnotes and nick named the phenomena "footnote dollars") on page 4:

"Stablecoins that are purportedly convertible for an underlying fiat currency are distinct from a smaller subset of stablecoin arrangements that use other means to attempt to stabilize the price of the instrument (sometimes referred to as “synthetic” or “algorithmic” stablecoins) or are convertible for other assets. Because of their more widespread adoption, this discussion focuses on stablecoins that are convertible for fiat currency."

i.e we'll pretend that people cant swap dollar denominated non centralized corporate issued stablecoins for any kind of fiat at the floating rate of the denomination of the stablecoins underlying to the fiat in typical fx markets (also ignoring that higher amount of those other stable coins are being used in defi protocols relative to their supply than the centralized ones).

So of course, those like FEI, FRAX and others will get ignored.

This is what I wonder, since I thought what most consider stablecoins now (like Tether) are basically steppingstones towards things like Maker/ Dai, which I am unsure how they would fit into this kind of regulation.

The primary targets here are going to be folks issuing stables backed by real world assets and fiat. Under-collateralized algo-stables will probably be targeted as securities by the SEC, while overcollaterized debt based ones will probably just be ignored for now because of how capital inefficient they are.

Excellent question, also synthetics. This is my big question. If you make fiat backed stable coins to onerous to manage, then everyone just moves to algorithmic stable coins.

I think it would make them illegal. As it probably should, I'm not aware of any that are not an elaborate scam.

Do you have any thoughts on how you would do that? Isn't that as practical as outlawing Bitcoin?

I'm not the government or even a lawyer. But I'd imagine they'd block companies from trading Bitcoins for dollars or mining Bitcoin. Turn off all the ETFs and options trading. Say Tesla and MicroStrategy can't hold it in their treasury. I doubt they can make it disappear but that would certainly put a dent in US adoption.

I'm sure they could ask for China's help with that. Maybe the US Gov could even get a copy of their Great Firewall? Good times.

They can make it illegal to buy and sell these stablecoins. The exchanges where the stablecoins are bought and sold would have to delist these coins or face criminal action.

someone has never heard of uniswap

This is probably very literally true. The vast majority of debate on cryptocurrencies is solely informed by bitcoin.

Or defi

I read your comment and then started reading about at MakerDAO's governance model. It doesn't jump out as a scam to me, just a clever bit of game theory.

What am I missing?

DAO is crypto backed by crypto. I think GP is referring to the lack of transparency with fiat-backed stable coins, like tether.

Hmmm, I'm aware of some that aren't scams. MakerDAO and OlympusDAO aren't scams. They might fail utterly, but lots of things that aren't scams are just good faith failures.

Reply on news.ycombinator.com