What is the purpose of “stable” coins? If you want a thing that is worth a dollar, why not just use dollars?
Or use Belize dollars. They’re worth $0.50 by law and have no instability issues.
Or use Belize dollars. They’re worth $0.50 by law and have no instability issues.
Okay this sounds a bit too cynical but each crypto bull market resulted in exactly that, unfortunately.
1) Actual regulated banking is ... well regulated. Buying and possibly selling monopoly money passes this regulation.
2) Making a token out of everything allows you to play on the chain.
3) There is profit in trading customers real money to your own monopoly tokens... Which of value is determined on market while you keep the real dollars.
4) It could allow some people to argue that they never realised any profits from their trading. Thus tax avoidance...
A true dollar, offered by a bank or money market fund, has assurances from the US that it really exists in our federal reserve system.
A stablecoin is a chuck e cheese token pretending to be a dollar. I can make an excel spreadsheet pretending I have a billion dollars, but I'd be a liar if I did that.
In reality you haven’t solved anything because there’s a trust element. It’s just moved. Also you need deep reserves to maintain a peg. There have been several attempts at an algorithmic stablecoin but they’ve had a tendency to collapse spectacularly.
Maintaining a peg in the real world is tricky too. Real world pegs can and do fail.
Of course, that will never happen as having the ability to restrict capital flows is a key power government wants to retain.
This sits right next to the sibling poster's comment:
> The US dollar is regulated and it’s use and transfer crates all kind of legal issues [...]
It looks like people who want stablecoins can't even agree on why they want them.
Random exchanges can‘t print dollars, but they can print stablecoins to prop up other crypto prices.
Or opposite of the word stable coins during bear markets behind the scenes with the firms that have to dramatically increase the assets used to peg the one dollar value.
That means we have two leverage levers at work the crypto coin used in trades and the stable coin itself.
[0] https://www.coindesk.com/learn/crypto-capital-gains-and-tax-...
The main reason was that historically, crypto institutions tended to be no-questions-asked blacklisted from any real bank, so those who could get banking made stablecoins. Circle, who runs USDC, got banking access from some favorable VC connections iirc, and Tether .... who knows.