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Comment by janmo | Hacker News Reader

FTX a few days before going belly up:

"Stablecoins: processing. Banks are closed for the weekend, though; USD <> stablecoin creations/redemptions might be slower until wires clear tomorrow, especially for some coins/chains."

https://twitter.com/FTX_Official/status/1589510763328450561

I also I would like to add that:

- USDC on Binance is not 1:1 backed by USDC, but by another stable coin such as BUSD or perhaps even USDT. Both of them are much harder to convert into real dollars!

- Binance is obviously not prepared for a bank run, this is happening on a Monday/Tuesday, not even a weekend, and the withdrawals issued started yesterday while the banks where open! As of this post, USDC withdrawals have been suspended for at least 14 hours!

Source: https://twitter.com/Cryptolicious9/status/160241155175102464...

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> - USDC on Binance is not 1:1 backed by USDC, but by another stable coin such as BUSD or perhaps even USDT. Both of them are much harder to convert into real dollars!

This is not true in any way. First, you do not hold USDC on Binance, you hold BUSD. Your USDC deposits are automatically converted to BUSD. Neither USDT nor BUSD is "hard" to convert to real dollars. Swap them to USDC on Uniswap and do whatever you please with them.

> - Binance is obviously not prepared for a bank run, this is happening on a Monday/Tuesday, not even a weekend, and the withdrawals issued started yesterday while the banks where open! As of this post, USDC withdrawals have been suspended for at least 14 hours!

As I said, you can withdraw in other stablecoins. If you go to a bank, and you cannot withdraw USD at that moment, but you can withdraw EUR - does that mean the bank is insolvent?

> If you go to a bank, and you cannot withdraw USD at that moment, but you can withdraw EUR - does that mean the bank is insolvent?

What kind of bank would this happen at? A bank in the EU where you're trying to withdraw USD?

If you put in USD and EUR had turned worthless..

> Your USDC deposits are automatically converted to BUSD

Guess this is not new, but it seems like an obviously horrible idea!! The minute people lose confidence, the value of BUSD go do down and people will withdraw in not-BUSD. Meaning they will have to make more BUSD to cover the difference, devaluing the BUSD more, causing a spiral.

What am I missing here? Hmm..

Not sure I follow. Why would they mint BUSD if people are withdrawing other coins?

BUSD is just USD denominated in tokens on chain, each token represents 1 usd at their bank so they cannot (or rather, should not) mint more than they have in custody.

Yeah, but what happens if it's not worth 1 $ anymore?

My understanding is limited, but naively:

  - I give them 10 USDC
  - They convert it to 10 BUSD
  - Price of BUSD falls to 0.5$
  - I want my 10 USDC back
  - They have to sell 20 BUSD to get 10 USDC
  - They have to generate 10 BUSD ??

I'm sure this is not how it actually works, but you get my point.

Also, one could argue that if the BUSD price drops against the dollar they should have more BUSD ? Or how does that work? :)

Fair question.

Although, in practice, I don't think they would buy USDC via BUSD, but use their cash reserves for that. The cash reserves correspond (allegedly) 1:1 to BUSD so they would need to burn equivalent amount of BUSD as well. This all means that Binance would always value BUSD at 1 USD. I don't see a scenario where BUSD falls to 0.5usd if there are no shenanigans happening with the cash reserves.

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