It's so ridiculous I just have to kind of admire it. It's like a cathedral of human hypocrisy.
If the US banking system starts failing, it absolutely should affect USD stable coins backed by exactly this banking system.
This is not a symptom of a stable banking system. It's a symptom of the banks having a disturbing amount of power over the government, which is not a good thing. They were able to conduct what is essentially fraud at a massive scale with impunity because they knew the gov would bail them out when shit hit the fan.
I really don't understand what's so "stable" about this.
You can't say the same for crypto systems, luna / terra being a very recent example.
And I never said crypto anything was stable on any level. I genuinely believe crypto has 0 usefulness for anything other than very specialised cases, usually to do with avoiding regulation.
The point I was making was that the banking system literally caused the large catastrophe. The fact that people seem to twist this into suggesting it's stable is just absurd.
Just like if your entire SAAS product horribly crashed, deleted and/or leaked a bunch of important customer data and so on, the fact that you were able to fix it doesn't magically mean the system was stable before.
In your analogy imagine your SAAS product horribly crashed and deleted customer data. So your cloud provider restored from the backups you had arranged and you were running normally soon after. Not ideal, but you had a far more stable system than someone without backups.
Asserting that bailouts are simply "part of the system" is just a cop out.
It doesn't respond to points about the behaviour of the bank which was key to my argument. Maybe read and try again.
I will repeat again at the risk of sounding like a broken record. There is no sane, logical way of arguing that the behaviour that led to the 2008 financial crisis is that of a stable, well-regulated banking system. If you believe otherwise, you are either on drugs, or have done no research, or both.
So, the "C" makes USD exposure available to anyone worldwide, assuming you have e.g. an Ethereum wallet.
Messy, inefficient and UX could be way better, but it works and is cheapest for everyone involved.
https://amp.scmp.com/business/banking-finance/article/300879...
https://enterprise.press/stories/2022/10/09/major-local-bank...
https://www.aljazeera.com/amp/economy/2022/2/3/lebanon-us-do...
> No withdrawals were allowed from accounts denominated in U.S. dollars, unless the owner agreed to convert the funds into pesos.
So, there was neither a technological problem moving fiat in our out of the country that would be amenable to a technological fix, nor unintended weaknesses in the regulatory regime covering local banks. Rather, it was deliberate government policy.
It’s not « access to foreign currency », it’s « access to your own deposits ».
Cuz the banks and/or the central banks spent/seized the foreign currency before you, the depositor, could spend them. So much for trying to protect your assets by holding them in foreign currency.
Though that seems to have been the problem here.
The original idea with a 100% collaterilised peg was that the entire reserve would be cash. Somewhere along the way treasury bonds were considered cash equivalent. Which on the face of it seems sort of reasonable but clearly they do have a different risk and liquidity profile. This allows the centre consortium to earn a yield.
So I'm not sure I think a USDC is a dollar, but also I'm not sure it's particularly different to what banks do with deposits to earn a yield.
One difference is you can reinvest the same USDC to earn a yield while the underlying backing USD also earns centre a yield.
And if only we're true to the "original idea" (whatever that might be). As seen with lots of coins / exchanges it's been a front to do something else.
What is cash? Banknotes? You can't store 500 million pieces of $100 banknotes easily or safely.
Cash usually refers to deposits at accredited financial institutions like banks. Effectively this is an amount of money that the bank owes to Circle. The bank deposits money elsewhere, and the central place where all the money is distributed is the Federal Reserve Bank, the central bank of USA, that can never go bankrupt. OTOH, treasury bond is money that US Treasury owes to Circle, so they are not fundamentally different than cash, and in some cases it's even safer since US Treasury bonds are usually regarded risk-free.
Obviously people differ as to the utility of those applications but that's what the "C" gets you. You can do those things if you want to. Of course there's quite a lot you can do with actual dollars that you can't do with USDC so you give up a lot also.
[1] https://ethereum.org/en/developers/docs/standards/tokens/erc...
The USD is entirely unaffected. Some deposits at certain banks are affected for large (mostly professional) holders. Retail investors will be made whole (up to 250k), thanks to this banking regulation thingy you might have heard of.
USDC is meant to mirror the USD (sure, with its concomitant FX and inflation risk), but it is certainly not meant to introduce credit risk vis-à-vis some bank most people hadn't heard of last week.
The value of one USD stablecoin (measured e.g. in various commodities) might well go down, but the redeemability for one USD never should, regardless of the economic environment.
Is it audited by the SEC or some "auditing firm"?
A Ponzi scheme pays a dividend or share of fake “revenue.” Stablecoins don’t make money, unless lent out.
Like if a bank has $10B in customer deposits and one of their armored truck drivers escapes across the border with $2B, then some customers can't be paid back when they try to withdraw, does that make it a ponzi?
Terra/Luna anyone?