Reminder: If you want a "legitimate stablecoin", get a savings account and/or money-market account and/or money market fund.
Prime money market funds are kept at $1 as long as "all is well", while the bank responsible buys and sells dollar-based instruments (such as commercial paper and US Treasuries). Also the whole SEC regulation thing to ensure proper liquidity levels (30% must mature in a week), and other such guarantees.
Savings accounts have additional requirements that allow for FDIC insurance. Money market is "risk" but not much risk (one fund dropped to 97-cents per dollar back in 2007 for example). So its possible to "break the buck" but very very rare. And US Laws/regulations changed in response to that 2007 failure.
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Real life money markets are yielding about 2.95% right now. Anyone offering more than that is taking on risk and/or lying to you. That's what highly ranked commercial paper can get you today.
In a few weeks, the Fed is expected to raise rates. We'll be at 3.75%, then 4.5% probably by the end of the year (?? Hard to tell the future though). So we're back into a realm where cash holdings can generate returns.
Anyone seeking 10% to 20% returns from a "Stablecoin" is taking on some kind of risk. Much like Celsius, any one returning that much is lying about something (or trusting somebody else's money and that someone else is lying to them).
All great US-centric points!
If you're living in Venezuela, Turkey, Argentina, Russia, Poland or other country with anywhere from 15 to 167% inflation, you might just be happy to have access to USD via easy to get stablecoins.
I'm glad you wrote this. It's eroding to constantly see financial advice that is impossible to apply in countries like these except for crypto and are mostly US/Europe centric. Sometimes, there simply is no other choice and that's crypto's killer use-case.
What are you talking about? I have direct access to buying USD via my Turkish and Russian banks. Rates and comissions are quite reasonable. Of course there are risks right now, especially in Russia, but they are incomparable with risks of putting your money into some virtual bytes someone told you should just work (and we have real life examples of some of them doing quite opposite).
The important bit about savings accounts and MMFs isn't specific to a country. Its about openness, regulation, and public trust.
I can confidently buy Schwab, Capital One, Vanguard, or other funds in the USA (without any research) because the US Government regulates the words "Money Market". Anyone claiming to be "Money Market" follows strict regulations and guidelines.
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This is NOT true for stablecoins. Stablecoins attempt to recreate the same thing but without openness, without regulations, and without audits.
They work because people "want" them. Everyone wants a bank, especially one tied to the US Dollar. Unfortunately, the easiest way to get one is to simply lie about your connections.
Do we truly know that Tether is tied to the US Dollar? No. We don't. There's been no audits. The yields generated from such loans are innately at risk. I recognize that people in other countries want that kind of trust, but you can't just fake trust. You have to rebuild it up from the ground up.
In those other countries, other entities must build that trust for themselves. Tether obviously wants to be such an entity, but I have my doubts to their legitimacy and safety.
If the argument it allows these people more stability / wealth to circumvent currency controls of their country, I don't see why the argument can't be extended to first / wealthy worlders as well. To note, I'm for deregulating these currency controls and deregulating the banking system, but giving 3rd worlders a pass while being harsher on those richer than us just seems like crab in a bucket mentality (not accusing you of that, but I've noticed HN exhibiting this duality).
You can open USD nominated checking account in almost every bank, for example[0]. You can exchange PLN for USD bills ( no coins) with spread 3% in any city[1].
For Russia and Venezuela you may have a point. But the others in that list still have much better (in terms of risk/reward) options for protecting their wealth than stablecoins.
Is this a joke? Russia literally restricted foreign currency usage, you can't get USD with you anywhere and you can't transfer it overseas. And no-one is able to use banking obviously. I bet in other countries there are the same issues and many people are unbanked.
This is blatant lie. I can show you my SWIFT transactions out of Russia. There are restrictions on USD cash, so you have alternative rate for paper money, but you still can legally exchange RUB cash to USD cash.
> Anyone seeking 10% to 20% returns from a "Stablecoin" is taking on some kind of risk.
Acceptable to me. Consumer/investors just need to be more discerning and pragmatic. There is nothing wrong with risk. There is something wrong with obsessing over there being no risk till you get duped by a fantasy you wanted to hear.
Fortunately, many crypto interest rates are really just shares of a revenue stream - usually transaction volume where some value is being extracted - and this revenue collection velocity is repackaged as "interest rates" because it is familiar to passive-income obsessed people. on top of that, the "rates" are juiced by the issuance of an additional new token. So that will remain attractive as a human and capital coordination mechanism.
Depends what you want to buy. Asset prices (property, stocks, bonds) are deflating right now, so your purchasing power is actually increasing in regards to those investments.
Yep - asset price deflation, consumer price inflation. But there's only so many consumer goods you need to/want to buy.
Things to buy with currencies experiencing inflation - hard assets with steady or increasing demand will probably do well over the next decade, but even those still have downside market risk as recession starts to bite, central banks keep tightening and all assets get repriced lower - likely lower than than current inflation.
With cash the only downside risk is persistent inflation - holding cash is ok for some time, but not forever. The value will get eaten away with inflation over time.
This is assuming you have available access to financial markets and US dollars. If you don't, I can see how stablecoins like USDC become attractive, perhaps even crypto like bitcoin and ethereum. Just stay away from the dodgy stuff - if it looks too good to be true, it probably is.
>If you want a "legitimate stablecoin", get a savings account and/or money-market account and/or money market fund.
In my state, I can walk into a bank and legally carry a concealed firearm without any ID whatsoever -- and yet not be allowed to open an account and put $20, even with a valid US passport (it doesn't show proof of address).
Want to put a damper on stablecoins? End KYC/AML/FATCA. If you can be trusted to carry a gun in the bank you ought to be trusted to put $20 into a new account.
I fail to see the connection between carrying a concealed weapon and opening a bank account. How does one correlate to the other?
If I am a licensed pyrotechnician and have legal access to high explosives, does that also mean I should be able to open a daycare with no additional checks or licenses?
Since you conveniently removed the correlation so you could complain the correlation is missing, lets re-insert it.
If I am a licensed pyrotechnician and am allowed to bring high explosives in the bank, does that also mean I should be able to deposit $20 into a new account at the bank? I would hope the answer is yes; if you can be trusted with high explosives in the bank you ought to be trusted to open the account and put $20 in.
Why? What does holding a pyrotechnician's license have to do with opening a bank account? Can you get a driver's license automatically as well when you are a pyrotechnician? The reason that bank accounts need proper identification is not something that I can comment on with authority, but whatever the reasoning is, it has nothing to do with whether you can carry and operate a firearm responsibly. The two have nothing to do with each other.
Allowing a patron to enter a bank with high explosives is trusting the patron with your life. I can't think of a single person I would be happy to welcome in my home/business with high explosives or a firearm, but would refuse to take $20 from in my ordinary course of business offered to the general public. Perhaps the correlation is not 1:1, but it is pretty high up there. If you can't see the connection between trusting someone with your life and trusting them with much smaller fractional pieces of life, like an hour's worth of life it may take to earn $20, then I'm afraid I don't expect you'll ever see the correlation and you are not part of the audience which I expect to benefit from my comment.
>The two have nothing to do with each other.
And yet they do have something to do with each other. If they had absolutely nothing to do with each other, you wouldn't become a prohibited possessor (can't have/carry guns) for committing bank related fraud and other account related felonies. The state has decided they're connected so intensely that you can go to jail for 10+ years if you committed felonies against the bank and then carry a gun. The trust, by fiat, is interconnected.
> I can't think of a single person I would be happy to welcome in my home/business with high explosives or a firearm, but would refuse to take $20 from in my ordinary course of business offered to the general public.
A person feeling safe around another person does not satisfy the government ID requirements for anything. Does it work when you show up at the DMV asking for a license? Are you upset that it doesn't?
Opening a bank account is not a trivial matter. A bank account has the potential to do a lot more damage to society than a single firearm.
> you are not part of the audience which I expect to benefit from my comment.
What is the benefit of your comment? In my opinion false equivalencies and over-the-top rhetoric are rarely beneficial.
Yes I am upset the ID requirement for a bank account is higher than the ID requirement to bring firearms into the bank. IMO even those without proof of address and other KYC deficiencies, which commonly disproportionately limit access to poor and vulnerable populations, should be permitted banking access.
>A bank account has the potential to do a lot more damage to society than a single firearm.
I think there is a strong argument there is a lot more day to day damage from not having a bank account than not having a gun. When we use your damage-based approach I think we may find KYC creates more damages than it prevents.
I appreciate at least you can have an opinion on this matter without pretending like somehow my point cannot be understood, even if you disagree with it. Your rebuttal shows you understand what was written and even are able to make counterpoints building on that understanding. Thank you for that basic respect, which sadly is not shown by the other counterparty.
> I think there is a strong argument there is a lot more day to day damage from not having a bank account than not having a gun. When we use your damage-based approach I think we may find KYC creates more damages than it prevents.
Are you advocating for removing KYC completely, or for making it on par with getting a concealed weapon, or that having a concealed weapons permit should qualify as KYC? This is the problem with using the kind of rhetoric that appeals to emotion -- it doesn't actually get your point across, it just gets people upset about something.
In my state you can carry concealed inside a bank (and indeed, the vast majority of places) without having a permit or an ID. There is no need to interact with the state in any way before doing so.
Perhaps to you. You can confess your crimes here if you like. Where I live, in the United States, there is no requirement to conduct KYC to create a wallet that holds stablecoins and thus creating such a self-custody 'account' is not evidence of crime.
Prime money market funds are kept at $1 as long as "all is well", while the bank responsible buys and sells dollar-based instruments (such as commercial paper and US Treasuries). Also the whole SEC regulation thing to ensure proper liquidity levels (30% must mature in a week), and other such guarantees.
Savings accounts have additional requirements that allow for FDIC insurance. Money market is "risk" but not much risk (one fund dropped to 97-cents per dollar back in 2007 for example). So its possible to "break the buck" but very very rare. And US Laws/regulations changed in response to that 2007 failure.
------
Real life money markets are yielding about 2.95% right now. Anyone offering more than that is taking on risk and/or lying to you. That's what highly ranked commercial paper can get you today.
In a few weeks, the Fed is expected to raise rates. We'll be at 3.75%, then 4.5% probably by the end of the year (?? Hard to tell the future though). So we're back into a realm where cash holdings can generate returns.
Anyone seeking 10% to 20% returns from a "Stablecoin" is taking on some kind of risk. Much like Celsius, any one returning that much is lying about something (or trusting somebody else's money and that someone else is lying to them).