> The world's biggest crypto exchange will freeze all withdrawals of USD Coin while it conducts a "token swap" to boost its holdings of the dollar-pegged cryptocurrency, the crypto group's CEO Changpeng Zhao said Tuesday
It's worth noting that USDC is not even a token controlled by Binance. It's controlled and issued by Circle. So effectively, Binance is refusing to honor its commitment to depositors to give them their money on demand.
That's called a "default."
Why? The article says something about a key bank being closed. Nonsense. Is the USDC held at that bank? No. Binance is allegedly holding it. Only clearly they're not because they can't produce it on demand.
I'm frankly amazed that people with the ability to understand this alphabet soup mumbo jumbo keep falling for the same scam over and over again. Underneath all of the slick marketing and nerd posturing is a simple truth: these are all fractional reserve systems. Conceptually, they are no different than banks or pyramid schemes.
The only possible reason you want a stable coin, rather than dollars, in the first place is because you're doing something that requires you to route around US financial regulation.
The US dollar is digital. It moves around the world using a digital network. It's traded the world over by almost every country whether they want to or not. You can buy almost anything there is to buy with US dollars.
You "need" a stable coin because you're trying to have your cake and eat it too: US dollar-like liquidity and value preservation without US dollar financial regulation.
> US dollar-like liquidity and value preservation without US dollar financial regulation.
Or in other words, they'd like the benefits of regulation without the costs of regulation. Which I certainly appreciate. As a child my plan for adulthood was desserts all the time, no vegetables ever.
Stablecoins have totally valid use cases in the crypto ecosystem that don’t involve skirting regulations. People want something that isn’t volatile. It takes days to deposit and withdraw actual USD from exchanges and requires centralized entities that charge fees (or are totally untrustworthy as we’ve seen). Contracts and dapps can hold and interact with USDC to create useful applications that aren’t just speculative investing.
Morgan Stanley ised to take a couple of days as well to wire Euros to my bank account. Never ever was that an issue, or something I wanted to solve by using an almast-but-not-really Euro, or Dollar.
It’s not really any less of a dollar than any other dollar is. All of our digital dollars are just bank liabilities. Circle and Tether are just banks with dollar liabilities. Their liabilities can be transferred on crypto networks rather than traditional bank wires.
> Circle and Tether are just banks with dollar liabilities.
But no regulatory oversight, and no chance for the common folk to prosecute or get their money back if they default.
I am one of the resident crypto apologists here on HN, but there is no way that we should even try to accept what the big exchanges are doing. The whole point of crypto is to have systems that do not depend on "too big to fail" institutions, why are we suddenly trying to find excuses for their BS?
Tether has no meaningful regulatory oversight. Circle has money transmitter licenses in most US states, some of which cover them as a virtual asset service provider, and require specific conditions around the way that they store customer funds: https://www.circle.com/en/legal/usdc-terms
I'm not claiming this is perfect, but it's pretty different.
That's great, but that only eliminates 2-3 classes of fraud from their potential thousands of exploits. We put too much trust in centralized companies to manage decentralized communities, and I'd bet you dollars-to-donuts that Circle will end up complicit in some sort of scheme.
Not trying to make excuses for any of these companies. I'm just saying, in the abstract, there are lots of reasons why an end user would want a stablecoin besides "avoiding regulations". Even if it weren't pegged to a national currency, there is value in having a digital currency that limits its volatility. Pegging to another currency is a shortcut for doing that w/o needing decentralized monetary policy.
Basically these people are trying to get the benefit of digital currencies without the downside of volatility. Somebody else will have to take the volatility risk. This is easy to do when the crypto currencies are going up in value, and almost impossible to do on the downside.
And yet most stable coins have maintained their peg for years now, despite many of them having gone through 2 large bear markets. If 80%-90% down and still pegged doesn't disprove "impossible to do on the downside" I don't know what could.
Clarification: I do think Tether is not fully backed and is likely to depeg some day, but the assertion that it's "impossible to do on the downside" is clearly not true even for Tether. And it's very clearly not impossible to keep a peg if the peg is fully backed, which may be the case for some coins (without naming specifics). DAI, backed by verifiable collateral, has also done extremely well through 2 bear markets.
> I do think Tether is not fully backed and is likely to depeg some day.
Which is a good reason to get out. Stablecoins have only two stable points, 1 and 0. When they crash, they go all the way. Look at what happened with the stablecoins that already crashed.
Maybe but not necessarily. I can log in to Coinbase and buy USDC with dollars in my bank account, use the USDC in a variety of decentralized applications or contracts, and then exchange my USDC for USD again via Coinbase. It’s similar to going to the bank and withdrawing cash, and it has no inherent volatility or downside risk.
Sorry, I did not mean to insinuate anything resembling cover for these stablecoins. I do not own any and I never would. In fact, I only own Bitcoin and I don’t keep any on any exchange at all. This is the only way I would ever recommend when interacting with cryptocurrencies.
It is less of a dollar, because I can say you can exchange it for a dollar when you can not, in fact, exchange it for a dollar when you try to,because I never had enough(or any) dollars. In the real world when the bank runs out of dollars the government will give me dollars instead.
I think that is a fair critique, but that will be coming at some point, very likely. Either a law requiring 100% liquid reserves, or a law bringing them into the FDIC system.
Not volatile? The point of stablecoins is they’re supposed to match the USD in value. By definition they are more volatile than usd as they are pegged to it and vary in price
> By definition they are more volatile than usd as they are pegged to it and vary in price
I understand your reasoning, and you're correct in this case (assuming your numeraire is USD). However, if your numeraire is something like a GDP-weighted basket of USD, EUR, JPY, and CNH, it's possible for a USD-pegged asset to be less volatile than USD (since your unit of account isn't USD).
Note that if the above is the case, that would imply that the tracking error of your USD-pegged asset is correlated to the non-USD components of your numeraire. In a risk-off/flight-to-quality environment (depending on the exact circumstances, but in general) you'd expect EUR and CNH to drop in relation to the USD and often JPY to rise in relation to USD. The opposite would be expected in a risk-on scenario.
Presumably, your USD-pegged asset would drop in relation to the USD in a risk-off scenario and rise in a risk-on scenario, so in that case it would seem that your tracking error would tend to be correlated to the non-USD components of your numeraire basket. So, if macro risk-on/risk-off are the primary drivers of your pegged asset's tracking error, it would seem that your pegged asset would tend to have less volatility than USD if a GDP-weighted basket of major currencies is your unit of account.
My first and only experience with stablecoins was when I moved a bunch of Stellaris into one and when I went back to do another transaction a few days later its value had been reduced to zero for 'technical reasons' that I am still unable to comprehend. Whoever was operating it basically helped themselves to a year's worth of investment gains, which soured me on the concept.
If a stablecoin is fully backed by USD, why does it exist?
The only reasons for these coins to exist are:
1. Avoid proper financial controls and regulations imposed on real currencies and operate illegally.
2. To separate fools from their USD and replace it with USDT or whatever.
This is akin to asking why commodity futures exist. It's an abstraction that provides utility. In the case of commodity futures, it allows commodities to be traded on an exchange where bags of onion seeds would otherwise be difficult to trade. In the case of USDC it allows USD to exist on the blockchain so that it can interact with smart contracts.
Believe it or not, if you want to invest in gold, the only option isn't buying and storing physical gold in your home. That might even be a dangerous idea.
Stocks are certificates which claim partial ownership of a company. But how can owning a piece of paper be like owning a part of a company? What is a company anyway but an abstraction over the concept of group liabilities, assets, contracts, and actions? Or do you think companies only exist to allow people to break laws under another identity?
> In the case of commodity futures, it allows commodities to be traded on an exchange where bags of onion seeds would otherwise be difficult to trade.
That is not essential to what futures do. The essence of a future, is that it is a trade that is agreed upon today, but which settles in the future. I sell my corn to you at a price we agree on today for delivery in 3 months. That allows producers and consumers of commodities to reduce risk, while speculators can increase their risk.
Also -- weird but interesting -- the https://en.wikipedia.org/wiki/Onion_Futures_Act bans trading futures contracts on onions (and motion picture box office receipts). Not sure if that would apply to onion seed.
Thanks for the usual collection of talking points from 2017 that nobody uses in the real world. There is no utility to these blockchain tokens except to scam others.
Americans that frequently need to transfer money (especially overseas) may find stablecoins a good way to effect that without bank fees and delays.
Other countries may not even be allowed to transfer from their bank overseas (I think China in most cases). Some countries have local currency that is devaluating, and banks that are less reliable than a mattress. Some countries have restrictions on the way that money can be stored or retrieved that basically mean that money deposited in the bank can not practically be withdrawn.
For some, the stablecoin is simply a more convenient bank that the one in the city, and in many cases they anyways don't have reportable income.
Other reasons exists for a stablecoin besides criminal activity, especially for people that live in poorer states - and these people are harder hit by losing their cash than would be someone who is in crypto for the ride. It is disingenuous to think its all crypto kiddies.
he already specified it in is his comment:
> In the case of USDC it allows USD to exist on the blockchain so that it can interact with smart contracts.
if you wanna question whether smart contracts are useful or not feel free, I sure do, but drop the smarminess when the answer to your question lies within the first paragraph.
Those are not the only possible reasons for stable coins to exist.
The obvious other reason is to use them on the blockchain. You cannot use USD on the blockchain.
Maybe you don't think there's anything of value on the blockchain and that's why you don't see a use for it. I don't want to get into an argument over whether blockchain tech has a use case or a future in this comment chain, but for the sake of understanding what stable coins could be used for just grant the following:
- There is some use for ETH out there that doesn't involve avoiding financial controls and regulations or separating fools from their USD
If you will grant that, then it's easy to see why here would be a use for USDC or similar. ETH price fluctuates. If you need to be able to utilize Ethereum, it's helpful to have value on it. If you don't want that value to fluctuate, you can hold it in USDC and convert to ETH when you want to use it. Plain and simple, this is the first application for stable coins.
If you will not grant that there is a use case for ETH then there's no point in having a discussion about stable coins anyway. That's a separate discussion that needs to be had first.
It's obvious why it exists. Dollar liquidity inside of the crypto network ecosystem. You can quickly move out of volatile assets into stable coins. You can transfer these stable coins quickly into and out of wallets and contracts. You cannot do either of these as efficiently with pure fiat which would then require an "IOU" from an exchange which would be less transferable, require trust of the exchange, and would insert friction moving into or out of the $.
If you want to use dollars in a smart contract or otherwise in the crypto "ecosystem" (holding them in a wallet), they are useful. If I were Goldman Sachs, I would have made the "GS Cryptodollar" by now, but we're stuck with weird and untrustworthy stablecoins like Tether and USDC.
By the way, the concept of a "stablecoin" (defined as a currency located in a separate financial system than its home) isn't new - you can buy eurodollar futures which are futures on dollars that are physically located in Europe. Ironically, you can also buy euroeuro futures contracts which are for euros located in the US: the euro- prefix on a currency just means "not delivered inside sovereign borders, although the European eurodollar is by far the most important of these.
More like they trusted two (well actually three if you count US gov) centralized entities instead of one. It's like asking permission from both momma and pappa to eat desert. They should have just depended on the single entity backing USDC rather than putting themselves in a situation where they'd be also be fucked if Binance froze by leaving their tokens on exchange.
When you put USD backed stablecoin on exchange you're trusting
1) Exchange won't fail
2) Backers won't fail
3) US gov won't fail
Any single one fail and you're fucked. America decided dollars should float in the 70s, and most of the world followed. IMO sooner or later crypto will end up all floating because pegging relies on centralized points of failure and eventually people will tire of getting wiped out.
> America decided dollars should float in the 70s, and most of the world followed.
Except that a bunch of countries in Europe went back to pegged currency with the Euro[1]. Part of the reason the 2008 crisis hit countries like Italy, Greece, and Ireland so hard.
---
1. Yes - the Euro is not technically pegged; but effectively, it's the same thing. Each individual country in the Eurozone can't engage in independent monetary policy.
I mean, the US Dollar is a "pegged" currency under that definition too. A while ago I read an economic analysis that said the US would optimally have five regional currencies (instead of the single one that it has today) to account for internal trade and wealth imbalances.
What makes the US dollar work in practice is the active role the federal government takes to internally rebalance the economy through taxation and spending, particularly with defense spending and social programs like Social Security, Medicare, and the FDIC. People in wealthier states (including myself) like to complain that we get a bad deal because we get less back from the federal government than we pay in but that's a crucial feature of the system that keeps it from getting too unbalanced.
Additionally, in the US the federal government (for all practical purposes) is not required to maintain a balanced budget while the state governments are. This constrains the ability of state governments to issue too much debt while still providing a relief valve for emergency spending needed during economic downturns or other crisis (such as the COVID-19 pandemic).
I expect that sooner rather than later the countries that have adopted the Euro will evolve a similar system, shifting the bulk of the costs of their social programs (pensions, unemployment insurance, medical care, banking insurance, etc.) to the EU itself and giving the EU the power to tax and borrow as needed to maintain those programs. It will be a hard sell to Europe's wealthier economies, since it would be a major transfer of their wealth to Europe's poorer economies, but I suspect a future crisis will force their hands if the alternative is the dissolution of the EU (Brexit has shown everyone how badly leaving the EU can hurt).
> A while ago I read an economic analysis that said the US would optimally have five regional currencies (instead of the single one that it has today) to account for internal trade and wealth imbalances.
That seems pretty silly on its face, but I suppose I've been persuaded of stranger things with a good argument.
> I mean, the US Dollar is a "pegged" currency under that definition too.
Yes and no. My point about pegging a currency really is about organizations that tax, borrow, and spend a currency they control. So the US Government has nothing to worry about in that regard. But all of the sub divisions definitely do - various states, counties, and cities regularly flirt with bankruptcy from time to time.
> I expect that sooner rather than later the countries that have adopted the Euro will evolve a similar system, shifting the bulk of the costs of their social programs (pensions, unemployment insurance, medical care, banking insurance, etc.) to the EU itself and giving the EU the power to tax and borrow as needed to maintain those programs. It will be a hard sell to Europe's wealthier economies, since it would be a major transfer of their wealth to Europe's poorer economies, but I suspect a future crisis will force their hands if the alternative is the dissolution of the EU (Brexit has shown everyone how badly leaving the EU can hurt).
I think, that will be a difficult decision point for the EU. I'm just not convinced that enough members want the "United States of Europe". National identity is much stronger in Europe than it ever was in the American Colonies pre-Constitution.
It will be the last in the long chain of decisions that will span over a few decades, and as such will likely be digestible for the majority. EU was never fast, but at the same time it was consistent in integration effort.
The Euro was introduced 23 years ago. It has successfully weathered one domestic crisis in addition to the dot-com bust and the 2008 US banking meltdown. Its exchange value has been stable and the Eurozone economies have fared better than, for example, the UK.
I'll take the Euro over any cryptocurrency any day, thanks.
On a PPP adjusted basis Italy/Spain/Portugal are no richer than they were 20 years ago. They can no longer devalue their currency like they used to when they ran into trouble.
In terms of the Euro, I find it more useful to view the Eurozone as somewhat similar to the US. There's one central monetary policy for really large economies that in a different environment, would have liked to do things independently. It's especially relevant now as US states have GDPs comparable to the Eurozone constituent nations.
> In terms of the Euro, I find it more useful to view the Eurozone as somewhat similar to the US. There's one central monetary policy for really large economies that in a different environment, would have liked to do things independently. It's especially relevant now as US states have GDPs comparable to the Eurozone constituent nations.
There is an enormous difference, though: internal mobility/identity.
Germans tend to strongly prefer living in Germany. Greeks tend to strongly prefer living in Greece.
People in Oregon and New Hampshire tend not to have very strong affection for their state.
Which means that, if one area is economically depressed at the same time that another area is booming, the problem tends to sort itself out as people move from the struggling area and to the prosperous one.
In Europe, that just doesn't happen to nearly the same extent.
> People in Oregon and New Hampshire tend not to have very strong affection for their state.
Did you miss the article last week on HN where 60% of American adults live within 10 miles of where they grew up? People in the US absolutely have a strong affinity for their states. Just as in the EU, they may choose to leave for better opportunities however.
People in Oregon and New Hampshire tend not to have very strong affection for their state.
This sounds like the opinion of a European who has never actually lived in the US. People are much more married to their states than it seems that you'd believe.
While someone from (say) Connecticut might not think much of moving to Maine, they would probably feel different about moving to Iowa, Washington, or Alabama.
Here's one of the various maps I've seen of US cultural regions: [0]
It seems to be accurate for the areas I know anything about; I can't speak for it in other places.
Just bringing your stuff with you from one state to another could make you a felon, making people very locked in from moving across certain states. Someone in Idaho would become a felon for bringing their (Idaho legal) AR-15 into California while the person in California would become a felon for bringing their (California legal) weed plant into Idaho.
A lot of these states have backdoor ways of keeping out culturally incompatible folks from moving state to state by making mere victimless possession of certain items disproportionately linked to certain American cultures into felonies.
Lots of young people in Greece who actually want a job and career prospects move.
This is not new in the 17th century Dutch VOC ships were crewed by destitute Swedes and Germans. Mobility in Europe is high which is why you can get excellent baklava and spaghetti as far as Helsinki. This is why the European Union makes sense.
I can't comment on Europe simply because I haven't lived there, but in my experience the US isn't at all like you mention. Sure, there might be states where people are willing to move, but if you think of cultural regions more and states less, people never leave certain areas their entire lives. I'm talking about areas like PNW, New England, Upper Midwest, Southern states and so on. This is very similar to your case, it is just that the US is far more fragmented in some sense, and some states can be similar to others.
California and Washington are the major sources (of course!) but (1) California is not PNW, and (2) places other than CA/WA contribute many more migrants.
A bunch of currencies were pegged to a virtual euro a few years before its actual introduction, but those currencies do not exist anymore, so to say they are still pegged doesn't make any sense.
Comment is saying that having Euro as your currency is, in some ways the same as pegging your currency to the Euro. As in “1 Ireland Euro” equals “1 German Euro”.
America went back to floating in 1971. The convertability with gold was only around for 17 years [1]. I don't know why that's relevant to USDC - there's no absolutely stable store of value, everything fluctuates.
And it will eventually because the FED turned off the fractional reserve requirements.
On March 15th, the Fed lowered the fractional reserve requirement to 0%.
Yet, since that day banks have been hoarding cash like never before. pic.twitter.com/jpYF4Ypzjq
— Mati Greenspan (tweets ≠ financial advice) (@MatiGreenspan) April 13, 2020
So, a bank can lend out what ever it wants. This is why inflation is high all over the world and the currency milkshake theory is playing out.
"Here's a simplified version: All currencies are doomed because they're not actually valuable. The dollar is slightly better because it's the favorite child. When the Fed stops making more dollars — the frothy “milkshake” — demand for existing dollars goes up.Jul 19, 2022" -- Bloomberg
So here’s where there might be some confusion, Binance consolidates a pool of different stable coins into 1 “BUSD” balance for its users[0]. Depositing any of these stablecoins into Binance will add to your BUSD balance, and you can withdraw from it as any stablecoin of your choice. What CZ is saying is that they ran out of USDC but have plenty of the other stablecoins instead. It sounds like they need to redeem the other stablecoins to fiat USD and send it to Circle to mint USDC with it, hence the talk about the bank.
So, they need to find gullible 3rd parties that accept to give them hard cash (USD) in exchange for their in house created clown money (BUSD), and then use this hard cash to go to the market and buy USDC. How is this different from FTX padding their balance sheet with billions of their own made up clown money? Crypto is ponzies all the way down.
BUSD is not clown money or created by Binance. It is the most highly regulated financial instrument in crypto, issued by Paxos New York, tightly regulated by NYDFS, backed 1:1 and regularly audited.
Only BUSD on Ethereum (ERC-20) is issued by Paxos. The BUSD on the BNB Chain (BEP-20) is not affiliated with Paxos and not regulated by NYDFS. Quoting Paxos:
"BUSD is issued by Paxos on the Ethereum blockchain and regulated by the New York Department of Financial Services. Separately, Binance wraps BUSD and issues separate tokens (known as Binance-Peg BUSD) on several blockchains, including BNB Smart Chain, Polygon, and Avalanche. These tokens are unaffiliated with Paxos and not regulated by the NYDFS."
Yes, but I believe that this "wrapping" should be visible on chain. In the sense that there should be a 1:1 mapping between "real" BUSD locked on Ethereum and the number of pegged BUSD on other chains, and that the accounting can be verified in real time. But I haven't verified.
I visited Binance's main page on BUSD [1] and it suggests you go look at their proof-of-reserves page [2], which lists the exact number of each token on Ethereum (5,334,500,000), BNB (5,315,999,056), Avalanche (11,500,000) and Polygon (6,000,000), each with links to block explorers. Note that if everything adds up, this total leaves 1,000,944 tokens on Ethereum, but at least that's positive.
Edit: I spent some time thinking the Ethereum number was the total number of BUSD, but apparently it is Binance's holdings which can be found in a wallet nicknamed "Binance: Binance-Peg Tokens" on Etherscan [3]. Since this number is greater than the total number of pegged tokens, I guess everything adds up. (Of course, since the "cross-chain peg" here is implemented in a centralized way by Binance, it could de-peg at any point they want it to.)
Yes, on a centralized entity you're required to trust ("we're totally backed by cash and bonds, for realsies"), as opposed to owning and holding your crypto outright.
From their web page:
> Transparent
> A top auditing firm will attest to the matching supply of BUSD tokens and underlying U.S. dollars on a monthly basis.
Note the future tense, as in, "sometime indefinitely away in the future".
Their attestations (as opposed to audits) just say that at a certain instant in time they had the required amount in a bank account. That means Paxos could have borrowed it for a short while. Quote [1]: "Any activity prior to or after the Report Dates and Times at 5:00 pm ET was not considered when testing the assertions described above."
This is the same trick pointed out by Coffeezilla about a year ago, about Tether. [2]
Binance is regulated where exactly? Can you please point me to the jurisdiction where it's offices are located, so I can instruct my lawyers to send them some papers? Just asking in case something happens in the future.
BUSD is not a Binance product, it is a Paxos product [0] regulated by the New York State Department of Financial Services. Binance merely pays to have their name on it.
[1] Here is the specific NYDFS guidance on Paxos' issuance of stablecoins. [2] And here is a link to their NYDFS appointed third-party auditory accounting firm.
Complaints against Paxos can be filed with the New York State Department of Financial Services at:
So in an eventual future where BINANCE stops allowing people to withdraw their BUSD, I can go to Paxos door and complain about it? Will my clown USD be returned to me?
'So effectively, Binance is refusing to honor its commitment to depositors to give them their money on demand. That's called a "default."'
Not in $CURRENT_YEAR it's not. In $CURRENT_YEAR it's not a default until the holder in question publicly and willingly admits it's a default. Otherwise, it's just a technical maintenance period, or a temporary suspension of withdrawal rights, or a customer-value preserving intervention, or a response to current market conditions, or just another step on our amazing journey to world-class reliability and customer satisfaction, or whatever, and only crazy conspiracy theorists who are probably going to be happy staying poor would say that a default is as simple as "you ask for something that is yours and you don't get it", regardless of the reasons why you don't get it.
That is sooo $CURRENT_YEAR-1 of you to think something so simplistic and unsophisticated. Clearly there are just a ton of reasons why you might ask for something that is yours, and not get it, that aren't anything as ugly as a default. Please. So plebian. And I can hardly believe that some knuckle-dragging cretins think a default should be treated by everyone as a default rather than just sort of glossed over with a vaguely stern look on your face before proceeding on as if nothing has happened.
(For a bit of context, it's not just the cryptocurrency space that has forgotten the fundamentals lately & I have to admit I'm getting a bit crabby about it. There is a time and a place for nuance, and there is a time and place for stubborn insistence on basic facts of reality and waving away any attempt at "nuance" as obfuscatory lies. The definition of default is one of them. Either you return my stuff on demand or you don't. Explaining why you failed your obligations does not mean that you met your obligations.)
Yes, it's digital already. However banks manage the whole system and they can do whatever they want with your money if you are nobody.
I have been waiting for 2 and a half months for an international payment via SWIFT, I worked long hours for that money and I needed it urgently. The money left the sender's account 2 and a half months ago. Neither of us has the money in our accounts while the bank tells us to just wait a little bit longer, or they do not know where the amount is, some nonsense about beneficiary bank holding/releasing my money. Whereas a friend just sent me a hefty figure (mid 5 figures) of crypto by withdrawing it out of Binance Global to my personal wallet, it was confirmed in 15 minutes and I got the money in my account in 10 minutes. I sent the crypto to my local (Binance has different companies/legal bodies in different countries) Binance account, converted it to a currency of my liking and withdrew it to my personal bank account. All under 20-30 minutes and I have the money now.
Not endorsing Binance or any other central exchange (my personal position is: not your keys, not your coins, I would never hold a big amount in any central exchange), but I do not understand HN's (majority of HN's) position against crypto in general. Maybe you are privileged enough to never have this kind of issues, but some of us do. Some of us live in countries with hostile governments, (which government isnt hostile towards the public anyways? /s).
SWIFT does not take 2 months; it takes minutes or hours. Your bank already has your money or it never received it.
More likely, they are holding your money due to some issues with your local KYC laws. (This is especially likely in South America, where foreign senders must verify the source and purpose of payments made to local residents.)
Yes, but the same issue will likely occur for any other large transfer of value, be it on the blockchain or a briefcase of cash or anything else. The wording of the regulations may not have caught up, but their intent is to regulate all wealth transfers.
Unless you're avoiding the regulation and just not reporting it, of course, which is likely illegal depending on the jurisdictions involved.
Sorry for not being specific enough, let me give more details about the incident.
My bank tell me they can see the transaction but it is not approved so they cant do anything about it and recommend me to contact with the sender's bank. Sender's bank tells the sender that the amount is held by the beneficiary bank and they can not do anything about it either. At some point, sender's bank told the sender that the beneficiary bank released the payment (around 25-30 days ago), but the transaction is still not completed anyhow. Weird thing about this is, the amount is very small (around 1k EUR), and I have received 20-30 payments from the same sender, same bank in the past 4 years.
The most troubling part is, I or the sender, can not take any action to fix the issue and the neither bank tells us what the issue is or recommends us an action to fix the issue.
I am not saying this happens all the time, or all SWIFT transactions are flawed by nature, but this occurring even once is enough for me to be in a very stressful situation without any remedy.
It seems FTX was perfectly able to do whatwver they wanted, through Alameda, with customer deposits as well. Banks on the other are much better regulated, and for very valid reasons as current events show.
Which bank provided the gateway for Alameda to send/receive from the legacy banking system? There may be some regulator questions for that bank's compliance team.
Of course, I guess that can happen if the bank decides so as well, but the transaction from local Binance bank account to my local bank account is not international and not via SWIFT (correct me if I am mistaken), so far those transactions have been always completed instantaneously (under 5-10 minutes) since they are domestic transactions (?).
To be fair, almost all of my international SWIFT transactions, except this one, have been completed in 6-10 business days (it's not so bad and I can live with it, as long as it doesn't take 3 damn months).
> Maybe you are privileged enough to never have this kind of issues, but some of us do.
Correct.
The eternal hate for crypto is by a screaming minority who are too privileged to even bother realising the majority of people are worse off in countries like Argentina, Nigeria, and Turkey which their currencies have lost over 80% of their value and is quite frankly worthless.
Using USDC as a cheap, fast, global way of sending money is a good alternative for those that don't have a choice in those countries. For those that keep shouting the existing solutions: Wise is neither same day or cheap to send money globally, . Same is true with SWIFT. FedNoW only works in the US and is not global and UPI is also not global.
Crypto and stablecoins tick all the boxes as a 24/7 cheap and very fast way of sending money globally.
The vast majority of people in those countries either go for USD, Euros or are too poor to bother with crypto. Portraing crypto as anything but privileged people's latest hot investment vehicle to become rich, fast, is just plain wrong.
> The eternal hate for crypto is by a screaming minority who are too privileged to even bother realising the majority of people are worse off in countries like Argentina, Nigeria, and Turkey which their currencies have lost over 80% of their value and is quite frankly worthless.
So like 5% of the world population in your examples...
I think there is an important missing part of this argument that many of the current paths to move dollars around that network in the traditional system take either days to settle and/or cost quite a lot in fees. I see crypto having potential to optimize lots of things and introduce extra trust from a technical infrastructure standpoint. Right now my traditional money is sitting in several digital banks or brokerages that I have no idea how well made they are underneath, I just see a website I can interact with. Crypto doesn't solve problems about where the coins meet the real world, even a stable coin with publicly auditable holdings to back it can have secret debt leveraged against those assets. Those problems seem only possible to resolve with regulation as it has been with the traditional financial system, but standardizing protocols to move money around and reducing lead time and/or fees as crypto evolves could really help the financial system be more flexible. With everyone carrying around a smartphone it really should make us question why so much money needs to move through the major credit card networks, we don't need their special hardware anymore.
You can absolutely regulate towards the goal of affordable, instantaneous money transfers within the context of the traditional finance system. The EU has done just that with SEPA (Single Euro Payments Area).
Next year the Federal Reserve will be launching their FedNow service which should provide equivalent functionality to Europe's SEPA or Canada's Interac service.
Unfortunately the current (and seemingly somewhat inevitable) architecture of cryptocurrency, relies on trustless distributed systems, which I don't see a clear path to making them give similar SLAs or UX to the traditional system with centralized authorities and defenses against "double spending", which really just isn't discussed outside of crypto because it was such an obvious thing to solve for our current system makes it so close to impossible (and that is part of the reason for the lead times discussed in my previous comment).
how about risk management? when i pay using a credit card, i know if things go sideways i can always dispute and most likely will get my money back. If I pay with bitcoin or even with cash or checks, i'm fucked. Not sure if Visa/MC duopoly specifically is the most efficient way to handle this risk, but it is a thing.
P.S. also too not sure how special credit card hardware is a problem anymore, if you want to pay with your phone, there are more and more options every year to do that, and even tie that to a credit card (for benefit of risk and/or points).
The credit card companies have built trust with merchants around the world that they'll settle up eventually, and that anyone (or most people) carrying their cards will pay their bills. If a cryptocurrency system were to try to supplant that, it'd need a form of revolving credit. I want to pay my bills at the end of the month, not immediately.
Wait...they're refusing to allow on-chain transfer of USDC from their custodial account to a customer's wallet? I assumed this was about exchange of USDC to fiat, hence the hand waving about banks.
So let's imagine that Binance has $4B of USD customer liabilities backed by $2B of USDC and $2B of BUSD. Fully solvent and fully liquid. Then customers try to withdraw $3B of USDC which Binance does not have. Binance would be happy to give you BUSD but for whatever reason customers specifically want USDC.
(I am absolutely convinced that Binance is evil but this specific situation does not appear particularly bad.)
So, they need to find gullible 3rd parties that accept to give them hard cash (USD) in exchange for their in house created clown money (BUSD), and then use this hard cash to go to the market and buy USDC. How is this different from FTX padding their balance sheet with billions of their own made up clown money? Crypto is ponzies all the way down.
In the hypothetical situation, both the BUSD and USDC are fully backed by USD. However, from an external observer's perspective, it is indistinguishable from the case where $1-2B USD is stuffed in a mattress in a country without extradition treaties.
(Which is why regulated financial institutions are externally audited and stuff.)
In general I agree crypto feels like ponzi. But in this specific case, they seem to be fully solvent relative to US dollars? If clown money was floating, it would definitely be iffy. But it's tethered to the dollar. It's almost an IOU in that sense relative to the dollar. They don't have enough specific "currency" (usdc), but as long as I can withdraw to USD, it is not a scam.
This seems like a major bug with crypto. I don't have physical possession of my bed when I get up from it and go to work, but I've yet to come home and discover a grifter, or conman sleeping in it.
Likewise, if I lose my car keys, society still manages to acknowledge that I am still the owner of my car.
And there's the much more important case. What if someone gets your keys? With bank fraud you will most likely get the money back. With crypto, not a chance.
Likely a lie for less savvy investors. Or they need cash to recapitalize before being able to transfer to wallets. Or people are withdrawing to fiat which would need a bank in many cases. My money is on it being a combination, but that they definitely don’t have reserves to cover a mass run on USDC.
Because the tokens aren't there. The web UI says they are but what's on the chain? You don't know because you don't have the keys. Hence my previous comment.
> You "need" a stable coin because you're trying to have your cake and eat it too: US dollar-like liquidity and value preservation without US dollar financial regulation.
What about transferring value anonymously? Apart from cash and stable coins, every way of transferring stable assets (wire transfer, Venmo, WU,...) requires a copious amount of KYC and hence a complete loss of privacy (as well as serious security risks given how some of these private companies can misuse personal data).
I don't mind people criticizing Binance, CEXs, and even the crypto industry in general, but I find it quite sad to see people, especially here on HN, essentially advocating for the end of any sort of financial privacy.
> essentially advocating for the end of any sort of financial privacy.
See the recent thread about cash transaction limits in the EU, an awful lot of HN users celebrating further restrictions that limit/erode financial privacy.
> So effectively, Binance is refusing to honor its commitment to depositors to give them their money on demand. That's called a "default."
What? So if I go into the bank at 4 AM and ask to withdraw $100,000, and they respond, "Sure, we'll need a few hours to get those funds together," the bank has defaulted?
Brokers are not banks. For real financial systems your stock are held 1:1 in a custody account in a separate company with regulations making sure you get to keep your stock even in the case of bankruptcy of the broker.
You can sell all your holdings at any second during the trading hours, no delay, the only problem you might face is that no buyers exist. That is something completely separate though.
What the crypto exchanges are doing is taking the Apple stock you think you bought and instead buy Wal-Mart. Hoping to pocket the difference when you eventually sell.
This works when the line goes up, or when you are a incredibly tightly regulated bank where the government through FDIC like schemes ensure that you will get your money back, even if the bank screws up.
Cash withdrawls have a ohysical aspect, cash. In the case of Binance, there is no such aspect. Obviously, banks have limits around cash withdrawls not the least due to limited amount of cash at hand at a given sight. Banks will happily allow you to wire transfer money wherever you want, since this is only a virtuap things and banks are required to have enough liquidity to serve those requests.
If I understand the Binance situation correctly they do not claim to be holding USDC for you, if you give them USDC then they convert it to their BUSD token (also a stable coin) and that's what's listed on your account. So when you withdraw your BUSD to USDC, they may have to go buy some USDC to actual service your withdrawal.
Presumably they just need to wait until 9am when people at work, so I wouldn't consider that a default.
If they say they need a few hours at 9am, they've defaulted. It would be a big "ha" if they couldn't get them together by 9:05am because they've done shady things with your money.
Umm.. that's not how banks operate. If I want to withdraw a million in cash, it is reasonable for the bank to ask me to wait until it mobilizes the cash. If they don't let me transfer money to another bank/account, that's problematic.
I'm not a fan of crypto, but that sounds like a stretch. I'm not aware you can go into any bank and withdraw e.g. a million just like that. It could be different in different countries, but there is a limit to what you can get done.
It could be careful manipulation on Binance's part, but we'll find out soon enough.
Yes they do... and if it was an exceptionally small bank that didn't have it at the moment, with a day or two notice, they'd happily give you $100k in cash after receiving it from the Fed or from their vault cash providers. A busy ATM will contain more than $100k and on premises ATMs are often refilled from the bank's vault.
Most Canadian banks need a few business days just for 5 thousand and above in cash. There is more zeros in bank accounts there is physical money in circulation.
Do you believe that banks hold every dollar they receive in deposits in cash in their vaults?
Because that's not how banks work at all. They make loans, and if enough people demand their cash back they will have to move things around to honor those withdrawals. That's how every bank in known history has operated.
You misses where Binance doing automatic conversion for any deposited USDC to BUSD. So every USDC deposit will counted as BUSD.
Withdrawal using BUSD and USDT is still available. Even USDC on some chain are still open. As I understand they just need time to replenish their USDC.
You could say the same thing about Eurodollars-- "US Dollar" denominated assets that are held in banks outside the United States and not subject to US Bank regulations. The size of this market is more than 10x all of crypto.
Not saying the rest of your comment is right or wrong but this part sticks out:
> It's traded the world over by almost every country whether they want to or not. You can buy almost anything there is to buy with US dollars.
That's definitely not true. Most places in the world, I'd wager, do not accept USD, as you seem to think. I can't even begin to count the times I've seen clueless American tourists in South America, Africa, Europe and Asia trying to pay with their "highly regarded" USD and being denied with laughs. And then being shocked at the results.
Lol almost no one in South America is laughing at USD. I've been to 3 of the 4 continents you mention and spent USD directly in all of them but Europe. Hello in many south america countries you get better prices even adjusted for true exchange rate because no one wants dog-shit <national currency> and it saves them a trip to the money-trader before their money turns into kindling.
>I'm frankly amazed that people with the ability to understand this alphabet soup mumbo jumbo keep falling for the same scam over and over again. Underneath all of the slick marketing and nerd posturing is a simple truth: these are all fractional reserve systems. Conceptually, they are no different than banks or pyramid schemes.
There are rational people who knowingly invest in ponzi and other schemes because they think they can get out before the music stops playing.
Some ultimately do, and some ultimately get caught.
> The only possible reason you want a stable coin, rather than dollars, in the first place is because you're doing something that requires you to route around US financial regulation.
This reeks of US centric privilege. Very similar to "the only people that want privacy are criminals". There are plenty of countries that you can't access UD dollars that would prefer to hold them than their own currency.
Also pumping the price of a token without putting in actual money. When you can issue unlimited number of casino chips, you can sell an imaginary asset using as many chips as you want. Better still, get all casinos to accept each others chips to buy and sell those imaginary worthless tokens to lend credibility to chips and tokens.
> You "need" a stable coin because you're trying to have your cake and eat it too: US dollar-like liquidity and value preservation without US dollar financial regulation.
That is not at all why people need/want USDC. People want stable coins because banks are all too happy refusing/blocking/reversing transactions to/from cryptocurrencies exchanges.
They hypocrisy of both banks and the states on this one is amazing: "it's all a ponzi" / "it's all criminal money" / "only fraustres use cryptocurrencies"
But then...
"Please pay your due taxes made on crypto".
FWIW France, at least, took a less dumb approach than many on the subject: conversions to/from crypto and stablecoins aren't a taxable event. It's only if you manage to cash out (and that's a gigantic "if") to actual EUR that taxes to the state are due. It solves at least the problem where people legally need to pay taxes but concretely cannot get money out of the crypto exchanges.
Sending from, say, Coinbase to a bank for tiny amount is relatively easy. But I'm atm helping someone "cash out" a 7 digits sum in France and it's hard. Extremely hard. It's near impossible actually to get one bank to approve the withdrawal from Coinbase. Saying: "I entered Bitcoin in 2016 and ETH when it was at 50 cents" ain't sufficient. They don't seem to understand that the KYC/AML is done to catch drug and arms dealers, organs traffickers, and pedophiles selling CSAM.
That's why there's KYC/AML right? To catch these guys.
But a 35 years old mom who made bank on crypto? That's no pedophile. No arm dealer. No drug dealer. And yet it's not clear if she'll ever be able to cash out.
That's why people are using USDC. Credit cards withdrawing from your USDC? Bring it on. Coinbase giving x% annual return on your return, please, keep it coming (btw even in France taxes are due on these annual yield). There's a shop here selling high-end second hand watches (you know, the kind of watches worth more used than new) that accepts crypto: maybe a way to get something out of your crypto.
Now I don't know if the short term US treasuries, whose numbers are all published, backing the USDC all actually exist and are really held at BNY Melon. Maybe it's all a scam. Maybe Coinbase shall rug pull too. Maybe BNY Melon shall rug pull.
For all I know, heck, maybe Uncle Sam himself is going to rug pull on the treasuries backing the USDC (I shouldn't give these people ideas but they maybe already fancied the idea anyway: "crypto are only scams, we're defaulting on the US treasuries backing stable coins"... and many idiots would applaude).
But USDC still looks, to me, more legit than USDT / Binance USD / etc.
That's why most people are using USDC: it's the least smelly of them all and the banks do no let people easily sell their crypto for real USD / EUR.
Meanwhile, as I mentioned, the state wants its taxes on crypto gains.
It's the state and the state lovers who want to have their cake and eat it too: they want to prevent people from cashing out their crypto "because pedophiles and criminals" but still want their taxes made on crypto "gains".
That's why people are using stable coins.
If people were actually free to use their money, free to do wire transfer to/from Coinbase at will, there wouldn't be that much need for stable coins.
But people aren't free to use their money as they want.
May I suggest the below insights to your point of view, which will allow you to have a better understanding of what is happening underneath the hood ?
USDC is issued by circle.com and the underlying assets are held on US bank accounts.
BUSD, which is Binance's USD stablecoin, is actually issued by paxos.com (see https://paxos.com/busd/) and the underlying assets are held on US bank accounts .
Binance definitely has accounts at both Circle and Paxos, that allow them to mint and redeem USDC and BUSD, by depositing or (respectively) withdrawing USD to Circle's or Paxos' bank account.
From a practical point of view, what Binance did was redeeming the USDC (by sending them back to Circle and withdrawing USD to it's bank account) and then subsequently minting BUSD (by wiring the USD to Paxos' bank account and receiving the corresponding amount of BUSD).
Binance also allows to "seamlessly" withdraw BUSD as USDC from it's exchange to your wallet.
Now you are starting to understand what happened today.
Following negative rumours, people started to massively withdraw BUSD as USDC from Binance. Binance fullfilled to first part of those withdrawal requests from it's hot wallets containing USDC, but past a certain amount it had no USDC left and temporarily halted withdrawals of USDC. A caveat to that is that Binance only halted withdrawals of USDC on the Ethereum and Tron chains. Withdrawal of USDC to Polygon and Avalanche for example have been running smooth all day, probably because less people choose those options, so there were still funds available on Binance's hot wallets on these chains.
Once the hot wallets were depleted of USDC on Ethereum and Tron, Binance could only continue to honor the withdrawal requests by converting the BUSD it held to USDC. That conversion requires to redeem the BUSD at Paxos, receiving USD on it's bank account, sending the USD to Circle, and receiving the corresponding amount of USDC. These steps involve regular wires between banks, hence why they could not be executed before the US banks opened.
That being said, the situation is now resolved and Binance has now re-enabled withdrawals of USDC.
It's worth noting that USDC is not even a token controlled by Binance. It's controlled and issued by Circle. So effectively, Binance is refusing to honor its commitment to depositors to give them their money on demand.
That's called a "default."
Why? The article says something about a key bank being closed. Nonsense. Is the USDC held at that bank? No. Binance is allegedly holding it. Only clearly they're not because they can't produce it on demand.
I'm frankly amazed that people with the ability to understand this alphabet soup mumbo jumbo keep falling for the same scam over and over again. Underneath all of the slick marketing and nerd posturing is a simple truth: these are all fractional reserve systems. Conceptually, they are no different than banks or pyramid schemes.
The only possible reason you want a stable coin, rather than dollars, in the first place is because you're doing something that requires you to route around US financial regulation.
The US dollar is digital. It moves around the world using a digital network. It's traded the world over by almost every country whether they want to or not. You can buy almost anything there is to buy with US dollars.
You "need" a stable coin because you're trying to have your cake and eat it too: US dollar-like liquidity and value preservation without US dollar financial regulation.