If they want stable currency they could just buy dollars. Why would they want to buy a high risk currency instead? The only possible outcome of this is you rigging them.
So the entire premise is that you really can't just 'buy dollars' in the majority. of these countries, hence the need for stablecoins.
And I don't think I would characterize this as a high-risk currency; it's essentially a digital receipt for a dollar, backed by US treasuries (https://www.circle.com/transparency).
adding onto this, i as a citizen of <high inflation country> who buys dollars from the national bank are probably holding digital dollar receipt anyways, since most foreign dollar holdings are held in nostro accounts at US correspondent banks.
if you trust your banking system to be a better custodian of your money than Circle, you're one of the lucky ones. billions of people in the world don't have that kind of luxury (see: https://www.bbc.com/news/world-asia-68778636), hence a part of the reason why stablecoins have grown to a little under a quarter trillion
2. a means of bypassing the US dollar / Western order during international trade
3. a means of transacting without Visa, Mastercard, Chase; cutting out banks and fintechs and their margins.
Stablecoins are pitched to investors as #3, but are more frequently used as #1 and #2.
If stablecoins catch on and can build a large network, it poses a real threat to American hegemony. You wouldn't need the dollar for international trade or settlement. You could trade, move large balances, etc. in stablecoins and never need to hold dollar reserves.
It's wild to see the US funding and developing this tech.
I see this take a lot, and there's some truths to it, but I'd like to take the other side of the argument.
These stablecoin issuers are enormous buyers of US treasuries: "Tether Holdings owned $97.6 billion worth of US Treasuries in June 2024, a new high. Hence, Tether now owns more US Treasuries than the governments of Germany, the United Arab Emirates (UAE), and Australia. Hence, Tether is now the 18th largest holder of US Treasury bonds" (https://medium.com/coinmonks/tether-usdt-is-the-third-larges...)
Thought experiment: how much USDT is made unredeemable every year? including through lost private keys, freezing related to sanctions, etc
If you think 1% is a reasonable number, that’s 1BN per year at current market cap. Tethers been around for 10 years. Dead funds also compound.
Let’s say Tether was grossly insolvent (ie only had 50% of reserves) for the first 10BN in market cap (in other words, for the first 5 years of their existence). In addition to the 6BN+ of interest income they earn every year, there’s 1BN of reserves that will never get redeemed added every year
If Tether was insolvent before, they just need time to change that
I’m doubtful these numbers are realistic, but a more conventional explanation is that stablecoins can earn interest on conservative investments (like treasuries) but don’t pay interest, which should be profitable enough if they don’t get too greedy.
This is very roughly similar to banking. It’s an unregulated bank, but it’s not inevitable that they’ll implode.
They have a shady past but quickly realized they had lucked into a WILDLY profitable business. That first 10% of their existence is debated constantly and is what you see referenced constantly online when Tether is labelled as shady.
They make a disgusting amount of money and it keeps snowballing. This annoys people who want them to implode for earlier crimes.
For context they are more profitable than Blackrock.
It’s individualism. Wild, but not so surprising to me. For instance, I want people to be able to choose what OS they use on their computers and I’d be happy to see more desktop and laptop computers sold without Windows included even if it hurts the US economy.
The biggest usage of stablecoins would be as a hedge on crypto itself. Don’t like where the current market, park it without needing to off-ramp and then on-ramp again when the conditions change.
And now that you’re in crypto-land 24/7, no need to skip weekend movements because offices are closed or accounts don’t get updated until Monday morning.
How do you demonstrate that User B earned their stablecoins via “salary, trading, mining, and etc.”; as opposed to through crime, whether the conventional crypto sort or through subverting currency controls?
What, other than money laundering, would motivate a person who had a supply of such stablecoins to want to supply them to into a market with currency controls? Is the concept there “I make my expat wages in dollars, I want to turn them back into $CURRENCY at the black market rate”?
User B is sending a peer-to-peer transaction, akin to a Zelle or Venmo. In most other countries, these peer-to-peer payments (PIX, UPI, etc.) do billions of transactions per month. And since you're sending your own funds, you're not a money transmitter. If we do work with any larger entities (e.g., an OTC desk, liquidity provider), we'd certainly be cognizant of the relevant licensing.
Hahaha we've had this conversation internally a couple of times.
Definitely a few places that we'd probably avoid. But also plenty of others (e.g., Kenya, LatAm, Turkey, etc.) that have been quite friendly and would be fine to visit.
The word stable doesn’t appear once in the post except for within the word stablecoin. It’s important to get past the name. It’s a pegged coin, the attempted stability is in terms of it being pegged, and people need to do their research on how well a coin achieves that just like with all of DeFi.
Pegged to the US Dollar, which is not stable, but maybe the least volatile Fiat currency in the world, so it's an upgrade for most people. I just worry about the nature of these pegged crypto currencies. Are they really safe?
(even if you can set up dollar-denominated accounts at a domestic bank, that doesn't mean your claim will be honored. stablecoins aren't dollars but they might be more stable than your average dollar-denominated bank account in some countries)
Well, if you're going to a little booth in the airport, or having a foreign cashier bill you in your native currency, sure, you're going to get fleeced.
I have a Capital One credit card that was advertised as "no foreign exchange fees", and its exchange fee is 1%. I wish it would stop lying about the absence of fees, but I can live with the 1% fee.
You really think it’s trivial to buy AND hold dollars safely in every country around the world?
Even I as an American has known so many people from countries like Argentina where just maintaining your bank balance is basically impossible due to inflation and currency controls.
Believing that this is easy or solved is a very Americentric viewpoint.
Unfortunately with money there will always be good and bad guys with it. We all need it. Have to do the best we can with not assuming everyone is a criminal re money laundering.
