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> they cannot escape US regulation and legal exposure as > long as they want to have the ability to trade US dollars You don't need to be in the US to trad

by cturner 11y ago

> they cannot escape US regulation and legal exposure as > long as they want to have the ability to trade US dollars You don't need to be in the US to trade USD. FX is more lightly regulated than almost all other asset classes. For most of the cold war there was a strong trade in USD based out of London-based banks that had no US presence. https://en.wikipedia.org/wiki/Eurodollar https://en.wikipedia.org/wiki/Eurodollar

cm2187 11y ago
But you still need a bank that can clear USD payments to trade FX.
- cturner 11y ago
  Doesn't need to be a bank. You go to a shopfront FX dealer in Vientiane or Tehran or St Petersburg and deposit or withdraw USD against local currency (or anything else that's liquid). In the most basic trades, possession is settlement. Much of the third world has significant trade in USD, including countries that the US doesn't regard well. In Panama, the USD is a defacto national currency, a choice the crowd has arrived at due to convenience. You can get an armoured van and deliver packs of physical notes. You can use contracts to get more complicated arrangements, including where you have USD on paper but backed by an alternative currency. You can do balance sheet adjustments by contract. You can be a dutch firm ordering agricultural goods from Kenya, and do your leg of the transaction by delivering USD. The banks in the middle might exchange physical USD to make it happen, without any of them being regulated by the US at the time. But - probably - they'll just organise the deal in terms of USD using holdings of other currencies or commodities or contract-agreed offsets that are convenient to them.
  - cm2187 11y ago
    If you do a transaction with physical cash, yes you don't need a bank. But if you do any large transaction it will not be in physical cash, and the clearing has to go through a US approved bank. Foreign banks that cannot clear USD use other banks behind the scene.
    - deleted 11y ago
      [deleted]

by cturner 11y ago

cm2187 11y ago

But you still need a bank that can clear USD payments to trade FX.

cturner 11y ago
Doesn't need to be a bank. You go to a shopfront FX dealer in Vientiane or Tehran or St Petersburg and deposit or withdraw USD against local currency (or anything else that's liquid). In the most basic trades, possession is settlement. Much of the third world has significant trade in USD, including countries that the US doesn't regard well. In Panama, the USD is a defacto national currency, a choice the crowd has arrived at due to convenience. You can get an armoured van and deliver packs of physical notes. You can use contracts to get more complicated arrangements, including where you have USD on paper but backed by an alternative currency. You can do balance sheet adjustments by contract. You can be a dutch firm ordering agricultural goods from Kenya, and do your leg of the transaction by delivering USD. The banks in the middle might exchange physical USD to make it happen, without any of them being regulated by the US at the time. But - probably - they'll just organise the deal in terms of USD using holdings of other currencies or commodities or contract-agreed offsets that are convenient to them.
- cm2187 11y ago
  If you do a transaction with physical cash, yes you don't need a bank. But if you do any large transaction it will not be in physical cash, and the clearing has to go through a US approved bank. Foreign banks that cannot clear USD use other banks behind the scene.
  - deleted 11y ago
    [deleted]