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On paper, you're basically entirely right. Stablecoins including FB are all smokescreens to sell managing fiat on an internal database for you with "blockchain"

On paper, you're basically entirely right. Stablecoins including FB are all smokescreens to sell managing fiat on an internal database for you with "blockchain" wrapped around it. This project and stablecoins in general have nothing to do with cryptocurrencies. With that said i can tell you at least one solid reason why any issuer would do it. At a bare minimum they can earn overnight on the holdings since stablecoins don't kick back interest to date. Although with stablecoin competition that should probably start happening until it squeezes to 0 and then it really wouldn't make any sense except to like monetize spying on you I suppose or something. But to take an example, at this point tether is generating 75mm a year for free for it owners at 0 risk. It's the crypto equivalent of a "free" checking account that doesn't pay interest. Not that any exchange was paying interest for fiat deposits in the first place so i'm not sure to what extent that's relevant for cryptoexchangess, but for FB obviously it would since they're starting from 0. With that said I can imagine one reason why users would care for USD stablecoins. The US has made owning and dealing with USD directly an absolute horrendous nightmare for international users and US citizens abroad following FATCA et al. And this way you can claim you never owned or touched USD which means whoever is holding stablecoins for you instead of USD doesn't have to file truckloads of paperwork for you to open the account. That's a regulatory loophole though one could imagine the US would start complaining about if this really took off. There's one remote reason I can think of that people would flip to stablecoins vs fiat if they had some tax view that that wasn't a constructive sale and it could benefit from some likekind kind of treatment since its a "crypto" and not a "fiat". It's obviously a silly argument and there's no way the IRS would fall for it (nor do they even accept it between regular cryptos) but i can't speak for other jurisdictions.

omarchowdhury 7y ago
> But to take an example, at this point tether is generating 75mm a year for free for it owners at 0 risk. Tether has got hundreds of millions of dollars worth of funds seized from their banks.
- awrence 7y ago
  True. But they still 2-3 billion working for them for free. And then that's a specific example where they went and made poor choices with their funds etc. On paper if all you do is create a "stablecoin" and segregate funds in an interest bearing account and don't touch them then its free running interest to you.
seanalltogether 7y ago
> This project and stablecoins in general have nothing to do with cryptocurrencies. I would disagree, using a central authority to sign transactions and exchange crypto back to fiat is fine, but the real power of a cryptocurrency is the ability to generate wallets and create transactions without having to register a profile with a central authority. Whether facebook allows that or not would really determine whether they are a cryptocurrency or just a normal bank.
- awrence 7y ago
  Which is basically my "regulatory loophole" comment.
badfrog 7y ago
> But to take an example, at this point tether is generating 75mm a year for free for it owners at 0 risk. It's the crypto equivalent of a "free" checking account that doesn't pay interest. It sounds more like an ETF than a checking account since the coins are directly tied to a "basket". If the SEC agrees, they'll likely eventually require that the dividends and interest from the basket go to the coin owners.
holy_city 7y ago
>That's a regulatory loophole though one could imagine the US would start complaining about if this really took off. Seriously. I don't see the fundamental difference in a digital widget that is used to transfer value backed by hard currency from transferring money between accounts by wire. It's like leaving a box on your doorstep by drone instead of truck and saying you're not delivering packages because the mechanism is different. This sounds to me like they're opening bank accounts and debit payment services by a different name with the added bonus they can devalue your account at will and you have no FICA protection or chargeback mechanism.
fastball 7y ago
You might be interested to learn about MakerDAO / DAI[0], which is a stablecoin pegged to USD using CDPs (collateralized debt positions) and decentralized governance. 0: https://makerdao.com/en/dai https://makerdao.com/en/dai
- cipherpro 7y ago
  This is an interesting project. The big question for Maker is, will decentralized governance work across the life cycle of this product? The nightmare scenario for a stablecoin is volatility, and governance in this space have historically resulted in volatility.
cipherpro 7y ago
>There's one remote reason I can think of that people would flip to stablecoins vs fiat if they had some tax view that that wasn't a constructive sale and it could benefit from some likekind kind of treatment since its a "crypto" and not a "fiat". It's obviously a silly argument and there's no way the IRS would fall for it (nor do they even accept it between regular cryptos) but i can't speak for other jurisdictions. The IRS have already made explicit that crypto to crypto is taxable and treated as capital gains/loss. Some stay in stablecoin so that they can be more liquid in the ecosystem. Simply, there are more exchange pairs for stablecoins, and some stablecoin allow storage in personal hardware wallet rather than exchanges.

omarchowdhury 7y ago

> But to take an example, at this point tether is generating 75mm a year for free for it owners at 0 risk. Tether has got hundreds of millions of dollars worth of funds seized from their banks.

awrence 7y ago
True. But they still 2-3 billion working for them for free. And then that's a specific example where they went and made poor choices with their funds etc. On paper if all you do is create a "stablecoin" and segregate funds in an interest bearing account and don't touch them then its free running interest to you.

seanalltogether 7y ago

> This project and stablecoins in general have nothing to do with cryptocurrencies. I would disagree, using a central authority to sign transactions and exchange crypto back to fiat is fine, but the real power of a cryptocurrency is the ability to generate wallets and create transactions without having to register a profile with a central authority. Whether facebook allows that or not would really determine whether they are a cryptocurrency or just a normal bank.

awrence 7y ago
Which is basically my "regulatory loophole" comment.

badfrog 7y ago

> But to take an example, at this point tether is generating 75mm a year for free for it owners at 0 risk. It's the crypto equivalent of a "free" checking account that doesn't pay interest. It sounds more like an ETF than a checking account since the coins are directly tied to a "basket". If the SEC agrees, they'll likely eventually require that the dividends and interest from the basket go to the coin owners.

holy_city 7y ago

>That's a regulatory loophole though one could imagine the US would start complaining about if this really took off. Seriously. I don't see the fundamental difference in a digital widget that is used to transfer value backed by hard currency from transferring money between accounts by wire. It's like leaving a box on your doorstep by drone instead of truck and saying you're not delivering packages because the mechanism is different. This sounds to me like they're opening bank accounts and debit payment services by a different name with the added bonus they can devalue your account at will and you have no FICA protection or chargeback mechanism.

fastball 7y ago

You might be interested to learn about MakerDAO / DAI[0], which is a stablecoin pegged to USD using CDPs (collateralized debt positions) and decentralized governance. 0: https://makerdao.com/en/dai https://makerdao.com/en/dai

cipherpro 7y ago
This is an interesting project. The big question for Maker is, will decentralized governance work across the life cycle of this product? The nightmare scenario for a stablecoin is volatility, and governance in this space have historically resulted in volatility.

cipherpro 7y ago

>There's one remote reason I can think of that people would flip to stablecoins vs fiat if they had some tax view that that wasn't a constructive sale and it could benefit from some likekind kind of treatment since its a "crypto" and not a "fiat". It's obviously a silly argument and there's no way the IRS would fall for it (nor do they even accept it between regular cryptos) but i can't speak for other jurisdictions. The IRS have already made explicit that crypto to crypto is taxable and treated as capital gains/loss. Some stay in stablecoin so that they can be more liquid in the ecosystem. Simply, there are more exchange pairs for stablecoins, and some stablecoin allow storage in personal hardware wallet rather than exchanges.