4 ms·

USDC's "custody accounts" aren't cash either: "US Dollars held in custody accounts are the total balances in accounts held by the Company at federally insured

by phire 5y ago

USDC's "custody accounts" aren't cash either: "US Dollars held in custody accounts are the total balances in accounts held by the Company at federally insured US depository institutions and in approved investments on behalf of the USDC holders at the Report Date."

Lionga 5y ago
what defines an "approved investment" ?
- csomar 5y ago
  > you agree Circle is free to use the funds provided for its own purposes prior to redemption subject to the terms of this Agreement. > Circle may also invest these fiat funds in highly-liquid, AAA-rated fixed income securities. I wrote about this here: https://omarabid.com/usd-stable-coins https://omarabid.com/usd-stable-coins Only Gemini USD is fully backed by US treasuries. Everyone else is using this money to play roulette.
  - nimchimpsky 5y ago
    dai ?
  - SilasX 5y ago
    Yes! And it redeems on demand! But what’s perplexed me is, the Gemini dollar (GUSD) is somehow more volatile than Dai, which uses much more complex, experimental means of stabilizing its value: https://coinmarketcap.com/currencies/multi-collateral-dai/ https://coinmarketcap.com/currencies/multi-collateral-dai/ https://coinmarketcap.com/currencies/gemini-dollar/ https://coinmarketcap.com/currencies/gemini-dollar/
    - csomar 5y ago
      That's economics for you! Your perception doesn't not much reality. The idea that because you can redeem at face value for 1:1 and you have stronger guarantees, then it should have a less volatile price. In reality, it comes down to market makers and market adoption/liquidity. That's why Tether could keep the beg at 1:1 despite having very little liquid cash. Liquidity will come from investors, and actually the more the better. Smaller fish like GUSD will not have that much interest from market makers.
      - SilasX 5y ago
        It doesn't need interest from market makers. You want GUSD, you can buy it from Gemini at 1:1. You want to sell, they redeem at 1:1. You don't need market makers unless you want to get ripped off.
ur-whale 5y ago
Yeah, 100% agree. The notion of counter-party risk is understood by a tiny fraction of the folks who participate in finance.
- makomk 5y ago
  At this kind of scale, I don't think there's such a thing as plain "cash" free of any counterparty risk - even just holding it in a bank account has risk attached (and most banks probably don't want an account with that much money in it because that would pose risks to them - they have the exact same problems finding somewhere to put it). US treasuries and AAA-rated bonds and commercial paper are about the best you can do.
  - H8crilA 5y ago
    Short dated treasuries are practically indistinguishable from "cash". They're counted together on corporate balance sheets. Also, what do you mean "cash"? Printed bills? Deposits in commercial banks' checking accounts? Would savings accounts count too (they can be frozen for some amount of days)? Deposits in Fed accounts?
    - ur-whale 5y ago
      You're right. These days, the word "cash" is basically meaningless for anything bigger than buying a bagful of groceries at the store. And it's not going to get any better. What sad times we live in.
      - H8crilA 5y ago
        Nothing has changed for many decades, actually. For much longer than I'm alive, for instance. There's nothing new in money classification, currently.
  - lordalch 5y ago
    I remember reading about some folks who wanted to open a bank that wouldn't make any loans, but rather just take store all their deposits as excess reserves at the federal reserve. They would take a few basis points for themselves, but offer their customers a way to have truly cash deposits that earned some interest with the absolute minimum amount of counter-party risk. The Federal Reserve didn't approve them to do that, because they were worried that it could "destabilize the financial system."
woah 5y ago
That sounds like a bank account. Are you criticizing USDC for not being as safe as paper dollars in a mattress?
- airza 5y ago
  Bank accounts are insured against counterparty risk by the FDIC.
  - jukabo 5y ago
    Did you know that FDIC is only back by 2.5% cash.

by phire 5y ago

Lionga 5y ago

what defines an "approved investment" ?

csomar 5y ago
> you agree Circle is free to use the funds provided for its own purposes prior to redemption subject to the terms of this Agreement. > Circle may also invest these fiat funds in highly-liquid, AAA-rated fixed income securities. I wrote about this here: https://omarabid.com/usd-stable-coins https://omarabid.com/usd-stable-coins Only Gemini USD is fully backed by US treasuries. Everyone else is using this money to play roulette.
- nimchimpsky 5y ago
  dai ?
- SilasX 5y ago
  Yes! And it redeems on demand! But what’s perplexed me is, the Gemini dollar (GUSD) is somehow more volatile than Dai, which uses much more complex, experimental means of stabilizing its value: https://coinmarketcap.com/currencies/multi-collateral-dai/ https://coinmarketcap.com/currencies/multi-collateral-dai/ https://coinmarketcap.com/currencies/gemini-dollar/ https://coinmarketcap.com/currencies/gemini-dollar/
  - csomar 5y ago
    That's economics for you! Your perception doesn't not much reality. The idea that because you can redeem at face value for 1:1 and you have stronger guarantees, then it should have a less volatile price. In reality, it comes down to market makers and market adoption/liquidity. That's why Tether could keep the beg at 1:1 despite having very little liquid cash. Liquidity will come from investors, and actually the more the better. Smaller fish like GUSD will not have that much interest from market makers.
    - SilasX 5y ago
      It doesn't need interest from market makers. You want GUSD, you can buy it from Gemini at 1:1. You want to sell, they redeem at 1:1. You don't need market makers unless you want to get ripped off.

ur-whale 5y ago

Yeah, 100% agree. The notion of counter-party risk is understood by a tiny fraction of the folks who participate in finance.

makomk 5y ago
At this kind of scale, I don't think there's such a thing as plain "cash" free of any counterparty risk - even just holding it in a bank account has risk attached (and most banks probably don't want an account with that much money in it because that would pose risks to them - they have the exact same problems finding somewhere to put it). US treasuries and AAA-rated bonds and commercial paper are about the best you can do.
- H8crilA 5y ago
  Short dated treasuries are practically indistinguishable from "cash". They're counted together on corporate balance sheets. Also, what do you mean "cash"? Printed bills? Deposits in commercial banks' checking accounts? Would savings accounts count too (they can be frozen for some amount of days)? Deposits in Fed accounts?
  - ur-whale 5y ago
    You're right. These days, the word "cash" is basically meaningless for anything bigger than buying a bagful of groceries at the store. And it's not going to get any better. What sad times we live in.
    - H8crilA 5y ago
      Nothing has changed for many decades, actually. For much longer than I'm alive, for instance. There's nothing new in money classification, currently.
- lordalch 5y ago
  I remember reading about some folks who wanted to open a bank that wouldn't make any loans, but rather just take store all their deposits as excess reserves at the federal reserve. They would take a few basis points for themselves, but offer their customers a way to have truly cash deposits that earned some interest with the absolute minimum amount of counter-party risk. The Federal Reserve didn't approve them to do that, because they were worried that it could "destabilize the financial system."

woah 5y ago

That sounds like a bank account. Are you criticizing USDC for not being as safe as paper dollars in a mattress?

airza 5y ago
Bank accounts are insured against counterparty risk by the FDIC.
- jukabo 5y ago
  Did you know that FDIC is only back by 2.5% cash.