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However, it said looser rules could apply to stablecoins – a new form of digital asset usually pegged to the value of a traditional currency – that may require

However, it said looser rules could apply to stablecoins – a new form of digital asset usually pegged to the value of a traditional currency – that may require only a level of capital rules applied to traditional assets such as bonds, loans, deposits, equities or commodities. Isn't that assuming that stablecoins are inherently lower risk than Bitcoin? Why should we take that assumption at face value? This just seems like it'd offer banks a way to launder their crypto risk by funneling it through stablecoins. Then, when a big spike or drop in the value of Bitcoin causes a stablecoin to break its peg, a bunch of banks who've put their crypto assets in the stablecoin in order to take advantage of the looser rules are suddenly caught out.

ProjectArcturis 5y ago
Yes, and we shouldn't. Your scenario is completely plausible. Though I don't know why a bank would want to hold any significant amount of stablecoins.
koheripbal 5y ago
The volatility isn't the issue for the regulators. What they're worried about is the ability of countries like Iran to circumvent sanctions. My suspicion is that they will order exchanges to de-list privacy coins.
deleted 5y ago
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dmurray 5y ago
The proposed rules require the banks to account for the credit risk of the party guaranteeing the stablecoin. So similar rules will apply to assessing a loan guaranteed by that party. I'm guessing Tether Ltd. won't fare that well on the credit risk assessment, but other institutions could.
- quanticle 5y ago
  I'm guessing Tether Ltd. won't fare that well on the credit risk assessment, but other institutions could. Given how the credit rating agencies were more than happy to give investment grade ratings to toxic waste in the run-up to the 2007-2008 financial crisis, I'm not sure that's a safe assumption to make.
  - cinquemb 5y ago
    What's even more of a joke is most peoples unawareness of how uncollaterlized/leveraged the __existing__ banking system debts are and are complaining about USDTs cash levels… like people never heard of the eurodollar markets… ~48.5% of long dated (gte 10 year maturities) of IG USD corp bonds are rated BBB (basically 1 notch above junk), and 97.4% of the same bonds are __uncollateralized__ (aka S-NT, aka Senior Unsecured…)… this is worse than the run up into 2007-2008… thousands and thousands of CUSIP's backed by nothing in the same way people rip on USDT… The "regulations" haven't stopped the banks and corporates building up leverage in all sorts of novel ways that have yet to enter textbooks these bureaucrats will spend decades to study (and still be behind), and they sure as hell wont stop it from happening in DeFi…

ProjectArcturis 5y ago

Yes, and we shouldn't. Your scenario is completely plausible. Though I don't know why a bank would want to hold any significant amount of stablecoins.

koheripbal 5y ago

The volatility isn't the issue for the regulators. What they're worried about is the ability of countries like Iran to circumvent sanctions. My suspicion is that they will order exchanges to de-list privacy coins.

deleted 5y ago

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dmurray 5y ago

The proposed rules require the banks to account for the credit risk of the party guaranteeing the stablecoin. So similar rules will apply to assessing a loan guaranteed by that party. I'm guessing Tether Ltd. won't fare that well on the credit risk assessment, but other institutions could.

quanticle 5y ago
I'm guessing Tether Ltd. won't fare that well on the credit risk assessment, but other institutions could. Given how the credit rating agencies were more than happy to give investment grade ratings to toxic waste in the run-up to the 2007-2008 financial crisis, I'm not sure that's a safe assumption to make.
- cinquemb 5y ago
  What's even more of a joke is most peoples unawareness of how uncollaterlized/leveraged the __existing__ banking system debts are and are complaining about USDTs cash levels… like people never heard of the eurodollar markets… ~48.5% of long dated (gte 10 year maturities) of IG USD corp bonds are rated BBB (basically 1 notch above junk), and 97.4% of the same bonds are __uncollateralized__ (aka S-NT, aka Senior Unsecured…)… this is worse than the run up into 2007-2008… thousands and thousands of CUSIP's backed by nothing in the same way people rip on USDT… The "regulations" haven't stopped the banks and corporates building up leverage in all sorts of novel ways that have yet to enter textbooks these bureaucrats will spend decades to study (and still be behind), and they sure as hell wont stop it from happening in DeFi…