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The interest bearing accounts on the stablecoins are the (edit: things analogous to) MMFs, not the stablecoins themselves — at least for backed ones like GUSD a
by SilasX 5y ago
The interest bearing accounts on the stablecoins are the (edit: things analogous to) MMFs, not the stablecoins themselves — at least for backed ones like GUSD and USDC.
Edit: not sure why a basic point is downvoted, I updated to clarify.
- JumpCrisscross 5y ago> interest bearing accounts on the stablecoins are the (edit: things analogous to) MMFs, not the stablecoins themselves Sorry, I was speaking metaphorically. Stablecoins are collateralized by money market assets. This backs their "guarantee" of convertibility. Money market funds used to provide a similar liquidity-risk transformation guarantee--they would never "break the buck," i.e. trade for less than $1/unit. Until they did in 2008, which created a credit crisis in the money markets as those funds all fire sold commercial paper at the same time to maintain their peg. So we changed the rules. No fake pegs. If you find yourself in a credit crisis, you trade your fund at 98¢ instead of incurring 50¢ of liquidation costs to defend a magic number. In exchange, no marketing your funds as being as stable as deposit accounts. See the rhyme?
- SilasX 5y agoNo, I don't see the "rhyme" about how USDC and GUSD lack actual cash to back them 100%, because they do in fact have such cash. Bottom line, you're painting with too broad a brush to say all stablecoins work like a MMF. At most, you're describing particular ones like Tether and Dai.
- tptacek 5y agoUSDC does not have actual cash to back it to 100%.