5 ms·

> Additionally, dollar-pegged stablecoins backed by adequately safe and liquid collateral can potentially serve as a digital safe haven currency during periods

> Additionally, dollar-pegged stablecoins backed by adequately safe and liquid collateral can potentially serve as a digital safe haven currency during periods of crypto market distress. That's the Federal Reserve being themselves. Buy US dollars, use US dollars as the global currency. It makes a lot of sense for the USA, not necessarily for the rest of the world. But the Federal Reserve represents it's country interest, so it makes sense.

Terry_Roll 5y ago
The Chinese currency used to be and might still be pegged to the US dollar so why shouldnt I invest in the Chinese govt debt instead? I do know some parts of the US govt has complained about the pegging because it made US workers more expensive than Chinese workers. And the I remember the £ in the 90's crashing out of the Exchange Rate Mechanism when it was pegged to the German DM as Germany had(still has) a strong economy which sent interest rates soaring to something like 12 or 15%!!! So pegging currency to others must be more nuanced than that it seems.
- seanmcdirmid 5y ago
  I don’t think you can invest in Chinese government debt as a foreigner, but there are some real estate bonds you can buy…just not very safe.
  - unmole 5y ago
    > I don’t think you can invest in Chinese government debt as a foreigner You most certainly can. Hell, there are ETFs that allow you to do that.
- vkou 5y ago
  > The Chinese currency used to be and might still be pegged to the US dollar so why shouldnt I invest in the Chinese govt debt instead? Because the US makes it easy for you to trade dollars around. The dollar's dominance will collapse the moment that significant restrictions are introduced around who can hold it, how they can hold it, and what they can trade it for. China doesn't care one whit about making it easy for a foreigner (or a local) to trade its money (or derivatives) around. China cares about stabilizing its economy. If the CPC decides tomorrow that currency controls are necessary to stabilize their economy, you're going to be SOL. If the CPC decides tomorrow that USD, or BTC, or RMB can't flow out of China, you're SOL. And so on, and so on. I wouldn't recommend making investments when you don't understand the risks.
steelstraw 5y ago
True, but what's the alternative? What would work better?
sremani 5y ago
A quick search revealed that in 2019 88% of international transactions were made in USD. So even if Reserve Bank of India was doing this analysis -- they might likely take USD as a global reference instead of Indian Rupees.
vmception 5y ago
Stablecoins already do this. Traders aren't exiting the crypto ecosystem during selloffs, they just go to stablecoins and move unlimited sums back into risk assets at a moment's notice. This is the FederalReserve taking a measured analysis, saying "wow all those luddites were hilariously wrong and have no idea what they're talking about, but we're going to stop just short of saying this is already pretty amazing".
lupire 5y ago
Also, wouldn't that transfer the stress from crypto to USD, by creating inflation whenever people exit crypto?
willmadden 5y ago
The moment we see stable coins emerge denominated in other national currencies with these stable coins trading against each other in high volume crypto exchanges is the moment the traditional cross-border payments industry dies. There's just no way traditional FX can compete when you can instantly swap a USD token for a token of any other currency at tiny cost everywhere in the world. Crypto exchange already does this, and sometimes better, it's just harder for people to figure out. Even the half-way situation we have today of USD stablecoins trading for local currency in other countries is likely going to obliterate traditional FX in a few years. It's already happening, and really fast.

Terry_Roll 5y ago

The Chinese currency used to be and might still be pegged to the US dollar so why shouldnt I invest in the Chinese govt debt instead? I do know some parts of the US govt has complained about the pegging because it made US workers more expensive than Chinese workers. And the I remember the £ in the 90's crashing out of the Exchange Rate Mechanism when it was pegged to the German DM as Germany had(still has) a strong economy which sent interest rates soaring to something like 12 or 15%!!! So pegging currency to others must be more nuanced than that it seems.

seanmcdirmid 5y ago
I don’t think you can invest in Chinese government debt as a foreigner, but there are some real estate bonds you can buy…just not very safe.
- unmole 5y ago
  > I don’t think you can invest in Chinese government debt as a foreigner You most certainly can. Hell, there are ETFs that allow you to do that.
vkou 5y ago
> The Chinese currency used to be and might still be pegged to the US dollar so why shouldnt I invest in the Chinese govt debt instead? Because the US makes it easy for you to trade dollars around. The dollar's dominance will collapse the moment that significant restrictions are introduced around who can hold it, how they can hold it, and what they can trade it for. China doesn't care one whit about making it easy for a foreigner (or a local) to trade its money (or derivatives) around. China cares about stabilizing its economy. If the CPC decides tomorrow that currency controls are necessary to stabilize their economy, you're going to be SOL. If the CPC decides tomorrow that USD, or BTC, or RMB can't flow out of China, you're SOL. And so on, and so on. I wouldn't recommend making investments when you don't understand the risks.

steelstraw 5y ago

True, but what's the alternative? What would work better?

sremani 5y ago

A quick search revealed that in 2019 88% of international transactions were made in USD. So even if Reserve Bank of India was doing this analysis -- they might likely take USD as a global reference instead of Indian Rupees.

vmception 5y ago

Stablecoins already do this. Traders aren't exiting the crypto ecosystem during selloffs, they just go to stablecoins and move unlimited sums back into risk assets at a moment's notice. This is the FederalReserve taking a measured analysis, saying "wow all those luddites were hilariously wrong and have no idea what they're talking about, but we're going to stop just short of saying this is already pretty amazing".

lupire 5y ago

Also, wouldn't that transfer the stress from crypto to USD, by creating inflation whenever people exit crypto?

willmadden 5y ago

The moment we see stable coins emerge denominated in other national currencies with these stable coins trading against each other in high volume crypto exchanges is the moment the traditional cross-border payments industry dies. There's just no way traditional FX can compete when you can instantly swap a USD token for a token of any other currency at tiny cost everywhere in the world. Crypto exchange already does this, and sometimes better, it's just harder for people to figure out. Even the half-way situation we have today of USD stablecoins trading for local currency in other countries is likely going to obliterate traditional FX in a few years. It's already happening, and really fast.