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It's basically all uncharted waters. Yesterday's freakout over Coinbase saying that all customer assets could be seized in the case of bankruptcy was basically

by tootie 5y ago

It's basically all uncharted waters. Yesterday's freakout over Coinbase saying that all customer assets could be seized in the case of bankruptcy was basically them saying they have absolutely no idea what would happen because no precedent exists. In reality, regulatory agencies have broad authority and can seek more when needed to deal with unexpected events. If they think Coinbase or Tether represent a systemic risk, they will find a way to bail out investors because the downside risk of doing nothing is too great. It's possible some of the major crypto institutions have reached Too Big To Fail status regardless of whatever statutory authority exists to protect them. The biggest problem is simply that ownership is anonymous so we have no idea which countries have the most exposure or who to rescue.

shkkmo 5y ago
> If they think Coinbase or Tether represent a systemic risk, they will find a way to bail out investors because the downside risk of doing nothing is too great. It's possible some of the major crypto institutions have reached Too Big To Fail status regardless of whatever statutory authority exists to protect them. That's silly. The only people who actually believe this are the ones who have so bought into the hype that they don't realize that crypto is not a functional part of our system of currency that underlies our economic production. Crypto is an asset that is prone to bubbles that provides little to no actual economic production. The "major crypto institutions" will have to be bailed out privately, if at all.
- tootie 5y ago
  It doesn't matter if it's a scam or if it provides value. Lots of activity leading up to the 2007 crisis was scammy but once enough people and institutions were exposed it had to be dealt with. If Moderna says they put all the cash in Tether and now they're broke and can't produce vaccines, they'll get bailed out. All that being said I don't actually think that we'll see anything like that. There will be some negative wealth effect but unlikely any systemic risk. Traditional financial institutions have been leery of crypto from the start and they still control the vast majority of capital.
  - shkkmo 5y ago
    Moderna might get bailed out...though I am skeptical how they would justify having so much cash in Tether rather than an actual bank and as such I highly doubt they would get terms as favorable as the banks got in 2008. Tether itself certainly would not get bailed. There is literally zero chance that the US Government would decide to help keep Tether pegged. Tether simply isn't important enough to the broader economy, it only exists so that sketchy businesses that have trouble interacting with banks can have an easier access.

by tootie 5y ago

shkkmo 5y ago

> If they think Coinbase or Tether represent a systemic risk, they will find a way to bail out investors because the downside risk of doing nothing is too great. It's possible some of the major crypto institutions have reached Too Big To Fail status regardless of whatever statutory authority exists to protect them. That's silly. The only people who actually believe this are the ones who have so bought into the hype that they don't realize that crypto is not a functional part of our system of currency that underlies our economic production. Crypto is an asset that is prone to bubbles that provides little to no actual economic production. The "major crypto institutions" will have to be bailed out privately, if at all.

tootie 5y ago
It doesn't matter if it's a scam or if it provides value. Lots of activity leading up to the 2007 crisis was scammy but once enough people and institutions were exposed it had to be dealt with. If Moderna says they put all the cash in Tether and now they're broke and can't produce vaccines, they'll get bailed out. All that being said I don't actually think that we'll see anything like that. There will be some negative wealth effect but unlikely any systemic risk. Traditional financial institutions have been leery of crypto from the start and they still control the vast majority of capital.
- shkkmo 5y ago
  Moderna might get bailed out...though I am skeptical how they would justify having so much cash in Tether rather than an actual bank and as such I highly doubt they would get terms as favorable as the banks got in 2008. Tether itself certainly would not get bailed. There is literally zero chance that the US Government would decide to help keep Tether pegged. Tether simply isn't important enough to the broader economy, it only exists so that sketchy businesses that have trouble interacting with banks can have an easier access.