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That's just a misunderstanding of why (most) people use stablecoins in the first place. It's not ideological, it's practical. When you sell crypto and want to
by fleddr 4y ago
That's just a misunderstanding of why (most) people use stablecoins in the first place. It's not ideological, it's practical.
When you sell crypto and want to exchange it for "real" money, say USD, some exchanges don't support that, they only support crypto to crypto conversions. On exchanges that do support it, it's sometimes slow and often comes with a fee. Both the exchange and your bank may impose arbitrary limits on it. It may create a taxable event.
By comparison, a crypto to crypto conversion (say BTC to USDC) is instant, often free, and without much limitation.
If actual USD had none of the above limitations, nobody would need or use a stablecoin. It's a utility, not some bet against the dollar.
- overtonwhy 4y agoThe exchanges that don't support cashing out direct to your USD bank are unlicensed and unregulated and they're dealing in Tether to skirt the KYC and AML requirements that a real financial business has to have. Those exchanges deal in scam coins that are pure pump and dump. Those exchanges don't have to keep client funds in reserve.
- elefanten 4y agoThis is not the point. Even the most legal/regulated have to ACH/wire cash. If you’re a trader and want to raise your cash portion of a portfolio it’s much faster/easier/cheaper to hold stablecoins. The cost is that it’s riskier.
- jazzyjackson 4y agoI don't know what you mean, for instance because Gemini follows all the regulations, I can hold USD cash in my account and it's even FDIC insured. Wiring back to a checking account is an option, but I can keep liquidity at the ready without dealing in stablecoins.
- aqme28 4y agoYou're ignoring distributed exchanges like Uniswap. They only deal in crypto-crypto because they exist only on the blockchain.
- smabie 4y agoA significant usage of stable coins is also as margin for crypto derivatives contracts.
- elefanten 4y agoBut ultimately for the same reason gp stated. It’s easier for the exchange to deal in all crypto
- Animats 4y agoThat's not a limitation of USD, it's a limitation of sleazy crypto exchanges. If I sell stock through my stockbroker, I can have funds in a bank account within hours. You ought to be able to sell BTC and get funds in your account in Chase or Barclays via wire transfer within hours. But no. Crypto exchanges hate to pay out real money. They don't even like paying out cryptocurrencies to external wallets. They want you to just bet within their closed system. Real brokerages don't care whether you're buying or selling. They get commissions either way. Crypto exchanges have a strong bias towards your buying what they're selling.
- bombcar 4y agoThe exchanges don't want (or pretend to ignore) the Know Your Customer (KYC) rules, which your brokerage does not. So your brokerage is fine sending you the funds immediately. They also are fine with the audits, etc that are required to prove that they're not playing sillybuggers with your stocks or funds.
- LewisVerstappen 4y agoJust a side note, but it's funny how the Patriot Act is commonly decried by everyone as an overreach of government power & invasion of privacy. But, when you mention these KYC laws (which were put into place in the US by the Patriot Act), no one bats an eye and just assumes KYC rules are reasonable.
- djur 4y agoThe Patriot Act is a broad-ranging piece of legislation, and the anti-money laundering provisions in Title III are less controversial than other titles.
- gabereiser 4y agoParty > Policy
- oarabbus_ 4y agoWhat is unreasonable about brokerages and crypto exchanges being subject to KYC and AML regulations? How is that at all comparable to the government being able to eavesdrop on my private communications and violate my 4th amendment rights without a warrant?
- fshbbdssbbgdd 4y ago>It may create a taxable event. What’s the difference in tax liability from trading your BTC for dollars vs. a stablecoin? I’m aware that there are places where you can exchange crypto for crypto that won’t report it to the IRS, but that doesn’t change whether it is a taxable event. By the way, there’s no statute of limitations for tax fraud.
- lxgr 4y agoIn some countries, crypto-for-crypto transactions are surprisingly really not taxable events!
- bombcar 4y agoI guess you could try to argue it is a 1031 exchange (but that's now real estate only, basically). I suspect it's much more that less-than-fully-compliant exchanges will only show "inputs and outputs" and not any trades in-between. https://www.irs.gov/businesses/small-businesses-self-employed/like-kind-exchanges-real-estate-tax-tips https://www.irs.gov/businesses/small-businesses-self-employe...
- whimsicalism 4y agoThe IRS has offered clear guidance that these sorts of exchanges are taxable events. You could argue all you want, but ultimately it is taxable.
- TacticalCoder 4y agoIt's been discussed several times... Many people are "trapped" into cryptos and can not get out (for example because their bank will close their account and kick them out if they do anything crypto related). So in several countries it's only when you sell for a currency that is legal tender that it's a taxable event. It's the case in France and, if I'm not mistaken, it's been clarified that it's now also the case in Germany. It makes sense in a world where people are taking a very big risk by selling for a "stable" coin. For the last thing you'd want is people selling BTC for Luna / UST, and then owing the state, say, 100 K EUR, only to then see Luna going to zero. Some of these people would have their lives ruined if the taxable event happens before they're able to cash out to a currency that is "real". If anything the Luna / UST fiasco as shown to many that it makes sense to only tax when something is sold for a real currency and not for monopoly money.
- nradov 4y agoWill the utility persist as governments ramp up compliance requirements on those exchanges? So far they've largely flown under the radar. But eventually they will be forced to do more to comply with AML/KYC and tax reporting rules.
- Hallucinaut 4y agoThe phrasing here seems to imply that exchanging one cryptocoin for a stablecoin should NOT create a taxable event. That's clearly not a long term reasonable expectation to hold as it's an obvious loophole all tax authorities will be looking to shut in the longer term.
- Karunamon 4y agoWhy should it, though? It's still just another cryptocurrency at the end of the day. The government shouldn't be looking for their vig until you exchange for legal tender, and I don't see how a third-party organization promising a specific exchange rate for the token changes that.
- fleddr 4y agoHow is it a loophole? Tax applies to your capital (gains) denominated in USD. Example 1: I deposit 10K USD and buy BTC for it. After a while I sell the BTC and get back 15K USD. I've now gained 5K in USD, which is taxable. Example 2: I deposit 10K USD and buy BTC for it. Next I swap the BTC to ETH, a stablecoin, or any other crypto token. I've gained nothing in USD. I still have 10K USD worth of crypto. I didn't sell crypto, so there should be no tax. Unless...you formally acknowledge a stablecoin to be representative of USD. Which may have all kinds of complicated implications.
- DennisP 4y agoIt's not just about central exchanges. A stablecoin lets you use on-chain exchanges like Uniswap, loan money on chain, etc. (I don't think there's a tax advantage though. I'm not a CPA but my understanding is that in the US, any exchange of one token for another is a taxable event.)