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> That's why I keep bringing up this comparison. MMFs are allowed to loan out their money and partake in various investment schemes to generate a yield. HOWEVER

> That's why I keep bringing up this comparison. MMFs are allowed to loan out their money and partake in various investment schemes to generate a yield. HOWEVER, there's reporting requirements, there's investment requirements, there's rating requirements, there's transparency, etc. etc. I think that's a good thing, although there are 2 things I disagree with: 1) I believe the investment requirements are a scheme that is unfair and can lead to forced (and unnatural) inequality. I would replace this with (sufficiently strict) tests of investment knowledge for new investors. 2) In practice the ratings agencies have a less than stellar record, as the way they are set up, they have an inherent conflict of interest. This leads to a false sense of security. So I would just get rid of these, but I don't see anything wrong with the rest in general (I'm sure there would be some specifics I would disagree with). > All of this giant exercise with crytocoins trying to "make a stablecoin", where 1-stablecoin == $1 all the time is just a crazy scheme to recreate MMFs. That's my overall point and viewpoint. It's quite different, as stablecoins can be traded in a completely decentralized way (i.e. peer-to-peer) with blockchain protocols using cryptographic assurances. But yes, in theory an MMF-backed stablecoin could be traded on a blockchain, and I see nothing wrong with that. That said, an MMF-backed stablecoin would be a bit more risky than a USD-backed stablecoin, due to an MMF being inherently a bit more risky than the USD. However, yeah.. another point is that the companies that issue stablecoins are also quite far from being sufficiently transparent. They also need to be subject to the same periodic financial audit requirements by a reputable firm as a crypto exchange should!

dragontamer 4y ago
USDC doesn't keep its USD in "cash". Its claiming its got "commercial paper" backing it. ("Commercial paper" being a codeword for loans, the same 5-day / 9-day loans that make up an entity such as SWVXX). Or government loans, etc. etc. Its the same thing, but worse. Its no more secure than an MMF as it is. In fact, due to the much weaker reporting guidelines, USDC is likely worse than an MMF like SWVXX. No stablecoin promises "cash" holdings. Literally none. The best you've got in the cryptocoin world is MMF-like promises, except without any of the MMF regulations. ------- There's no guarantees that USDC's backing of "commercial paper" has any good rating at all. What 5-day loans are USDC banking on? Is it Bank of America? Or is it a loan to Binance? No one knows. > USDC has always been backed by the equivalent value of U.S. dollar denominated assets; USDC reserves are kept in the management and custody of leading U.S. financial institutions, including BlackRock and Bank of New York Mellon
- wizeman 4y ago
  Yeah, I know... what these companies are doing is absolute crap and I suspect that in the future this is going to lead to an even bigger crisis than what's happening right now in the crypto industry. I suspect that this is a side effect of 1) being impossible to store large amounts of USD cash in a bank, at least without incurring into significant risks of losing it or actually even losing money over time due to negative interest rates and/or 2) being more lucrative to hold these paper products rather than keep everything strictly in cash, perhaps even also 3) lack of moral standards? I don't know. I think this is even worse than what the traditional banks are doing and I'm completely against it. Especially due to the lack of transparency that you are mentioning.

dragontamer 4y ago

USDC doesn't keep its USD in "cash". Its claiming its got "commercial paper" backing it. ("Commercial paper" being a codeword for loans, the same 5-day / 9-day loans that make up an entity such as SWVXX). Or government loans, etc. etc. Its the same thing, but worse. Its no more secure than an MMF as it is. In fact, due to the much weaker reporting guidelines, USDC is likely worse than an MMF like SWVXX. No stablecoin promises "cash" holdings. Literally none. The best you've got in the cryptocoin world is MMF-like promises, except without any of the MMF regulations. ------- There's no guarantees that USDC's backing of "commercial paper" has any good rating at all. What 5-day loans are USDC banking on? Is it Bank of America? Or is it a loan to Binance? No one knows. > USDC has always been backed by the equivalent value of U.S. dollar denominated assets; USDC reserves are kept in the management and custody of leading U.S. financial institutions, including BlackRock and Bank of New York Mellon

wizeman 4y ago
Yeah, I know... what these companies are doing is absolute crap and I suspect that in the future this is going to lead to an even bigger crisis than what's happening right now in the crypto industry. I suspect that this is a side effect of 1) being impossible to store large amounts of USD cash in a bank, at least without incurring into significant risks of losing it or actually even losing money over time due to negative interest rates and/or 2) being more lucrative to hold these paper products rather than keep everything strictly in cash, perhaps even also 3) lack of moral standards? I don't know. I think this is even worse than what the traditional banks are doing and I'm completely against it. Especially due to the lack of transparency that you are mentioning.