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> The world's biggest crypto exchange will freeze all withdrawals of USD Coin while it conducts a "token swap" to boost its holdings of the dollar-pegged crypto

> The world's biggest crypto exchange will freeze all withdrawals of USD Coin while it conducts a "token swap" to boost its holdings of the dollar-pegged cryptocurrency, the crypto group's CEO Changpeng Zhao said Tuesday It's worth noting that USDC is not even a token controlled by Binance. It's controlled and issued by Circle. So effectively, Binance is refusing to honor its commitment to depositors to give them their money on demand. That's called a "default." Why? The article says something about a key bank being closed. Nonsense. Is the USDC held at that bank? No. Binance is allegedly holding it. Only clearly they're not because they can't produce it on demand. I'm frankly amazed that people with the ability to understand this alphabet soup mumbo jumbo keep falling for the same scam over and over again. Underneath all of the slick marketing and nerd posturing is a simple truth: these are all fractional reserve systems. Conceptually, they are no different than banks or pyramid schemes. The only possible reason you want a stable coin, rather than dollars, in the first place is because you're doing something that requires you to route around US financial regulation. The US dollar is digital. It moves around the world using a digital network. It's traded the world over by almost every country whether they want to or not. You can buy almost anything there is to buy with US dollars. You "need" a stable coin because you're trying to have your cake and eat it too: US dollar-like liquidity and value preservation without US dollar financial regulation.

yashg 4y ago
Also pumping the price of a token without putting in actual money. When you can issue unlimited number of casino chips, you can sell an imaginary asset using as many chips as you want. Better still, get all casinos to accept each others chips to buy and sell those imaginary worthless tokens to lend credibility to chips and tokens.
jaltekruse 4y ago
I think there is an important missing part of this argument that many of the current paths to move dollars around that network in the traditional system take either days to settle and/or cost quite a lot in fees. I see crypto having potential to optimize lots of things and introduce extra trust from a technical infrastructure standpoint. Right now my traditional money is sitting in several digital banks or brokerages that I have no idea how well made they are underneath, I just see a website I can interact with. Crypto doesn't solve problems about where the coins meet the real world, even a stable coin with publicly auditable holdings to back it can have secret debt leveraged against those assets. Those problems seem only possible to resolve with regulation as it has been with the traditional financial system, but standardizing protocols to move money around and reducing lead time and/or fees as crypto evolves could really help the financial system be more flexible. With everyone carrying around a smartphone it really should make us question why so much money needs to move through the major credit card networks, we don't need their special hardware anymore.
- jaltekruse 4y ago
  Unfortunately the current (and seemingly somewhat inevitable) architecture of cryptocurrency, relies on trustless distributed systems, which I don't see a clear path to making them give similar SLAs or UX to the traditional system with centralized authorities and defenses against "double spending", which really just isn't discussed outside of crypto because it was such an obvious thing to solve for our current system makes it so close to impossible (and that is part of the reason for the lead times discussed in my previous comment).
- xapata 4y ago
  The credit card companies have built trust with merchants around the world that they'll settle up eventually, and that anyone (or most people) carrying their cards will pay their bills. If a cryptocurrency system were to try to supplant that, it'd need a form of revolving credit. I want to pay my bills at the end of the month, not immediately.
- markonen 4y ago
  You can absolutely regulate towards the goal of affordable, instantaneous money transfers within the context of the traditional finance system. The EU has done just that with SEPA (Single Euro Payments Area). Here's the SEPA instant credit transfer service (maximum duration of ten seconds): https://www.europeanpaymentscouncil.eu/what-we-do/sepa-instant-credit-transfer https://www.europeanpaymentscouncil.eu/what-we-do/sepa-insta...
  - MrRadar 4y ago
    Next year the Federal Reserve will be launching their FedNow service which should provide equivalent functionality to Europe's SEPA or Canada's Interac service.
- twelve40 4y ago
  how about risk management? when i pay using a credit card, i know if things go sideways i can always dispute and most likely will get my money back. If I pay with bitcoin or even with cash or checks, i'm fucked. Not sure if Visa/MC duopoly specifically is the most efficient way to handle this risk, but it is a thing. P.S. also too not sure how special credit card hardware is a problem anymore, if you want to pay with your phone, there are more and more options every year to do that, and even tie that to a credit card (for benefit of risk and/or points).
capableweb 4y ago
Not saying the rest of your comment is right or wrong but this part sticks out: > It's traded the world over by almost every country whether they want to or not. You can buy almost anything there is to buy with US dollars. That's definitely not true. Most places in the world, I'd wager, do not accept USD, as you seem to think. I can't even begin to count the times I've seen clueless American tourists in South America, Africa, Europe and Asia trying to pay with their "highly regarded" USD and being denied with laughs. And then being shocked at the results.
- notch656a 4y ago
  Lol almost no one in South America is laughing at USD. I've been to 3 of the 4 continents you mention and spent USD directly in all of them but Europe. Hello in many south america countries you get better prices even adjusted for true exchange rate because no one wants dog-shit <national currency> and it saves them a trip to the money-trader before their money turns into kindling.
  - jen20 4y ago
    You can also spend them in several places in Europe with ease, albeit at an exchange rate that means you should not.
- axoltl 4y ago
  I don't think the parent comment was referring to buying an ice cream cone, but rather things traded on the open market.
wpietri 4y ago
> US dollar-like liquidity and value preservation without US dollar financial regulation. Or in other words, they'd like the benefits of regulation without the costs of regulation. Which I certainly appreciate. As a child my plan for adulthood was desserts all the time, no vegetables ever.
- notch656a 4y ago
  More like they trusted two (well actually three if you count US gov) centralized entities instead of one. It's like asking permission from both momma and pappa to eat desert. They should have just depended on the single entity backing USDC rather than putting themselves in a situation where they'd be also be fucked if Binance froze by leaving their tokens on exchange. When you put USD backed stablecoin on exchange you're trusting 1) Exchange won't fail 2) Backers won't fail 3) US gov won't fail Any single one fail and you're fucked. America decided dollars should float in the 70s, and most of the world followed. IMO sooner or later crypto will end up all floating because pegging relies on centralized points of failure and eventually people will tire of getting wiped out.
  - nordsieck 4y ago
    > America decided dollars should float in the 70s, and most of the world followed. Except that a bunch of countries in Europe went back to pegged currency with the Euro[1]. Part of the reason the 2008 crisis hit countries like Italy, Greece, and Ireland so hard. --- 1. Yes - the Euro is not technically pegged; but effectively, it's the same thing. Each individual country in the Eurozone can't engage in independent monetary policy.
    - notch656a 4y ago
      Euro floats.
      - klodolph 4y ago
        Comment is saying that having Euro as your currency is, in some ways the same as pegging your currency to the Euro. As in “1 Ireland Euro” equals “1 German Euro”.
datadata 4y ago
You could say the same thing about Eurodollars-- "US Dollar" denominated assets that are held in banks outside the United States and not subject to US Bank regulations. The size of this market is more than 10x all of crypto.
- BobbyJo 4y ago
  You could an you'd be right. Although, then you are trading one regulatory body for another, which you can do pretty freely with currency trading. Crypto is where you go if you don't want any regulatory bodies at all.
  - jqpabc123 4y ago
    Crypto is where you go if you don't want any regulatory bodies at all. Crypto is where you go if you are naive enough to believe that technology can be an effective substitute for financial rules and regulations.
dboreham 4y ago
Wait...they're refusing to allow on-chain transfer of USDC from their custodial account to a customer's wallet? I assumed this was about exchange of USDC to fiat, hence the hand waving about banks.
- fallingknife 4y ago
  Not your key, not your crypto.
  - dboreham 4y ago
    Definitely, but why would they not be able to submit a txn to the chain to move a token balance "because bank closed" ??
    - vrc 4y ago
      Likely a lie for less savvy investors. Or they need cash to recapitalize before being able to transfer to wallets. Or people are withdrawing to fiat which would need a bank in many cases. My money is on it being a combination, but that they definitely don’t have reserves to cover a mass run on USDC.
    - fallingknife 4y ago
      Because the tokens aren't there. The web UI says they are but what's on the chain? You don't know because you don't have the keys. Hence my previous comment.
  - vkou 4y ago
    This seems like a major bug with crypto. I don't have physical possession of my bed when I get up from it and go to work, but I've yet to come home and discover a grifter, or conman sleeping in it. Likewise, if I lose my car keys, society still manages to acknowledge that I am still the owner of my car.
    - nibbleshifter 4y ago
      There's a variety of "social recovery mechanisms" being worked on in ETH land, at least.
2OEH8eoCRo0 4y ago
> I'm frankly amazed that people with the ability to understand this alphabet soup mumbo jumbo keep falling for the same scam over and over again. They say a lot of words but they don't understand them. Also greed and pride.
flamemyst 4y ago
You misses where Binance doing automatic conversion for any deposited USDC to BUSD. So every USDC deposit will counted as BUSD. Withdrawal using BUSD and USDT is still available. Even USDC on some chain are still open. As I understand they just need time to replenish their USDC. BUSD is released by Paxos.
bellip 4y ago
Yes, it's digital already. However banks manage the whole system and they can do whatever they want with your money if you are nobody. I have been waiting for 2 and a half months for an international payment via SWIFT, I worked long hours for that money and I needed it urgently. The money left the sender's account 2 and a half months ago. Neither of us has the money in our accounts while the bank tells us to just wait a little bit longer, or they do not know where the amount is, some nonsense about beneficiary bank holding/releasing my money. Whereas a friend just sent me a hefty figure (mid 5 figures) of crypto by withdrawing it out of Binance Global to my personal wallet, it was confirmed in 15 minutes and I got the money in my account in 10 minutes. I sent the crypto to my local (Binance has different companies/legal bodies in different countries) Binance account, converted it to a currency of my liking and withdrew it to my personal bank account. All under 20-30 minutes and I have the money now. Not endorsing Binance or any other central exchange (my personal position is: not your keys, not your coins, I would never hold a big amount in any central exchange), but I do not understand HN's (majority of HN's) position against crypto in general. Maybe you are privileged enough to never have this kind of issues, but some of us do. Some of us live in countries with hostile governments, (which government isnt hostile towards the public anyways? /s).
- hef19898 4y ago
  It seems FTX was perfectly able to do whatwver they wanted, through Alameda, with customer deposits as well. Banks on the other are much better regulated, and for very valid reasons as current events show.
  - landemva 4y ago
    Which bank provided the gateway for Alameda to send/receive from the legacy banking system? There may be some regulator questions for that bank's compliance team. https://www.ledgerinsights.com/senators-quiz-silvergate-bank-over-ftx-alameda-transfers https://www.ledgerinsights.com/senators-quiz-silvergate-bank...
- gamblor956 4y ago
  SWIFT does not take 2 months; it takes minutes or hours. Your bank already has your money or it never received it. More likely, they are holding your money due to some issues with your local KYC laws. (This is especially likely in South America, where foreign senders must verify the source and purpose of payments made to local residents.)
jasonlingx 4y ago
So here’s where there might be some confusion, Binance consolidates a pool of different stable coins into 1 “BUSD” balance for its users[0]. Depositing any of these stablecoins into Binance will add to your BUSD balance, and you can withdraw from it as any stablecoin of your choice. What CZ is saying is that they ran out of USDC but have plenty of the other stablecoins instead. It sounds like they need to redeem the other stablecoins to fiat USD and send it to Circle to mint USDC with it, hence the talk about the bank. [0]https://www.binance.com/en/support/announcement/binance-to-auto-convert-usdc-usdp-tusd-to-busd-binance-usd-e62f703604a94538a1f1bc803b2d579f https://www.binance.com/en/support/announcement/binance-to-a...
- kikokikokiko 4y ago
  So, they need to find gullible 3rd parties that accept to give them hard cash (USD) in exchange for their in house created clown money (BUSD), and then use this hard cash to go to the market and buy USDC. How is this different from FTX padding their balance sheet with billions of their own made up clown money? Crypto is ponzies all the way down.
  - MacsHeadroom 4y ago
    BUSD is not clown money or created by Binance. It is the most highly regulated financial instrument in crypto, issued by Paxos New York, tightly regulated by NYDFS, backed 1:1 and regularly audited. https://paxos.com/busd/ https://paxos.com/busd/
    - kikokikokiko 4y ago
      So, it's just like the deposits on FTX, or the reserves of Tether right?
      - danuker 4y ago
        Yes, on a centralized entity you're required to trust ("we're totally backed by cash and bonds, for realsies"), as opposed to owning and holding your crypto outright. From their web page: > Transparent > A top auditing firm will attest to the matching supply of BUSD tokens and underlying U.S. dollars on a monthly basis. Note the future tense, as in, "sometime indefinitely away in the future". Their attestations (as opposed to audits) just say that at a certain instant in time they had the required amount in a bank account. That means Paxos could have borrowed it for a short while. Quote [1]: "Any activity prior to or after the Report Dates and Times at 5:00 pm ET was not considered when testing the assertions described above." This is the same trick pointed out by Coffeezilla about a year ago, about Tether. [2] And the one from November is missing. [1] - https://paxos.com/wp-content/uploads/2022/10/Executed-BUSD-Examination-Report-October-2022-2.pdf https://paxos.com/wp-content/uploads/2022/10/Executed-BUSD-E... [2] - https://www.youtube.com/watch?v=-whuXHSL1Pg https://www.youtube.com/watch?v=-whuXHSL1Pg
soerxpso 4y ago
> So effectively, Binance is refusing to honor its commitment to depositors to give them their money on demand. That's called a "default." What? So if I go into the bank at 4 AM and ask to withdraw $100,000, and they respond, "Sure, we'll need a few hours to get those funds together," the bank has defaulted?
- dheera 4y ago
  Presumably they just need to wait until 9am when people at work, so I wouldn't consider that a default. If they say they need a few hours at 9am, they've defaulted. It would be a big "ha" if they couldn't get them together by 9:05am because they've done shady things with your money.
  - driverdan 4y ago
    That's not how banks work. You can't go into a bank and withdraw $100k in cash. Most banks don't hold that much cash.
    - mikeyouse 4y ago
      Yes they do... and if it was an exceptionally small bank that didn't have it at the moment, with a day or two notice, they'd happily give you $100k in cash after receiving it from the Fed or from their vault cash providers. A busy ATM will contain more than $100k and on premises ATMs are often refilled from the bank's vault.
  - jki275 4y ago
    Do you believe that banks hold every dollar they receive in deposits in cash in their vaults? Because that's not how banks work at all. They make loans, and if enough people demand their cash back they will have to move things around to honor those withdrawals. That's how every bank in known history has operated.
  - Exuma 4y ago
    That's not how banks work
vkou 4y ago
These aren't fractional reserve systems, a fractional reserve system requires liquid and illiquid assets to exceed liabilities. This is just a fraud. :) You can tell, because they seem to be incapable of passing anything resembling an audit.
jerf 4y ago
'So effectively, Binance is refusing to honor its commitment to depositors to give them their money on demand. That's called a "default."' Not in $CURRENT_YEAR it's not. In $CURRENT_YEAR it's not a default until the holder in question publicly and willingly admits it's a default. Otherwise, it's just a technical maintenance period, or a temporary suspension of withdrawal rights, or a customer-value preserving intervention, or a response to current market conditions, or just another step on our amazing journey to world-class reliability and customer satisfaction, or whatever, and only crazy conspiracy theorists who are probably going to be happy staying poor would say that a default is as simple as "you ask for something that is yours and you don't get it", regardless of the reasons why you don't get it. That is sooo $CURRENT_YEAR-1 of you to think something so simplistic and unsophisticated. Clearly there are just a ton of reasons why you might ask for something that is yours, and not get it, that aren't anything as ugly as a default. Please. So plebian. And I can hardly believe that some knuckle-dragging cretins think a default should be treated by everyone as a default rather than just sort of glossed over with a vaguely stern look on your face before proceeding on as if nothing has happened. (For a bit of context, it's not just the cryptocurrency space that has forgotten the fundamentals lately & I have to admit I'm getting a bit crabby about it. There is a time and a place for nuance, and there is a time and place for stubborn insistence on basic facts of reality and waving away any attempt at "nuance" as obfuscatory lies. The definition of default is one of them. Either you return my stuff on demand or you don't. Explaining why you failed your obligations does not mean that you met your obligations.)
three_seagrass 4y ago
>I'm frankly amazed that people with the ability to understand this alphabet soup mumbo jumbo keep falling for the same scam over and over again. Underneath all of the slick marketing and nerd posturing is a simple truth: these are all fractional reserve systems. Conceptually, they are no different than banks or pyramid schemes. There are rational people who knowingly invest in ponzi and other schemes because they think they can get out before the music stops playing. Some ultimately do, and some ultimately get caught.
TacticalCoder 4y ago
> You "need" a stable coin because you're trying to have your cake and eat it too: US dollar-like liquidity and value preservation without US dollar financial regulation. That is not at all why people need/want USDC. People want stable coins because banks are all too happy refusing/blocking/reversing transactions to/from cryptocurrencies exchanges. They hypocrisy of both banks and the states on this one is amazing: "it's all a ponzi" / "it's all criminal money" / "only fraustres use cryptocurrencies" But then... "Please pay your due taxes made on crypto". FWIW France, at least, took a less dumb approach than many on the subject: conversions to/from crypto and stablecoins aren't a taxable event. It's only if you manage to cash out (and that's a gigantic "if") to actual EUR that taxes to the state are due. It solves at least the problem where people legally need to pay taxes but concretely cannot get money out of the crypto exchanges. Sending from, say, Coinbase to a bank for tiny amount is relatively easy. But I'm atm helping someone "cash out" a 7 digits sum in France and it's hard. Extremely hard. It's near impossible actually to get one bank to approve the withdrawal from Coinbase. Saying: "I entered Bitcoin in 2016 and ETH when it was at 50 cents" ain't sufficient. They don't seem to understand that the KYC/AML is done to catch drug and arms dealers, organs traffickers, and pedophiles selling CSAM. That's why there's KYC/AML right? To catch these guys. But a 35 years old mom who made bank on crypto? That's no pedophile. No arm dealer. No drug dealer. And yet it's not clear if she'll ever be able to cash out. That's why people are using USDC. Credit cards withdrawing from your USDC? Bring it on. Coinbase giving x% annual return on your return, please, keep it coming (btw even in France taxes are due on these annual yield). There's a shop here selling high-end second hand watches (you know, the kind of watches worth more used than new) that accepts crypto: maybe a way to get something out of your crypto. Now I don't know if the short term US treasuries, whose numbers are all published, backing the USDC all actually exist and are really held at BNY Melon. Maybe it's all a scam. Maybe Coinbase shall rug pull too. Maybe BNY Melon shall rug pull. For all I know, heck, maybe Uncle Sam himself is going to rug pull on the treasuries backing the USDC (I shouldn't give these people ideas but they maybe already fancied the idea anyway: "crypto are only scams, we're defaulting on the US treasuries backing stable coins"... and many idiots would applaude). But USDC still looks, to me, more legit than USDT / Binance USD / etc. That's why most people are using USDC: it's the least smelly of them all and the banks do no let people easily sell their crypto for real USD / EUR. Meanwhile, as I mentioned, the state wants its taxes on crypto gains. It's the state and the state lovers who want to have their cake and eat it too: they want to prevent people from cashing out their crypto "because pedophiles and criminals" but still want their taxes made on crypto "gains". That's why people are using stable coins. If people were actually free to use their money, free to do wire transfer to/from Coinbase at will, there wouldn't be that much need for stable coins. But people aren't free to use their money as they want.
trotro 4y ago
> You "need" a stable coin because you're trying to have your cake and eat it too: US dollar-like liquidity and value preservation without US dollar financial regulation. What about transferring value anonymously? Apart from cash and stable coins, every way of transferring stable assets (wire transfer, Venmo, WU,...) requires a copious amount of KYC and hence a complete loss of privacy (as well as serious security risks given how some of these private companies can misuse personal data). I don't mind people criticizing Binance, CEXs, and even the crypto industry in general, but I find it quite sad to see people, especially here on HN, essentially advocating for the end of any sort of financial privacy.
- deleted 4y ago
  [deleted]
- nibbleshifter 4y ago
  > essentially advocating for the end of any sort of financial privacy. See the recent thread about cash transaction limits in the EU, an awful lot of HN users celebrating further restrictions that limit/erode financial privacy.
autokad 4y ago
I'm really shocked more aren't talking about how binance 'failed' an audit for proof of reserves.
nathias 4y ago
yes, of course the goal is to avoid US dollar, and no not all stable coins are fractional reserve systems
rodgerd 4y ago
> I'm frankly amazed that people with the ability to understand this alphabet soup mumbo jumbo keep falling for the same scam over and over again. You can't cheat an honest man, but it's easy to scam people who think that they've found a loophole.
quentinadam 4y ago
May I suggest the below insights to your point of view, which will allow you to have a better understanding of what is happening underneath the hood ? USDC is issued by circle.com and the underlying assets are held on US bank accounts. BUSD, which is Binance's USD stablecoin, is actually issued by paxos.com (see https://paxos.com/busd/ https://paxos.com/busd/) and the underlying assets are held on US bank accounts . Binance definitely has accounts at both Circle and Paxos, that allow them to mint and redeem USDC and BUSD, by depositing or (respectively) withdrawing USD to Circle's or Paxos' bank account. In September, Binance announced that all USDC deposits made on Binance would be converted to BUSD at 1:1 (https://www.binance.com/en/support/announcement/binance-to-auto-convert-usdc-usdp-tusd-to-busd-binance-usd-e62f703604a94538a1f1bc803b2d579f https://www.binance.com/en/support/announcement/binance-to-a...). The move was indeed an attempt to boost the adoption of BUSD, which is the third largest stablecoin with a market cap of $19B, behind USDC which is the second largest with a market cap of $43B (see https://coinmarketcap.com/view/stablecoin/ https://coinmarketcap.com/view/stablecoin/). From a practical point of view, what Binance did was redeeming the USDC (by sending them back to Circle and withdrawing USD to it's bank account) and then subsequently minting BUSD (by wiring the USD to Paxos' bank account and receiving the corresponding amount of BUSD). Binance also allows to "seamlessly" withdraw BUSD as USDC from it's exchange to your wallet. Now you are starting to understand what happened today. Following negative rumours, people started to massively withdraw BUSD as USDC from Binance. Binance fullfilled to first part of those withdrawal requests from it's hot wallets containing USDC, but past a certain amount it had no USDC left and temporarily halted withdrawals of USDC. A caveat to that is that Binance only halted withdrawals of USDC on the Ethereum and Tron chains. Withdrawal of USDC to Polygon and Avalanche for example have been running smooth all day, probably because less people choose those options, so there were still funds available on Binance's hot wallets on these chains. Once the hot wallets were depleted of USDC on Ethereum and Tron, Binance could only continue to honor the withdrawal requests by converting the BUSD it held to USDC. That conversion requires to redeem the BUSD at Paxos, receiving USD on it's bank account, sending the USD to Circle, and receiving the corresponding amount of USDC. These steps involve regular wires between banks, hence why they could not be executed before the US banks opened. That being said, the situation is now resolved and Binance has now re-enabled withdrawals of USDC.
TimJRobinson 4y ago
> The only possible reason you want a stable coin, rather than dollars, in the first place is because you're doing something that requires you to route around US financial regulation. This reeks of US centric privilege. Very similar to "the only people that want privacy are criminals". There are plenty of countries that you can't access UD dollars that would prefer to hold them than their own currency.

yashg 4y ago

Also pumping the price of a token without putting in actual money. When you can issue unlimited number of casino chips, you can sell an imaginary asset using as many chips as you want. Better still, get all casinos to accept each others chips to buy and sell those imaginary worthless tokens to lend credibility to chips and tokens.

jaltekruse 4y ago

I think there is an important missing part of this argument that many of the current paths to move dollars around that network in the traditional system take either days to settle and/or cost quite a lot in fees. I see crypto having potential to optimize lots of things and introduce extra trust from a technical infrastructure standpoint. Right now my traditional money is sitting in several digital banks or brokerages that I have no idea how well made they are underneath, I just see a website I can interact with. Crypto doesn't solve problems about where the coins meet the real world, even a stable coin with publicly auditable holdings to back it can have secret debt leveraged against those assets. Those problems seem only possible to resolve with regulation as it has been with the traditional financial system, but standardizing protocols to move money around and reducing lead time and/or fees as crypto evolves could really help the financial system be more flexible. With everyone carrying around a smartphone it really should make us question why so much money needs to move through the major credit card networks, we don't need their special hardware anymore.

jaltekruse 4y ago
Unfortunately the current (and seemingly somewhat inevitable) architecture of cryptocurrency, relies on trustless distributed systems, which I don't see a clear path to making them give similar SLAs or UX to the traditional system with centralized authorities and defenses against "double spending", which really just isn't discussed outside of crypto because it was such an obvious thing to solve for our current system makes it so close to impossible (and that is part of the reason for the lead times discussed in my previous comment).
xapata 4y ago
The credit card companies have built trust with merchants around the world that they'll settle up eventually, and that anyone (or most people) carrying their cards will pay their bills. If a cryptocurrency system were to try to supplant that, it'd need a form of revolving credit. I want to pay my bills at the end of the month, not immediately.
markonen 4y ago
You can absolutely regulate towards the goal of affordable, instantaneous money transfers within the context of the traditional finance system. The EU has done just that with SEPA (Single Euro Payments Area). Here's the SEPA instant credit transfer service (maximum duration of ten seconds): https://www.europeanpaymentscouncil.eu/what-we-do/sepa-instant-credit-transfer https://www.europeanpaymentscouncil.eu/what-we-do/sepa-insta...
- MrRadar 4y ago
  Next year the Federal Reserve will be launching their FedNow service which should provide equivalent functionality to Europe's SEPA or Canada's Interac service.
twelve40 4y ago
how about risk management? when i pay using a credit card, i know if things go sideways i can always dispute and most likely will get my money back. If I pay with bitcoin or even with cash or checks, i'm fucked. Not sure if Visa/MC duopoly specifically is the most efficient way to handle this risk, but it is a thing. P.S. also too not sure how special credit card hardware is a problem anymore, if you want to pay with your phone, there are more and more options every year to do that, and even tie that to a credit card (for benefit of risk and/or points).

capableweb 4y ago

Not saying the rest of your comment is right or wrong but this part sticks out: > It's traded the world over by almost every country whether they want to or not. You can buy almost anything there is to buy with US dollars. That's definitely not true. Most places in the world, I'd wager, do not accept USD, as you seem to think. I can't even begin to count the times I've seen clueless American tourists in South America, Africa, Europe and Asia trying to pay with their "highly regarded" USD and being denied with laughs. And then being shocked at the results.

notch656a 4y ago
Lol almost no one in South America is laughing at USD. I've been to 3 of the 4 continents you mention and spent USD directly in all of them but Europe. Hello in many south america countries you get better prices even adjusted for true exchange rate because no one wants dog-shit <national currency> and it saves them a trip to the money-trader before their money turns into kindling.
- jen20 4y ago
  You can also spend them in several places in Europe with ease, albeit at an exchange rate that means you should not.
axoltl 4y ago
I don't think the parent comment was referring to buying an ice cream cone, but rather things traded on the open market.

wpietri 4y ago

> US dollar-like liquidity and value preservation without US dollar financial regulation. Or in other words, they'd like the benefits of regulation without the costs of regulation. Which I certainly appreciate. As a child my plan for adulthood was desserts all the time, no vegetables ever.

notch656a 4y ago
More like they trusted two (well actually three if you count US gov) centralized entities instead of one. It's like asking permission from both momma and pappa to eat desert. They should have just depended on the single entity backing USDC rather than putting themselves in a situation where they'd be also be fucked if Binance froze by leaving their tokens on exchange. When you put USD backed stablecoin on exchange you're trusting 1) Exchange won't fail 2) Backers won't fail 3) US gov won't fail Any single one fail and you're fucked. America decided dollars should float in the 70s, and most of the world followed. IMO sooner or later crypto will end up all floating because pegging relies on centralized points of failure and eventually people will tire of getting wiped out.
- nordsieck 4y ago
  > America decided dollars should float in the 70s, and most of the world followed. Except that a bunch of countries in Europe went back to pegged currency with the Euro[1]. Part of the reason the 2008 crisis hit countries like Italy, Greece, and Ireland so hard. --- 1. Yes - the Euro is not technically pegged; but effectively, it's the same thing. Each individual country in the Eurozone can't engage in independent monetary policy.
  - notch656a 4y ago
    Euro floats.
    - klodolph 4y ago
      Comment is saying that having Euro as your currency is, in some ways the same as pegging your currency to the Euro. As in “1 Ireland Euro” equals “1 German Euro”.

datadata 4y ago

You could say the same thing about Eurodollars-- "US Dollar" denominated assets that are held in banks outside the United States and not subject to US Bank regulations. The size of this market is more than 10x all of crypto.

BobbyJo 4y ago
You could an you'd be right. Although, then you are trading one regulatory body for another, which you can do pretty freely with currency trading. Crypto is where you go if you don't want any regulatory bodies at all.
- jqpabc123 4y ago
  Crypto is where you go if you don't want any regulatory bodies at all. Crypto is where you go if you are naive enough to believe that technology can be an effective substitute for financial rules and regulations.

dboreham 4y ago

Wait...they're refusing to allow on-chain transfer of USDC from their custodial account to a customer's wallet? I assumed this was about exchange of USDC to fiat, hence the hand waving about banks.

fallingknife 4y ago
Not your key, not your crypto.
- dboreham 4y ago
  Definitely, but why would they not be able to submit a txn to the chain to move a token balance "because bank closed" ??
  - vrc 4y ago
    Likely a lie for less savvy investors. Or they need cash to recapitalize before being able to transfer to wallets. Or people are withdrawing to fiat which would need a bank in many cases. My money is on it being a combination, but that they definitely don’t have reserves to cover a mass run on USDC.
  - fallingknife 4y ago
    Because the tokens aren't there. The web UI says they are but what's on the chain? You don't know because you don't have the keys. Hence my previous comment.
- vkou 4y ago
  This seems like a major bug with crypto. I don't have physical possession of my bed when I get up from it and go to work, but I've yet to come home and discover a grifter, or conman sleeping in it. Likewise, if I lose my car keys, society still manages to acknowledge that I am still the owner of my car.
  - nibbleshifter 4y ago
    There's a variety of "social recovery mechanisms" being worked on in ETH land, at least.

2OEH8eoCRo0 4y ago

> I'm frankly amazed that people with the ability to understand this alphabet soup mumbo jumbo keep falling for the same scam over and over again. They say a lot of words but they don't understand them. Also greed and pride.

flamemyst 4y ago

You misses where Binance doing automatic conversion for any deposited USDC to BUSD. So every USDC deposit will counted as BUSD. Withdrawal using BUSD and USDT is still available. Even USDC on some chain are still open. As I understand they just need time to replenish their USDC. BUSD is released by Paxos.

bellip 4y ago

Yes, it's digital already. However banks manage the whole system and they can do whatever they want with your money if you are nobody. I have been waiting for 2 and a half months for an international payment via SWIFT, I worked long hours for that money and I needed it urgently. The money left the sender's account 2 and a half months ago. Neither of us has the money in our accounts while the bank tells us to just wait a little bit longer, or they do not know where the amount is, some nonsense about beneficiary bank holding/releasing my money. Whereas a friend just sent me a hefty figure (mid 5 figures) of crypto by withdrawing it out of Binance Global to my personal wallet, it was confirmed in 15 minutes and I got the money in my account in 10 minutes. I sent the crypto to my local (Binance has different companies/legal bodies in different countries) Binance account, converted it to a currency of my liking and withdrew it to my personal bank account. All under 20-30 minutes and I have the money now. Not endorsing Binance or any other central exchange (my personal position is: not your keys, not your coins, I would never hold a big amount in any central exchange), but I do not understand HN's (majority of HN's) position against crypto in general. Maybe you are privileged enough to never have this kind of issues, but some of us do. Some of us live in countries with hostile governments, (which government isnt hostile towards the public anyways? /s).

hef19898 4y ago
It seems FTX was perfectly able to do whatwver they wanted, through Alameda, with customer deposits as well. Banks on the other are much better regulated, and for very valid reasons as current events show.
- landemva 4y ago
  Which bank provided the gateway for Alameda to send/receive from the legacy banking system? There may be some regulator questions for that bank's compliance team. https://www.ledgerinsights.com/senators-quiz-silvergate-bank-over-ftx-alameda-transfers https://www.ledgerinsights.com/senators-quiz-silvergate-bank...
gamblor956 4y ago
SWIFT does not take 2 months; it takes minutes or hours. Your bank already has your money or it never received it. More likely, they are holding your money due to some issues with your local KYC laws. (This is especially likely in South America, where foreign senders must verify the source and purpose of payments made to local residents.)

jasonlingx 4y ago

So here’s where there might be some confusion, Binance consolidates a pool of different stable coins into 1 “BUSD” balance for its users[0]. Depositing any of these stablecoins into Binance will add to your BUSD balance, and you can withdraw from it as any stablecoin of your choice. What CZ is saying is that they ran out of USDC but have plenty of the other stablecoins instead. It sounds like they need to redeem the other stablecoins to fiat USD and send it to Circle to mint USDC with it, hence the talk about the bank. [0]https://www.binance.com/en/support/announcement/binance-to-auto-convert-usdc-usdp-tusd-to-busd-binance-usd-e62f703604a94538a1f1bc803b2d579f https://www.binance.com/en/support/announcement/binance-to-a...

kikokikokiko 4y ago
So, they need to find gullible 3rd parties that accept to give them hard cash (USD) in exchange for their in house created clown money (BUSD), and then use this hard cash to go to the market and buy USDC. How is this different from FTX padding their balance sheet with billions of their own made up clown money? Crypto is ponzies all the way down.
- MacsHeadroom 4y ago
  BUSD is not clown money or created by Binance. It is the most highly regulated financial instrument in crypto, issued by Paxos New York, tightly regulated by NYDFS, backed 1:1 and regularly audited. https://paxos.com/busd/ https://paxos.com/busd/
  - kikokikokiko 4y ago
    So, it's just like the deposits on FTX, or the reserves of Tether right?
    - danuker 4y ago
      Yes, on a centralized entity you're required to trust ("we're totally backed by cash and bonds, for realsies"), as opposed to owning and holding your crypto outright. From their web page: > Transparent > A top auditing firm will attest to the matching supply of BUSD tokens and underlying U.S. dollars on a monthly basis. Note the future tense, as in, "sometime indefinitely away in the future". Their attestations (as opposed to audits) just say that at a certain instant in time they had the required amount in a bank account. That means Paxos could have borrowed it for a short while. Quote [1]: "Any activity prior to or after the Report Dates and Times at 5:00 pm ET was not considered when testing the assertions described above." This is the same trick pointed out by Coffeezilla about a year ago, about Tether. [2] And the one from November is missing. [1] - https://paxos.com/wp-content/uploads/2022/10/Executed-BUSD-Examination-Report-October-2022-2.pdf https://paxos.com/wp-content/uploads/2022/10/Executed-BUSD-E... [2] - https://www.youtube.com/watch?v=-whuXHSL1Pg https://www.youtube.com/watch?v=-whuXHSL1Pg

soerxpso 4y ago

> So effectively, Binance is refusing to honor its commitment to depositors to give them their money on demand. That's called a "default." What? So if I go into the bank at 4 AM and ask to withdraw $100,000, and they respond, "Sure, we'll need a few hours to get those funds together," the bank has defaulted?

dheera 4y ago
Presumably they just need to wait until 9am when people at work, so I wouldn't consider that a default. If they say they need a few hours at 9am, they've defaulted. It would be a big "ha" if they couldn't get them together by 9:05am because they've done shady things with your money.
- driverdan 4y ago
  That's not how banks work. You can't go into a bank and withdraw $100k in cash. Most banks don't hold that much cash.
  - mikeyouse 4y ago
    Yes they do... and if it was an exceptionally small bank that didn't have it at the moment, with a day or two notice, they'd happily give you $100k in cash after receiving it from the Fed or from their vault cash providers. A busy ATM will contain more than $100k and on premises ATMs are often refilled from the bank's vault.
- jki275 4y ago
  Do you believe that banks hold every dollar they receive in deposits in cash in their vaults? Because that's not how banks work at all. They make loans, and if enough people demand their cash back they will have to move things around to honor those withdrawals. That's how every bank in known history has operated.
- Exuma 4y ago
  That's not how banks work

vkou 4y ago

These aren't fractional reserve systems, a fractional reserve system requires liquid and illiquid assets to exceed liabilities. This is just a fraud. :) You can tell, because they seem to be incapable of passing anything resembling an audit.

jerf 4y ago

'So effectively, Binance is refusing to honor its commitment to depositors to give them their money on demand. That's called a "default."' Not in $CURRENT_YEAR it's not. In $CURRENT_YEAR it's not a default until the holder in question publicly and willingly admits it's a default. Otherwise, it's just a technical maintenance period, or a temporary suspension of withdrawal rights, or a customer-value preserving intervention, or a response to current market conditions, or just another step on our amazing journey to world-class reliability and customer satisfaction, or whatever, and only crazy conspiracy theorists who are probably going to be happy staying poor would say that a default is as simple as "you ask for something that is yours and you don't get it", regardless of the reasons why you don't get it. That is sooo $CURRENT_YEAR-1 of you to think something so simplistic and unsophisticated. Clearly there are just a ton of reasons why you might ask for something that is yours, and not get it, that aren't anything as ugly as a default. Please. So plebian. And I can hardly believe that some knuckle-dragging cretins think a default should be treated by everyone as a default rather than just sort of glossed over with a vaguely stern look on your face before proceeding on as if nothing has happened. (For a bit of context, it's not just the cryptocurrency space that has forgotten the fundamentals lately & I have to admit I'm getting a bit crabby about it. There is a time and a place for nuance, and there is a time and place for stubborn insistence on basic facts of reality and waving away any attempt at "nuance" as obfuscatory lies. The definition of default is one of them. Either you return my stuff on demand or you don't. Explaining why you failed your obligations does not mean that you met your obligations.)

three_seagrass 4y ago

>I'm frankly amazed that people with the ability to understand this alphabet soup mumbo jumbo keep falling for the same scam over and over again. Underneath all of the slick marketing and nerd posturing is a simple truth: these are all fractional reserve systems. Conceptually, they are no different than banks or pyramid schemes. There are rational people who knowingly invest in ponzi and other schemes because they think they can get out before the music stops playing. Some ultimately do, and some ultimately get caught.

TacticalCoder 4y ago

> You "need" a stable coin because you're trying to have your cake and eat it too: US dollar-like liquidity and value preservation without US dollar financial regulation. That is not at all why people need/want USDC. People want stable coins because banks are all too happy refusing/blocking/reversing transactions to/from cryptocurrencies exchanges. They hypocrisy of both banks and the states on this one is amazing: "it's all a ponzi" / "it's all criminal money" / "only fraustres use cryptocurrencies" But then... "Please pay your due taxes made on crypto". FWIW France, at least, took a less dumb approach than many on the subject: conversions to/from crypto and stablecoins aren't a taxable event. It's only if you manage to cash out (and that's a gigantic "if") to actual EUR that taxes to the state are due. It solves at least the problem where people legally need to pay taxes but concretely cannot get money out of the crypto exchanges. Sending from, say, Coinbase to a bank for tiny amount is relatively easy. But I'm atm helping someone "cash out" a 7 digits sum in France and it's hard. Extremely hard. It's near impossible actually to get one bank to approve the withdrawal from Coinbase. Saying: "I entered Bitcoin in 2016 and ETH when it was at 50 cents" ain't sufficient. They don't seem to understand that the KYC/AML is done to catch drug and arms dealers, organs traffickers, and pedophiles selling CSAM. That's why there's KYC/AML right? To catch these guys. But a 35 years old mom who made bank on crypto? That's no pedophile. No arm dealer. No drug dealer. And yet it's not clear if she'll ever be able to cash out. That's why people are using USDC. Credit cards withdrawing from your USDC? Bring it on. Coinbase giving x% annual return on your return, please, keep it coming (btw even in France taxes are due on these annual yield). There's a shop here selling high-end second hand watches (you know, the kind of watches worth more used than new) that accepts crypto: maybe a way to get something out of your crypto. Now I don't know if the short term US treasuries, whose numbers are all published, backing the USDC all actually exist and are really held at BNY Melon. Maybe it's all a scam. Maybe Coinbase shall rug pull too. Maybe BNY Melon shall rug pull. For all I know, heck, maybe Uncle Sam himself is going to rug pull on the treasuries backing the USDC (I shouldn't give these people ideas but they maybe already fancied the idea anyway: "crypto are only scams, we're defaulting on the US treasuries backing stable coins"... and many idiots would applaude). But USDC still looks, to me, more legit than USDT / Binance USD / etc. That's why most people are using USDC: it's the least smelly of them all and the banks do no let people easily sell their crypto for real USD / EUR. Meanwhile, as I mentioned, the state wants its taxes on crypto gains. It's the state and the state lovers who want to have their cake and eat it too: they want to prevent people from cashing out their crypto "because pedophiles and criminals" but still want their taxes made on crypto "gains". That's why people are using stable coins. If people were actually free to use their money, free to do wire transfer to/from Coinbase at will, there wouldn't be that much need for stable coins. But people aren't free to use their money as they want.

trotro 4y ago

> You "need" a stable coin because you're trying to have your cake and eat it too: US dollar-like liquidity and value preservation without US dollar financial regulation. What about transferring value anonymously? Apart from cash and stable coins, every way of transferring stable assets (wire transfer, Venmo, WU,...) requires a copious amount of KYC and hence a complete loss of privacy (as well as serious security risks given how some of these private companies can misuse personal data). I don't mind people criticizing Binance, CEXs, and even the crypto industry in general, but I find it quite sad to see people, especially here on HN, essentially advocating for the end of any sort of financial privacy.

deleted 4y ago
[deleted]
nibbleshifter 4y ago
> essentially advocating for the end of any sort of financial privacy. See the recent thread about cash transaction limits in the EU, an awful lot of HN users celebrating further restrictions that limit/erode financial privacy.

autokad 4y ago

I'm really shocked more aren't talking about how binance 'failed' an audit for proof of reserves.

nathias 4y ago

yes, of course the goal is to avoid US dollar, and no not all stable coins are fractional reserve systems

rodgerd 4y ago

> I'm frankly amazed that people with the ability to understand this alphabet soup mumbo jumbo keep falling for the same scam over and over again. You can't cheat an honest man, but it's easy to scam people who think that they've found a loophole.

quentinadam 4y ago

May I suggest the below insights to your point of view, which will allow you to have a better understanding of what is happening underneath the hood ? USDC is issued by circle.com and the underlying assets are held on US bank accounts. BUSD, which is Binance's USD stablecoin, is actually issued by paxos.com (see https://paxos.com/busd/ https://paxos.com/busd/) and the underlying assets are held on US bank accounts . Binance definitely has accounts at both Circle and Paxos, that allow them to mint and redeem USDC and BUSD, by depositing or (respectively) withdrawing USD to Circle's or Paxos' bank account. In September, Binance announced that all USDC deposits made on Binance would be converted to BUSD at 1:1 (https://www.binance.com/en/support/announcement/binance-to-auto-convert-usdc-usdp-tusd-to-busd-binance-usd-e62f703604a94538a1f1bc803b2d579f https://www.binance.com/en/support/announcement/binance-to-a...). The move was indeed an attempt to boost the adoption of BUSD, which is the third largest stablecoin with a market cap of $19B, behind USDC which is the second largest with a market cap of $43B (see https://coinmarketcap.com/view/stablecoin/ https://coinmarketcap.com/view/stablecoin/). From a practical point of view, what Binance did was redeeming the USDC (by sending them back to Circle and withdrawing USD to it's bank account) and then subsequently minting BUSD (by wiring the USD to Paxos' bank account and receiving the corresponding amount of BUSD). Binance also allows to "seamlessly" withdraw BUSD as USDC from it's exchange to your wallet. Now you are starting to understand what happened today. Following negative rumours, people started to massively withdraw BUSD as USDC from Binance. Binance fullfilled to first part of those withdrawal requests from it's hot wallets containing USDC, but past a certain amount it had no USDC left and temporarily halted withdrawals of USDC. A caveat to that is that Binance only halted withdrawals of USDC on the Ethereum and Tron chains. Withdrawal of USDC to Polygon and Avalanche for example have been running smooth all day, probably because less people choose those options, so there were still funds available on Binance's hot wallets on these chains. Once the hot wallets were depleted of USDC on Ethereum and Tron, Binance could only continue to honor the withdrawal requests by converting the BUSD it held to USDC. That conversion requires to redeem the BUSD at Paxos, receiving USD on it's bank account, sending the USD to Circle, and receiving the corresponding amount of USDC. These steps involve regular wires between banks, hence why they could not be executed before the US banks opened. That being said, the situation is now resolved and Binance has now re-enabled withdrawals of USDC.

TimJRobinson 4y ago

> The only possible reason you want a stable coin, rather than dollars, in the first place is because you're doing something that requires you to route around US financial regulation. This reeks of US centric privilege. Very similar to "the only people that want privacy are criminals". There are plenty of countries that you can't access UD dollars that would prefer to hold them than their own currency.