4 ms·

> invest in much lower risk investments like money market funds and high quality commercial paper, which tends to have very low returns As I wrote in the other

> invest in much lower risk investments like money market funds and high quality commercial paper, which tends to have very low returns As I wrote in the other comment: Coinbase says the tens of billions of USD backing their USDC are in short term US treasuries. ATM the return on these is 4.7% yearly? 4.7% yearly they pocket on more than $50 billions. Without giving the returns back to the USDC holders (as far as I know people keeping USDCs in their own private wallets do not get any yeld). Or is Coinbase not actually putting these tens of billions in short term US treasuries (which mean they'd be lying)? Or am I misunderstanding what's the yearly return on these short term US treasuries?

dmoy 4y ago
The return on US treasuries is usually lower than inflation. You lose real money by keeping only US treasuries. It could maybe be done with TIPS, but that would be a little tricky to accomplish. For example a couple years ago, 1 year treasuries had a ~0% rate.
- 0x53 4y ago
  Yes, but it doesn’t matter if the money you are losing to inflation is being lent to you for free. Although coinbase does pay a small percentage to usdc holders on their exchange I think it is one of the ways to convince people to switch away from tether.
- JackMcMack 4y ago
  Inflation is irrelevant if your stable coin is pegged to the currency that is inflating.
- jiggawatts 4y ago
  Just to expand on the comments made by other places: The holders of Tether lose money (effectively) due to inflation. The owners of Tether the corporation (Binance) can collect the interest, which is cash money. Billions is billions. They only have to repay the face value of the deposited cash. Yes, the real purchasing power goes down over time, but that's not their problem!
hbrn 4y ago
> 4.7% yearly they pocket on more than $50 billions. Without giving the returns back to the USDC holders (as far as I know people keeping USDCs in their own private wallets do not get any yeld). They do if your USDC is in Coinbase account. https://www.coinbase.com/blog/coinbase-customers-around-the-world-can-now-earn-up-to-1-5-apy-on-usdc https://www.coinbase.com/blog/coinbase-customers-around-the-... Of course you won't get any yields on private wallets, how would that even work?
- actionfromafar 4y ago
  It would work by the issuer buying slighly higher than they sold for.
  - hbrn 4y ago
    Do you see any problems with that? Like, the fact that it is trivial to exploit?

dmoy 4y ago

The return on US treasuries is usually lower than inflation. You lose real money by keeping only US treasuries. It could maybe be done with TIPS, but that would be a little tricky to accomplish. For example a couple years ago, 1 year treasuries had a ~0% rate.

0x53 4y ago
Yes, but it doesn’t matter if the money you are losing to inflation is being lent to you for free. Although coinbase does pay a small percentage to usdc holders on their exchange I think it is one of the ways to convince people to switch away from tether.
JackMcMack 4y ago
Inflation is irrelevant if your stable coin is pegged to the currency that is inflating.
jiggawatts 4y ago
Just to expand on the comments made by other places: The holders of Tether lose money (effectively) due to inflation. The owners of Tether the corporation (Binance) can collect the interest, which is cash money. Billions is billions. They only have to repay the face value of the deposited cash. Yes, the real purchasing power goes down over time, but that's not their problem!

hbrn 4y ago

> 4.7% yearly they pocket on more than $50 billions. Without giving the returns back to the USDC holders (as far as I know people keeping USDCs in their own private wallets do not get any yeld). They do if your USDC is in Coinbase account. https://www.coinbase.com/blog/coinbase-customers-around-the-world-can-now-earn-up-to-1-5-apy-on-usdc https://www.coinbase.com/blog/coinbase-customers-around-the-... Of course you won't get any yields on private wallets, how would that even work?

actionfromafar 4y ago
It would work by the issuer buying slighly higher than they sold for.
- hbrn 4y ago
  Do you see any problems with that? Like, the fact that it is trivial to exploit?