7 ms·

A lot of "stable" coins have always looked a bit shakey, but as long as the music keeps playing no one has to face reality. It doesn't matter if the coins aren'

A lot of "stable" coins have always looked a bit shakey, but as long as the music keeps playing no one has to face reality. It doesn't matter if the coins aren't backed as long as no one asked for the backing. Now with BUSD... there's nothing to do left but ask for the money back. They can't mint any more so at best there will be a net outflow, at worst people will panic and run for the exit. So this is really going to test whether Binance wants to come up with $16Bn to keep this all afloat.

leereeves 4y ago
Do they have a choice? The claims they've made (fully backed by cash equivalents, separated reserves safe even in bankruptcy, always available for 1:1 redemption) [1] will be considered fraud if they don't redeem all $16Bn. 1: https://www.binance.com/en/blog/ecosystem/understanding-busd-and-binancepeg-busd-5526464425033159282 https://www.binance.com/en/blog/ecosystem/understanding-busd...
- elbigbad 4y ago
  My argument if I were Binance would be that no reasonable person would have seen these statements and believed them or took them at face value so they don’t have to abide by them.
  - notahacker 4y ago
    I'm not sure "your honour, it's so obvious that we're scammers that we can tell as many lies as we like and do whatever we like with people's money" has a particularly high success rate as a legal defence...
    - michaelt 4y ago
      Presumably elbigbad is thinking of cases like Tucker Carlson [1], Elon Musk [2], Sidney Powell [3], and Elon Musk again [4], all of whom have successfully defended themselves in court by claiming no reasonable person would have believed what they said. I don't know whether such a defence would work for cryptocurrency scammers - it's certainly not the lowest risk option IMHO. [1] https://www.businessinsider.com/fox-news-karen-mcdougal-case-tucker-carlson-2020-9?r=US&IR=T https://www.businessinsider.com/fox-news-karen-mcdougal-case... [2] https://www.reuters.com/article/us-musk-lawsuit-idUSKBN1YA13U https://www.reuters.com/article/us-musk-lawsuit-idUSKBN1YA13... [3] https://www.theguardian.com/us-news/2021/mar/23/sidney-powell-trump-election-fraud-claims https://www.theguardian.com/us-news/2021/mar/23/sidney-powel... [4] https://www.theguardian.com/technology/2023/feb/03/elon-musk-tesla-investors-lawsuit-twitter https://www.theguardian.com/technology/2023/feb/03/elon-musk...
      - notahacker 4y ago
        Big difference between libel claims being ruled non-serious and "it's not crime if the people we stole from should have expected our statements to be fraudulent" though. (And it's not exactly a low risk defence for libel and defamation either. It worked for Alex Jones until it didn't)
headsoup 4y ago
Like all good Ponzi schemes, they work until they don't. The crypto exchanges have a handy benefit of being able to block withdrawals in multiple ways, including 'technical issues' or 'verification issues' etc. Problem is at some point (I.e. when they can't print tokens out of thin air any more) they still have to convince others to put new money in and it just becomes shuffling deck chairs on the Titanic...
codesuela 4y ago
Binance doesn't have to come up with anything, it is a white label solution managed by Paxos.
- qeternity 4y ago
  Sort of - there are two versions of BUSD that people use interchangeably. Paxos issues one, and Binance issues the other.
  - deleted 4y ago
    [deleted]
  - lxgr 4y ago
    Are you sure about that, and if so, do you have any sources? I'm almost certain that there's only BUSD [1], issued by Paxos. What would be the other version? [1] https://etherscan.io/token/0x4Fabb145d64652a948d72533023f6E7A623C7C53 https://etherscan.io/token/0x4Fabb145d64652a948d72533023f6E7...
    - Jommi 4y ago
      Your misconception is the exact reason SEC took this action: There are two different BUSDs, one by Paxos on the Ethereum netowrk and one is a BUSD based derivative on other chains such as BSC. https://www.binance.com/en/blog/ecosystem/understanding-busd-and-binancepeg-busd-5526464425033159282 https://www.binance.com/en/blog/ecosystem/understanding-busd...
      - lxgr 4y ago
        Very interesting, do you have any sources on this being the reason for SEC's actions? As far as I understand this, this is "just" wrapping/bridging – "just" in quotation marks because that often does carry counterparty risk if not done in a trustless way. Is the issue that Binance is acting as a secondary custodian (holding Ethereum BUSD, issuing BSC BUSD) for a Paxos-issued (holding USD, issuing Ethereum BUSD) asset, and that that activity is not regulated by the NYDFS?
roenxi 4y ago
I think it is fair to note the ["as directed by" the New York Department of Financial Services] part of the article. While it does seem likely that stablecoins are shakey, most financial instruments look a bit shakey. Stocks, bonds, rental houses, etc are actually all pretty unreliable looking to a new entrant. I've had to coax some friends and family into the share market and it involves making a lot of reassuring noises as they imagine their money disappearing into the den of hucksters. If this stablecoin fails, we should note that it failed after the regulators effectively required it to fail. And, out of a feeling of obligation, the USD looks shakey. The powers that be are printing dollars like a drunken sailor, the backer of the USD is insolvent and clearly not going to pay back their debts in real terms. There is a Russia-China-Iran axis forming that would be quite happy to see the dollar become less important in world trade. This is not a recipe for success. I personally object to stable coins more because they are pegged to something that looks unreliable rather than the (presumed high) risk of the stablecoin collapsing.
- Nursie 4y ago
  I don't think 'insolvent' means what you think it means. So long as the US can service the debt it's not really insolvent.
- notahacker 4y ago
  Ah yes, the real problem with people selling assets they lie about being backed with dollars is the dollar itself. And if it turns out they lied about keeping dollars to back the coins and actually spent them all on coke and hookers, the real blame for the failure will lie with the regulators telling them to stop
- pjc50 4y ago
  Spoken like somebody who can't do risk assesment. > Stocks, bonds, rental houses, etc are actually all pretty unreliable looking to a new entrant I mean .. yes, there are ways you can lose your money with these. "The value of your money may go down as well as up". It probably is reasonable for a new entrant to be extremely cautious, especially if people are marketing a "scheme" at them. > the backer of the USD is insolvent Objectively false. > and clearly not going to pay back their debts in real terms. This doesn't matter and doesn't stop people buying T-bills. Tip for extremely cautious retail investors: https://www.investopedia.com/terms/t/tips.asp https://www.investopedia.com/terms/t/tips.asp ; the nearest you'll get to "guaranteed never to lose money". > There is a Russia-China-Iran axis forming that would be quite happy to see the dollar become less important in world trade. And I'd like a pony. China and some also-rans aren't going to dislodge the dollar if the Euro can't, especially as two out of the three are sanctioned off world trade and the remaining one has to do most of its trade .. with the US. In dollars. And has a nonexportable currency.

leereeves 4y ago

Do they have a choice? The claims they've made (fully backed by cash equivalents, separated reserves safe even in bankruptcy, always available for 1:1 redemption) [1] will be considered fraud if they don't redeem all $16Bn. 1: https://www.binance.com/en/blog/ecosystem/understanding-busd-and-binancepeg-busd-5526464425033159282 https://www.binance.com/en/blog/ecosystem/understanding-busd...

elbigbad 4y ago
My argument if I were Binance would be that no reasonable person would have seen these statements and believed them or took them at face value so they don’t have to abide by them.
- notahacker 4y ago
  I'm not sure "your honour, it's so obvious that we're scammers that we can tell as many lies as we like and do whatever we like with people's money" has a particularly high success rate as a legal defence...
  - michaelt 4y ago
    Presumably elbigbad is thinking of cases like Tucker Carlson [1], Elon Musk [2], Sidney Powell [3], and Elon Musk again [4], all of whom have successfully defended themselves in court by claiming no reasonable person would have believed what they said. I don't know whether such a defence would work for cryptocurrency scammers - it's certainly not the lowest risk option IMHO. [1] https://www.businessinsider.com/fox-news-karen-mcdougal-case-tucker-carlson-2020-9?r=US&IR=T https://www.businessinsider.com/fox-news-karen-mcdougal-case... [2] https://www.reuters.com/article/us-musk-lawsuit-idUSKBN1YA13U https://www.reuters.com/article/us-musk-lawsuit-idUSKBN1YA13... [3] https://www.theguardian.com/us-news/2021/mar/23/sidney-powell-trump-election-fraud-claims https://www.theguardian.com/us-news/2021/mar/23/sidney-powel... [4] https://www.theguardian.com/technology/2023/feb/03/elon-musk-tesla-investors-lawsuit-twitter https://www.theguardian.com/technology/2023/feb/03/elon-musk...
    - notahacker 4y ago
      Big difference between libel claims being ruled non-serious and "it's not crime if the people we stole from should have expected our statements to be fraudulent" though. (And it's not exactly a low risk defence for libel and defamation either. It worked for Alex Jones until it didn't)

headsoup 4y ago

Like all good Ponzi schemes, they work until they don't. The crypto exchanges have a handy benefit of being able to block withdrawals in multiple ways, including 'technical issues' or 'verification issues' etc. Problem is at some point (I.e. when they can't print tokens out of thin air any more) they still have to convince others to put new money in and it just becomes shuffling deck chairs on the Titanic...

codesuela 4y ago

Binance doesn't have to come up with anything, it is a white label solution managed by Paxos.

qeternity 4y ago
Sort of - there are two versions of BUSD that people use interchangeably. Paxos issues one, and Binance issues the other.
- deleted 4y ago
  [deleted]
- lxgr 4y ago
  Are you sure about that, and if so, do you have any sources? I'm almost certain that there's only BUSD [1], issued by Paxos. What would be the other version? [1] https://etherscan.io/token/0x4Fabb145d64652a948d72533023f6E7A623C7C53 https://etherscan.io/token/0x4Fabb145d64652a948d72533023f6E7...
  - Jommi 4y ago
    Your misconception is the exact reason SEC took this action: There are two different BUSDs, one by Paxos on the Ethereum netowrk and one is a BUSD based derivative on other chains such as BSC. https://www.binance.com/en/blog/ecosystem/understanding-busd-and-binancepeg-busd-5526464425033159282 https://www.binance.com/en/blog/ecosystem/understanding-busd...
    - lxgr 4y ago
      Very interesting, do you have any sources on this being the reason for SEC's actions? As far as I understand this, this is "just" wrapping/bridging – "just" in quotation marks because that often does carry counterparty risk if not done in a trustless way. Is the issue that Binance is acting as a secondary custodian (holding Ethereum BUSD, issuing BSC BUSD) for a Paxos-issued (holding USD, issuing Ethereum BUSD) asset, and that that activity is not regulated by the NYDFS?

roenxi 4y ago

I think it is fair to note the ["as directed by" the New York Department of Financial Services] part of the article. While it does seem likely that stablecoins are shakey, most financial instruments look a bit shakey. Stocks, bonds, rental houses, etc are actually all pretty unreliable looking to a new entrant. I've had to coax some friends and family into the share market and it involves making a lot of reassuring noises as they imagine their money disappearing into the den of hucksters. If this stablecoin fails, we should note that it failed after the regulators effectively required it to fail. And, out of a feeling of obligation, the USD looks shakey. The powers that be are printing dollars like a drunken sailor, the backer of the USD is insolvent and clearly not going to pay back their debts in real terms. There is a Russia-China-Iran axis forming that would be quite happy to see the dollar become less important in world trade. This is not a recipe for success. I personally object to stable coins more because they are pegged to something that looks unreliable rather than the (presumed high) risk of the stablecoin collapsing.

Nursie 4y ago
I don't think 'insolvent' means what you think it means. So long as the US can service the debt it's not really insolvent.
notahacker 4y ago
Ah yes, the real problem with people selling assets they lie about being backed with dollars is the dollar itself. And if it turns out they lied about keeping dollars to back the coins and actually spent them all on coke and hookers, the real blame for the failure will lie with the regulators telling them to stop
pjc50 4y ago
Spoken like somebody who can't do risk assesment. > Stocks, bonds, rental houses, etc are actually all pretty unreliable looking to a new entrant I mean .. yes, there are ways you can lose your money with these. "The value of your money may go down as well as up". It probably is reasonable for a new entrant to be extremely cautious, especially if people are marketing a "scheme" at them. > the backer of the USD is insolvent Objectively false. > and clearly not going to pay back their debts in real terms. This doesn't matter and doesn't stop people buying T-bills. Tip for extremely cautious retail investors: https://www.investopedia.com/terms/t/tips.asp https://www.investopedia.com/terms/t/tips.asp ; the nearest you'll get to "guaranteed never to lose money". > There is a Russia-China-Iran axis forming that would be quite happy to see the dollar become less important in world trade. And I'd like a pony. China and some also-rans aren't going to dislodge the dollar if the Euro can't, especially as two out of the three are sanctioned off world trade and the remaining one has to do most of its trade .. with the US. In dollars. And has a nonexportable currency.