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No, they are more prone to runs because there is no central bank to bail anyone out
by hd95489 4y ago
No, they are more prone to runs because there is no central bank to bail anyone out
- jejeyyy77 4y agoUhm, hate to break it to you, but you can only have a run on the bank as a result of fractional banking - which is systemic in the fiat banking system due to regulations only requiring they hold 10% of customers' deposits. You literally cannot have a bank run on USDC or BTC because they do not do fractional banking (i.e loan out the money you deposited).
- opportune 4y agoYes you can with stable coins, the money held to back USDC was held in regular banks like SVB, some of which would have gone poof if not for the Fed has not guaranteed all SVB deposits. That’s why USDC depegged before the deposit guarantee was announced
- roflyear 4y agoYou can't give out loans really without fractional banking either. I mean you can. But not really.
- DANmode 4y agoYou could. Banks, bolstered nightly with USD loans from this Fed, could not.
- roflyear 4y agoWell, you technically can, but few individuals will be issuing mortgages to the average joe.
- alxmng 4y agoThe majority of business capitalization isn’t a loan, but invested savings in return for equity. All of venture capital, the stock market, small business using their own funds, etc. Mortgages are collateralized, and business loans can be secured with assets or equity. I suspect the majority of bank loans are mortgages (?). Interest rates do not need to be high without fractional banking, since loans can be secured.
- roflyear 4y agoWho is going to issue mortgages, if not banks?
- hd95489 4y agoBanks only do community and jumbo in the us. Most mortgages are owned by the federal government
- alxmng 4y agoBanks can issue mortgages without fractional banking… Investors pool capital and start a bank. The bank loans money for homes and makes a profit from interest.
- roflyear 4y agoI suppose, but wouldn't really need a bank for that. And you need a lot of money - more money I'd wager than investors will want to pool together. But, I guess if your goal is less people being able to get mortgages and loans, maybe it will be a good thing!
- quickthrower2 4y agoWith stable coins you can have insolvency which is worse than a bank run probably (because no government insurance). Stable coins are the worse to keep cash - higher risk than a bank account but no interest. The only logical uses for them is online gambling and money laundering. You don’t own a USDC. Instead some random offshore company owes you a dollar.
- jejeyyy77 4y agoHow can a stable coin be insolvent if they have proof of reserves showing they have assets that match total deposit value?
- quickthrower2 4y ago1. Do they post daily proof of reserves? 2. Are their bank accounts locked down to strictly the blockchain activity? Proof of reserves means everyone was safe yesterday, at best.
- hd95489 4y agoSame way you did with svb. A stable coin is basically a bank. They take in assets and generate tokens against them. If there is a mass withdrawal they would need to sell assets possibly at a loss to cover it. If they a duration mismatch then they eat the losses come withdrawal time. Go too fast and they depeg and boom