US Regulators Say Issuers of 'Stablecoins' Should Be Policed Like Banks (reuters.com) 76
A U.S. Treasury Department-led regulatory body called on Monday for Congress to regulate issuers of "stablecoins" like banks and urged financial agencies to assess whether the role of these fast-growing digital assets in the country's payments system posed a systemic risk. Reuters reports: The hotly awaited report by the President's Working Group on Financial Markets will likely boost policymakers' efforts to put guardrails around stablecoins, a type of digital asset pegged to traditional currencies which the body said could pose threats to the broader financial system. Stablecoins, which include the likes of Tether, USD Coin and Binance USD, have ballooned 500% to reach a market cap of $127 billion over the past 12 months, according to the report. "The rapid growth of stablecoins increases the urgency of this work," the report stated. "Failure to act risks growth of payment stablecoins without adequate protection for users, the financial system, and the broader economy."
While stablecoins are primarily used to facilitate trading in other cryptocurrencies, they could become widely used by households and businesses to make payments, the report said. Currently, though, stablecoins have a wide range of policies governing disclosures, what assets are held in reserve to back the coins, and around redemption rights, all of which could make them susceptible to runs if users lose confidence in the asset. "Runs could spread contagiously from one stablecoin to another, or to other types of financial institutions that are believed to have a similar risk profile. Risks to the broader financial system could rapidly increase as well, especially in the absence of prudential standards," the report warned. Chief among the report's recommendations is for Congress to "urgently" pass a law that would regulate stablecoin issuers akin to insured depository institutions, subjecting them to strict supervision by banking regulators while also providing some form of government backstop in the event of crises.
While stablecoins are primarily used to facilitate trading in other cryptocurrencies, they could become widely used by households and businesses to make payments, the report said. Currently, though, stablecoins have a wide range of policies governing disclosures, what assets are held in reserve to back the coins, and around redemption rights, all of which could make them susceptible to runs if users lose confidence in the asset. "Runs could spread contagiously from one stablecoin to another, or to other types of financial institutions that are believed to have a similar risk profile. Risks to the broader financial system could rapidly increase as well, especially in the absence of prudential standards," the report warned. Chief among the report's recommendations is for Congress to "urgently" pass a law that would regulate stablecoin issuers akin to insured depository institutions, subjecting them to strict supervision by banking regulators while also providing some form of government backstop in the event of crises.
Pray tell (Score:1, Interesting)
Is that with or without federal reserve membership and therefore a say in its policies?
You may recall that the US way of policing banks is through the federal reserve, which isn't really federal, or a reserve, but a cartel of banks. So, stablecoin issuers are just like banks, eh? What's sauce for the goose is sauce for the gander, or wouldn't you go just that far? And if not, why not?
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No Luckyo. But they must at least have the assets they claim to have to back their coins.
No borrowing money from one pocket and putting it in the other claiming you now have an asset...
That's pretty much how the dollar works. Do you think banks actually have money? It's just numbers on a computer, that they create out of nothing [wikipedia.org]. In the past there were rules like they could only lend out 10 dollars for every dollar they actually had. So give them a dollar, then they loan out 10 numbers on a computer. Now those new 10 numbers on a computer can be used as backing to loan out 1000 numbers on a computer. The restrictions on that are gone as of 2020 [medium.com], so they can loan an 1,000,000 numbers on a
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At least with cryptocurrency there's a ledger showing the creation of it (which actually takes work) and you can't just take 1 bitcoin and loan out 10 bitcoin, you would actually need 10 bitcoin to be able to lend out 10 bitcoin.
OR, you mint enough USDT for 10 BTC, then use that to buy Bitcoin. Without any backing.
Which is exactly what's going on today.
Re: Pray tell (Score:1)
Which makes USDT worthless. People arenâ(TM)t investing in stablecoin as the production of it is pegged to an inflationary currency.
Yes I am aware that businesses and banks use it to say they are participating in cryptocurrency but long-term stablecoins are doomed.
Re: Pray tell (Score:2)
Re:Pray tell (Score:4, Insightful)
Dollars are backed by the ability of the US to levy taxes. The US has income streams. As for banks, they're backed by FDIC. Aka, the government. Aka, the entity with the ability to levy taxes.
Stablecoins are not insured by FDIC. Nor would they be, because a key aspect of FDIC is openness and accountability with regulators. The physical assets have to be verifiable. Not digital assets - physical assets, because we're talking stablecoins here. The entire point of a stablecoin is that it's pegged to a physical asset, to avoid the wild swings of cryptocurrencies.
Re:Pray tell (Score:5, Informative)
Dollars are backed by the ability of the US governments ability to levy taxes, and the ability to enforce the payment of fines and debts in the form of US dollars.
It's a subtle one, but effectively any disagreement or damage occurring between two parties in any transaction can be fought out in the courts and a decision reached, the compensation to the wronged party will be required to be paid in USD.
In the crypto world, say someone defrauds someone else out of their bitcoin and it goes to civil court in an attempt to recover some of the bitcoin, the restitution will most likely not be in bitcoin but in an amount of USD determined by the value of the bitcoin at the time.
Exactly. And taxes are paid with... (Score:2)
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> Dollars are backed by the ability of the US to levy taxes.
Not anymore. It's mathematically impossible for the US to repay its debts with taxation. It prints money to pay debt instead.
It's currently backed by momentum reinforcing momentum because its value is only fiat. That's why crypto is so dangerous to these scammers.
Okay... but... (Score:2)
"It's currently backed by momentum reinforcing momentum because its value is only fiat. That's why crypto is so dangerous to these scammers. That's why crypto is so dangerous to these scammers."
If the backing of the fiat currency from taxation is considered illusory (and that's very debatable), the backing of it with the U.S. military is very much not. Also backing it is the acceptance as the trading currency of fossil fuels, and don't minimize that particular use case.
So what's backing crypto? It doesn't e
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So what's backing crypto?
Absolutely nothing. That is what the greedy scum trying to defraud others via pump & dump are desperate to hide.
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The federal reserve (Score:2)
That's what the whole point of the federal reserve system is!! It prevents inflation of assets indefinitely . If you have to put 10% of every dollar you take in as an asset on reserve then you can't inflate your funds on deposit more that ten fold . This is the difference between m0 and m1b measures of total money in circulation (. The amount of money in circulation is very very roughly 10x the number of dollars actuslly minted).
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I've put this another place in the thread, but:
https://www.frbservices.org/re... [frbservices.org]
"What was a reserve balance requirement?
Prior to the reduction of reserve requirement ratios to zero percent, a reserve balance requirement was the portion of an institution’s reserve requirement that was not satisfied by its vault cash and therefore had to be maintained either directly with a Reserve Bank or in a pass-through arrangement with a correspondent institution.
As announced (Off-site) on March 15, 2020, the Board
Re: The federal reserve (Score:2)
The fed adjusts reserve ratios as a way to increase or decrease the money supply without the treasure having to actually print money. So decreasing the reserve requirment to zero is a temporary measure ti make money easy to borrow. If inflation kicks in they will raise it up probably to a value near 10%
But right now the problem is that people are not borrowing enough money. Too much savings.
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IF inflation kicks in? Inflation hasn't stopped since we went off the gold standard. The rate of inflation changes, but that's about all.
Just remember, whenever the federal government runs a deficit, they print more money (for which you may read: "they inflate the money supply"). And the federal government has run a deficit pretty much continuously since 1932...
Note, by the by, that while many (most?) people think that a price increase is "inflation", it's not. Inflation is an in
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Banks are required to hold a reserve of actual money. It's not 100%, but it's also not zero. They're also insured in most modern economies so that if you go to the bank and demand your money, they can give it to you. That system was implemented because of very bad things that happened repeatedly.
You're right though, stable coins *are* just like a bank, so they should be regulated just like one.
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> Banks are required to hold a reserve of actual money. It's not 100%, but it's also not zero.
Lol, get this guy with his pre-2020 thinking.
https://www.frbservices.org/re... [frbservices.org]
"What was a reserve balance requirement?
Prior to the reduction of reserve requirement ratios to zero percent, a reserve balance requirement was the portion of an institution’s reserve requirement that was not satisfied by its vault cash and therefore had to be maintained either directly with a Reserve Bank or in a pass-through ar
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First, that seems to be an emergency change. Second, it doesn't matter because the accounts are still insured. The US taxpayer guarantees 100% instead of a mere 97% of the digital tokens the bank gives you (up to a particular limit, if you've got more cash in a single account than that you're dumb and probably a drug dealer).
The digital tokens Tether gives you are guaranteed by this guy. [steemitimages.com] It appears we don't even know his real name. And that's one of the more reputable "stable" coins.
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Banks are required to hold a reserve of actual money. It's not 100%, but it's also not zero.
You are flat-out WRONG. Your information is pre 2020.
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I did say "in most modern economies." Also, it's an emergency measure. Your bold face and capitals are a little over the top.
But I notice neither you or the other guy actually addressed the point. Pretty typical for crypto fans.
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I did say "in most modern economies." Also, it's an emergency measure. Your bold face and capitals are a little over the top.
But I notice neither you or the other guy actually addressed the point. Pretty typical for crypto fans.
I'm not a crypto fan. I think they're fucking retarded versions of the tulip craze. Strange how you got "crypto fan" out of my comment that banks don't have to hold the 10% reserve any more. As for most modern economies... Almost all of those are tightly woven into the US's economy (and vice-versa of course).
Anything else you'd like to assume about me based on two ~5 word sentences?
Emergency measure.. That's a good one..
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And you're basically an idiot. Banks still need to have adequate capital. They just no longer need to keep it in this specific one place. You're kind lying if your intent is to claim banks can now issue as much debt as they like now.
The retard is YOU. Nobody said a fucking thing about Capital. They use to be required to keep actual CASH on hand. That requirement is gone. Who the FUCK said anything about debt?
Wassamatta AC? Too pussy to post under your account?
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Does not need to be actual money. Real-estate, companies, etc. will all do fine. But yes, banks need to have a certain amount of real assets and that determines how much money they can get as a loan. Any loan they hand out themselves must and will come from real money. Whether that is printed or electronic money is irrelevant. The only one that is allowed to create money or can authorize others to create money is the respective state institution, in the US that is the Federal Reserve.
Seriously, stop likenin
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That's a good point. One of the issues with Tether was that they *did* have a reserve, but it was in high risk investments.
The point of a stable coin is that its value is fixed. The only way to fix the value is for someone to guarantee they will buy your tokens for that price. The Templars guaranteed they would give you back your gold in exchange for your letter of credit. Western Union guarantees they will give you back your money in exchange for your receipt. The taxpayer / bank guarantees you will get ba
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Indeed. Stablecoins without regulations are just a gamble. Regulators basically never want excessive reserves. What they require is what you should have anyways for a sound business.
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Well, there is a "Reserve" requirement but it works the opposite of what you think. You think they can loan out more than they have on deposit. That is 100% not true. They can loan out less than they have on deposit. The "reserve" requirement is something like 10%. So, for every $10.00 they have in deposits, they must keep $1.00 in the vault (so to speak) and can lend out the other $9.00. This is called "Fraction Reserve Banking". Less here: Read a book.
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Complete bullshit. Banks must have assets backing up whatever they hand out. Also, banks are _not_ allowed to "create" money. That does not mean physical money, but usually that is part of it. It can be foreign currencies, it can be other assets like buildings, paintings, companies, etc.
Also, banks are _not_ allowed to "create" money. They are carefully regulated, monitored and audited to make sure they do not. They can only loan out money they have, whether in paper form or electronic form is irrelevant. W
Re: Pray tell (Score:2)
Re: Pray tell (Score:2)
No Luckyo. But they must at least have the assets they claim to have to back their coins.
No borrowing money from one pocket and putting it in the other claiming you now have an asset..
So, anyone havethe heart to tell him/her?
Look up âoefractional reserve bankingâ, and then come back. Or better yet, just forget you saw this thread and be happy.
âoeIt is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolutio
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While there are a lot of banks, most of which are chartered and regulated by the various States and not the Fed, the application process isn't simple -- or cheap. You should research "capital adequacy".
https://www.federalreserve.gov/faqs/banking_12779.htm [federalreserve.gov]
The guidelines require a bank to demonstrate that it will have enough capital to support its risk profile, operations, and future growth even in the event of unexpected losses. Newly established banks are generally subject to additional criteria that remain in place until the bank's operations become well-established and profitable.
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You do know that the bars to becoming a bank are pretty low? There are over 4,000 independently owned banks in the US as of 2020 [wikipedia.org]. If an entity running a stablecoin wants to have the privileges of a bank, all they have to do is apply.
Hahahahaha, you have no clue what they actually need to get through to do that! Even only the audit-requirements are impossible to fulfill without some experienced banking experts. And forget trying it without a major established bank or company backing the venture.
Of course they should (Score:1)
They all probably only keep about 10% of the money they have as reserves, and lend out the other 90%. They are increasing the m2 money supply like any other bank, but are not regulated at all. Why shouldn't they be?
Re:Of course they should (Score:5, Insightful)
Tether in particular is leveraged to degrees not even banks dare to. I've read estimates of 300:1.
There were $48bn USDT minted this year alone, and no one has any idea what's backing those. Absolutely insane.
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How else will they pump BTC?
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Authorities don't say you must accept USDT.
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There were $48bn USDT minted this year alone, and no one has any idea what's backing those.
It's backed by authorities saying you must accept it.
No. That's a common fallacy. I can offer a car for sale and DEMAND that it be paid for in butterscotch. Two parties have the right to use any medium of exchange that they prefer.
Re: Of course they should (Score:3)
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Here in Ontario Canada they would still want the dollar value of the butterscotch to assess taxes. If you don't provide it they get to make it up.
Here too. The only thing you have to pay, using legal tender, is taxes.. And even that is open to a bit of wiggle-room.
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300:1?
That means even a very slight rush out of it will crash this "stable" coin.
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Re: Of course they should (Score:2)
They need to be heavily regulated else there's an incentive for them to undertake risky lending where the bank gets the upside but the taxpayer gets the downside if they go bust ("looting").
Whew, thank goodness that never happens! Let's hear It for regulation!
(regulation is only as good as the regulator)
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I'd say they are more like Paypal than a bank.
Paypal are regulated, not under the same regulations as banks, but still regulated.
In Europe that means they have to keep their customer balances in a segregated bank account, and they are only allowed to take money out of that bank account to repay those balances, or, if they earn interest on balance, they can keep that for themselves.
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Paypal has had banking license since 2007. Before they were an "Electronic Money Issuer supervised by the U.K. Financial Services Authority".
These "stable" crapcoins have exactly nothing.
Poilced? (Score:3)
Shouldn't stable-hands or grooms be enough for stable-coins?
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You'd think so. There's an awful lot of grooming done by the people who want to sell them.
Slashdot stories should be policed (Score:2)
for dupes. It's not even off the front page man.
over-leveraged (Score:1)
No policy change (Score:2)
It's good they didn't change their minds in the last 24 hours [slashdot.org].
I'm working on a Very Stable Genius Coin (Score:1)
A lot of people are calling it Trumpcoin.
Boris wants to eliminate cash (Score:2)
https://twitter.com/BorisJohns... [twitter.com]
I’ll be asking world leaders to take action on coal, cars, cash and trees – to keep alive the prospect of limiting global temperature rise to 1.5 degrees.
What does cash have to do with climate change?
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What does cash have to do with climate change?
Burning holes in people's pockets.
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What does cash have to do with climate change?
When your buddies get a % of every transaction, it has everything to do with anything you can try to tie it to.
Are US Regulators getting afraid? (Score:1)
Regulators can't monetize bitcoin (Score:1)
Btw inflation hurts the poor more than the rich because their investments rise in cost.
Thank the Democrats for continuing the wealth gap expansion that started under Obama.
So let me get this straight... (Score:2)
Banks, which only need to maintain a 10% reserve of the money they "store" for people, are less risky than stablecoins that maintain (at least close to) 100% reserve.
hmmm.
Regulators take all the fun away... (Score:2)
Now how am I supposed to start my own coin and print fake money?
Seriously though saying that you have backed up every coin and then not doing so is crazy. Especially if you ever have a crash, people will want their coins transferred back to dollars and that guarantee won't happen because the coins didn't hold the cash to back up the coins.