May be looking at this the wrong way, but I thought the point of stablecoins (as compared to normal USD) is that the banking system is slow, expensive and cumbersome to transfer USD due for regulatory reasons and perhaps legacy tech reasons.
If so, what is the point of stablecoins if the banks themselves are running it? If regulations and technology are no longer an issue, can’t they just make USD transfers fast and easy? Why bother with a wrapper around USD?
> If so, what is the point of stablecoins if the banks themselves are running it? If regulations and technology are no longer an issue, can’t they just make USD transfers fast and easy? Why bother with a wrapper around USD?
I think at a macro level, the key point is that banks were initially unmotivated/uninterested in, and critical of crypto. The long-term effort behind stablecoins to become compliant and aligned with regulatory frameworks has now positioned them as useful infrastructure. Today, banks can simply adopt or acquire the benefits of a system they had no interest in building themselves. The current US administration clearly helps.
The point is absolute control of ALL accounts of some token and every single token in said accounts from a central location. And no, currently digital money are not even close in the level of control.
I'm sure they're excited to offer bank accounts that don't pay interest.
Network.
Sending USD from random bank from random country to another random bank from another random country is a network problem. While it’s solved by SEPA in EUR to EUR countries by pan european clearing and settlement systems, out in the big world it’s not as simple. Specially considering cross-border.
You have to somehow get the payment message across banks and decide on how to settle. It fundamentally a hard problem.
Stable cryptos put the message and settlement in the same system and it’s a global one (not just EU/wtv). The problem is then, which stable crypto? The moment the Fed has a USD crypto, our ECB has an Eur crypto, than that problem is solved. In the meanwhile, joining a big stable usd crypto might still provide you better remittance routes (and settlement) than sending messages over swift.
Tldr: stablecoins solve remittance routing “edge cases”, if the stablecoin is adopted enough
If Bank of America let anyone in the world easily open a checking account, this wouldn’t be a problem right? But they don’t do that, because of regulations and KYC etc.
Similarly, if BoA supported an Ethereum stablecoin but a random bank in Argentina supports a Solana stablecoin, it’s still going to be a pain to transfer money right?
I’m struggling to see how this is a blockchain issue rather than a regulatory + agreement on international standard issue.
What I have missed with stablecoins is that how they fix the final settlement. That is say you send money from USA to say Somalia or North Korea. Who in those countries will have dollars most likely to give out for the stablecoin?
Paper dollars are a common store of value in emerging markets. Trading digital dollars for paper dollars, is becoming as common as paper foreign exchange
There are already hawala / xawala money transfer services in Somalia that will exchange cryptocurrencies for physical dollars or local currency, or load value onto a local phone app. Does that answer your question? https://en.wikipedia.org/wiki/Hawala
The final settlement inside Somalia or North Korea isn't necessary because they can buy things from other countries where those people can do the settlement. Just like if you have US dollar bills in Somalia, they have value even if there is no nearby ATM you can find to deposit them.
In practice, everyone just has binance app and pays each other stablecoins within that platform
So your suggestion is that they build a new system that makes USD transfers faster. Isn't that what they're doing?
If they want, then they can make banks the only entities who can hold their stablecoin, and the whole thing would be invisible to everyone else.
If they allow other people to hold the stablecoin directly, then they could still have the invisible system with banks holding it, plus there'd be extra capabilities on top, like letting people use the coin in smart contracts.
I mean, to get negative but real.
The point is for banks to remain powerful in a world where cryptocurrency is at thing; in other words, to subvert the point of cryptocurrency.
I'm surprised not many people have pointed at this simpler explanation. It's not about providing a faster better service to the customers and citizens. It's about using their privileged position as the dominant players in the market and government, to secure their power and control by taking over a competing paradigm (cryptocurrency) that threaten their dominance. In the process they will neuter the concept to fit the existing power structure.
Yup. As someone who generally believes in a lot of cryptocurrency ideals while acknowledging the vast amounts of mess -- right now e.g. "widespread adoption of Bitcoin, an inferior technology, by banks and other established players" is the precise playbook to destroy what crypto ideally stands for.
Don't try to be reasonable, this is not how cults and pyramid schemes work in this world.
I’ve come to realize I was very wrong when I used to think crypto was a scam and therefore would never succeed.
My error was in believing being a scam had any correlation with whether or not something would be successful or not.
> the banking system is slow, expensive and cumbersome
I think you missed "profitable" from that list.
What I have understood that banking as in the money handling process is not that profitable. Keeping track of people account and allowing them to do transfers is not that great. Payment processing is better. But real money comes from gambling and offering gambling services... Also known as investing...
> But real money comes from gambling and offering gambling services... Also known as investing...
There's a huge gulf between a night at the poker tables, and buying into a little of MSFT's dividend, and it's really disengenuous to pretend they're the same.
Yes, in one scenario when you lose the money you move on. In the other, governments bail you out and you keep gambling.
The banking system can move billions in seconds. Velocity is only an issue for criminals and people trying to avoid taxes.
The people who are the thinkers in this space like to quack like libertarians and look back fondly at the gold standard. For better or for worse, they are driving US policy now. It’s one of the reasons why our government is setting the financial and economic system on fire and destabilizing the dollar.
If you want to provide fan service to the idiots keeping you in office, and get really really rich in this process, what do you do? Pivot to crypto as there isn’t enough gold to capitalize the world, and outsource the new version of the fed to private interests.
This is a way to stay relevant from the banks point of view in what whatever this new world turns into. They add value because there’s inherent trust in day JPMC, UBS or Barclays versus some random crypto bro company.
the point of crypto was “decentralization”, banks getting involved is not what they were initially meant for at all
And the point of Bitcoin was a means of transacting, yet people are just mining them and holding as an investment asset!
Once AI takes over and these digital currencies are “smart” and tightly integrated, we’re going to be living in a Black Mirror episode.
"can’t they just make USD transfers fast and easy?"
its cause regulation???, easy and fast to moving money its good until you got hack from state sponsored actor that you can't even do anything (ehm ehm north korea ehm)
in seriousness, people can get away with billions of dollar and "vanish" is wild world if you think about it.
UK regulations forced banks to create APIs for money transfers, and UK banks now have instant free transfers: https://en.wikipedia.org/wiki/Faster_Payments
USA is just bad at governing. Tries not to tell corporations what to do, so it ends up with toothless half-assed laws that do nothing except being a tool for regulatory capture.