Thanks...interesting.
Upon an initial read, here are some nuggets: they distinguish between "payment stablecoins" and "endogenously collaterized stablecoins".
obviously, USDC/USDT fits into cat 1 and cat2 is like infamous 'almost dead' Luna. Cat 1 can only have cash, 90 day Treasury bills, deposits with Fed reserve and 7 day repurchasing agreements for 90 day bills backing it (at least 1:1). Another interesting point: deposits of payment stablecoins are deemed as legally belonging to a person, NOT to the institution which holds them. Even more interestingly, if a payment stablecoin issuer goes bankrupt, stablecoin owners have first dibs on remaining assets (their rights are higher than anybody else).
On a more sombre note, stablecoins are NOT covered by FDIC and it is expressly forbidden telling customers otherwise. BTW, the issuance of new "endogenously collaterized" stablecoins is prohibited for 2 years under moratorium, but current are grandfathered in. Did not see a part if current "payment stablecoins" (like USDC/USDT) are grandfathered in or not-the doc it too long. Maybe someone else can pinpoint this part.
Obviously, Wall Street wants to "play" with stablecoins, but, personally, I don't see much need for them now, especially when fast payment rails would be established soon. Perhaps, stablecoins is a way for banks to get back into the payments (after they were effectively cut off by the FedNow system).
Not sure if I'm saying the same as what you are saying or reading it the same way, but the way I see this whole pursuit of a stablecoin thing is:
1. It's a way to separate investment bank/HNW investor/corporate deposits away from Average Joe deposits. It's all about putting more safety gates/fences around parts of the banking system. Average Joe depositors are broke so they no longer hold all the power to create a "bank run" through withdrawals (because they have very little if any), that power is now in the hands of the other HNW depositors and investors. So they want to limit the potential public fallout and outcry when major money gets moved and a bank's liquidity dries up.
"If you have this stablecoin in your wallet, you already have your money, no need to worry." Ok, sure you do.
2. They want to separate out Average Joe deposits to create the necessary liquidity to prevent main street banking disruptions.
3. Main street banking liquidity will move from a "long term liquidity with hard backing assets" model to a "liquidity on demand with no real collateral behind it" model for most run-of-the-mill, regional banks.
4. This will just create or increase more of a liquidity problem everywhere else, and allow them to further increase the fractional reserve model(s). Nothing will change, in fact the fragility of the global financial system will just continue to deteriorate.
5. Average Joe could still be left holding the bag and take a hair cut if the stablecoin has a crisis and goes belly up. FDIC will no longer be there to protect the Average Joe who is holding it. Because they still ultimately want Average Joe to foot the bill if things go bad (i.e., "Privatize gains, Socialize losses", remember?)
This is why you can't trust any of this shit. It's not being set up for
our best interests, but theirs. Shit is shit, and you can smell it from a mile away.
