Stablecoins Not Ready for Consumer Payments, US Watchdog Says (bloomberg.com) 75
The recent collapse of a popular stablecoin shows that the tokens aren't ready to be used by consumers to make payments, according to a key US watchdog. From a report: "People wonder: Is it going to be one day used for consumer payments?" Rohit Chopra, director of the Consumer Financial Protection Bureau, said in a Bloomberg TV interview Monday. "Many are thinking it's not ready yet."
[...] Chopra said there may be "movement" on crypto regulation this year. Regulators are studying a range of issues, including rules for stablecoins, following an executive order from President Joe Biden. "A lot of people thought that a stablecoin was just going to be as good as a dollar," Chopra said. "But they're learning that it's not."
[...] Chopra said there may be "movement" on crypto regulation this year. Regulators are studying a range of issues, including rules for stablecoins, following an executive order from President Joe Biden. "A lot of people thought that a stablecoin was just going to be as good as a dollar," Chopra said. "But they're learning that it's not."
Great insight (Score:5, Insightful)
But I think that this conclusion had already been reached by the world's population of several billion consumers not using cryptocurrency for payments.
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But I think that this conclusion had already been reached by the world's population of several billion consumers not using cryptocurrency for payments.
Not to mention those that headed for the exits as the value goes down. I mean, come on, there either has to be an inherent value (with companies it's "book value", with real estate it's land value) or it has to have a guarantee of last resort. With actual money it's whatever government accepts tax payment in that currency at a fixed value. (and the economy of the US is what holds up the value of being able to pay US taxes in US dollars, even though though it's not backed by gold. 1's and 0's in a certain or
Re: Great insight (Score:2)
USDC has been operating for years without a hiccup. Stop spouting ignorance.
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Re: Great insight (Score:2)
They came to the same faulty realization you did.
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The Gartner of the crypto world. I'm waiting for their ruling on the Pope's Catholicism.
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Most people do not use cryptocoins for payments because they already have alternative methods of payment that are cheaper, faster and easier to use.
And, if based on Etherium code, it has only 7 TPS globally. Not even close to what is needed for a digital transaction.
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I think that conclusion was even better reached when thousands of people tried to use cryptocurrency to purchase NFT's all at once, and the payment networks crashed on them. These things seem to scale about as well as web servers did... back in the 1990s.
Re: Great insight (Score:2)
That's because those popular NFTs chose to use a small, illiquid payment network instead of relying on a major network, like Bitcoin using Lightning.
This is mostly because there's lots of open source code to make it really easy to launch on the Ethereum network. Launching this on the Bitcoin network would require actual code to be written and protocols to be designed.
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A dollar (2022) is not as good as a dollar (1873) so why should stablecoin be any different?
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Depends on what you are measuring. What kind of computer could your 1873 dollar buy? What about antibiotics? OTOH, it could buy better seeds if you want to be able to raise your own crops without buying more seeds.
Value has LOTS of dimensions.
recent? (Score:1)
The "recent" ones in news aren't the only "stablecoins" with big problems. Tether eventually admitting only 2.9 percent of its assets were backed with dollars, fined by the OAG and CFTC for fraud and covering up losses ,transaction backlog from five years ago still be processed... what a farce.
Shun stablecoins like the plague. They aren't stable and they aren't coins.
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"A lot of people thought that a stablecoin was just going to be as good as a dollar," Chopra said.
*NOBODY* actually believes that. Not even the scammers hoping to make money from their cryptobullshit.
Pump and Dump. Nothing more.
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"A lot of people thought that a stablecoin was just going to be as good as a dollar," Chopra said.
*NOBODY* actually believes that. Not even the scammers hoping to make money from their cryptobullshit.
Pump and Dump. Nothing more.
Well, you have a lot of faith in humans generally being in possession of actually effective intelligence. I think a lot of people actually did believe that. As an example, look at all the crypto-bros here that really and genuinely think they are smarter than everybody else, but then proceed to give the most hilarious bogus arguments why that is the case. These people are so deep in delusion they cannot see reality anymore.
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class action lawsuit against Tether shows that wasn't the case, their deception and fraud presented as viable business and proper pegging with assets to cover did mislead people.
THIS JUST IN! (Score:1)
No shit
not ready (Score:4, Insightful)
If you want to be ready for consumer payments you need a few things:
1. You cannot start with a ponzi scheme.
2. You need processes to handle human error like sending to an invalid address.
3. You need very fast and very cheap transactions.
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If you want to be ready for consumer payments you need a few things:
1. You cannot start with a ponzi scheme.
2. You need processes to handle human error like sending to an invalid address.
3. You need very fast and very cheap transactions.
And that's the problem with cryptobullshit. We already have all the things we need and those things have been in place for a few decades. Worldwide, we are now processing an average of One Billion credit/debit card transactions every day. Crypto brings nothing to the table.
Re: not ready (Score:2)
I see you've never tried to import something from a nation without American banking...
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If you want to be ready for consumer payments you need a few things:
Actually, you only need one thing, which is called CBDC [federalreserve.gov].
It isn't a ponzi scheme though, so don't expect anyone bothering with it any time soon.
Re: not ready (Score:2)
Now that truly provides nothing of value. If you're connected to American banking, you have all the same problems you get with Visa/MC and wire transfers.
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You also need a high level of stability. And you need traceability to limit money-laundering and crime-financing. And a few other things.
Re: not ready (Score:2)
Why? USD doesn't have traceability...
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And how practical is the transfer of non-electronic USD?
Re: not ready (Score:2)
It's quite practical, actually. Boxes filled with cash travel just as well as anything else.
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Your first point is wrong. The US dollar essentially started with a ponzi scheme. But it had government coercion backing it, and that's what you left out.
I think your second point is wrong also. It's a highly desirable feature, but it hasn't been a feature of physical money, and doing it with contracts requires expensive lawyers.
The third point is essential. You've GOT to have a low transactional overhead. This is one of the reasons sales taxes are bad.
Another point you left out is the need for a predi
Algorithmic stablecoins experiment (Score:3)
> Unlike other stablecoins that are backed by cash or other assets, the Terra coin primarily relied on algorithms. The experiment failed ...
Other stablecoins backed by proof-of-reserves are fine. So LUNA was something new, an "experiment" as the article says. People piled in without knowing what an algorithmic stablecoin is or how it worked or how it could be attacked, and vefore it was tested in the wild for some length of time.
If it was /possible/ that a coordinated effort by some tradfi whales /could/ bring LUNA down, then it is excellent that they /did/ bring it down and so early in its life. Fail-fast is better than having it go for years and get much bigger before failing.
Re: Algorithmic stablecoins experiment (Score:2)
Which is why he said: "stablecoins backed by proof-of-reserves are fine"
Tether is not backed by proof-of-reserves.
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Gradually the government is moving in the regulate cryptocurrencies to prevent these sort of losses from bleeding into the economy proper and as they do cryptocurrency will just fade away as the government protects the scammies from the scammers.
And con
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So stable coin has a pretty clear definition based on the president set by tether. Trying to use financial tricks to maintain the value of a coin while also using the word stable isn't just disingenuous if we had proper regulation it would be a crime.
Indeed. That is the very point of regulation: To keep extreme risk investments out of the hands of non-experts and limit it in scope and scale to institutions that you can reasonably expect to do such things. Financial tricks work to get not so smart people who vastly overestimate their own level of understanding (there are a lot of those) to buy in, but eventually the pyramid must crash and everybody but the instigators of the scam loses their money. Regulation just recognizes that there are a lot of peopl
Scam only payment systems (Score:2)
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Paying blackmail money.
Re: Scam only payment systems (Score:2)
Buying goods from countries not connected to the US banking system.
Preserving wealth in third world economies.
Sending payments to relatives in such countries.
Transferring money during risky international moves.
Buying pizza. Plane tickets. And anything else you might need.
So they are either over complicated gift cards (Score:4, Insightful)
Bitcoin came very close to the $25,000 point where a couple of the major investors have set up doomsday scenarios where they sell off their holdings. I suspect at this point that those investors did that explicitly to force other market players to jump in and pump up Bitcoin or risk the entire market collapsing. It's mighty fine currency manipulation and probably the tip of that iceberg.
Re: So they are either over complicated gift cards (Score:2)
Even if it's overcomplicated for a gift card (and I don't think it is), these things are cheaper than gift cards (which typically have about 3% in fees), and they aren't tied to a vendor.
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Either there's a US dollar or similar fiat currency backing it up or you did some shenanigans like with that Terra coin thing where they were shuffling money around to make it look like it was backed by something of value.
It's simpler than that. Faking US dollars is a crime. There is a reason why a country enforces the idea of legal tender, and prosecutes fakes. If you can't rely on the official currency, how are you going to be paid for your work, pay the rent, buy your food, and so on. An asset that swings up and down according to the latest fashions is bloody useless for trade. Governments know this. I presume most citizens know this too. I don't want my money going poof between payday and rent day. The value of the dolla
"not ready" is the wrong word (Score:5, Insightful)
This is like saying that astrology is not ready to replace MRI machines.
It buys into the "mass adoption right around the corner" rhetoric that Bitcoin has been coasting on forever, and at this point it's irresponsible to keep talking like that.
So one of the co-founders of ethereum (Score:4, Insightful)
Seeing as how none of these are banks and haven't been following any of the regulations let alone the steps needed for FDIC insurance they can go fuck themselves, but it is amusing to see how quickly when things go south these free market libertarians turn to the government and anyone else for help.
It's all fun and games until the real world comes knocking along with its reasons why government regulation exists in the first place.
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You know something for once you're right (Score:2)
You know what else, that's the stupidest thing I've ever right in my entire life. It's literally impossible. The company question burned through all its assets trying to keep the currency from collapsing. They've already said they're going to take what's left and give it to the investors but they don't have very much left so it's not going to go very far.
So instead what the clever little bas
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Hahahaha, pure gold. "Moron berates person with an actual clue because he thinks he understands the world much better." You should look up the Dunning-Kruger effect. That is if your mental capabilities are sufficient to even understand it.
Fact of the matter is it will burn all down. The ETH folks are hard at work to give their stuff some actual use besides gambling and crime, but it looks doubtful whether they can get there in time and if they can get there, it will _not_ be hugely profitable.
No crypto is still garbage (Score:2)
It is fantastic for Ponzi schemes though.
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Ah, so that is the real story. Well, not much better. That company never had the amount of assets that it takes to prevent a collapse. It is well-known from past bank-rushes where that level lies and it is pretty high and a rather large faction must be "hard" assets, not outstanding debt. Basically all the Terra folks had is hot air.
So, yes, this is about limiting the PR impact, not about helping anybody impacted by the scam collapsing. (I will not call cryto-morons "victims", because they are doing it to t
Re: You know something for once you're right (Score:2)
They probably DID have enough to prevent a collapse. Which they could do by immediately shutting down at the first sign of collapse instead of sending good money after bad.
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Indeed. The FDIC will do nothing, except maybe be flabbergasted at the sheer level of non-understanding expressed in such a request.
To people that understand a bit how a real currency actually works and what banks have to go through to get and keep their licenses, such claims are utterly hilarious. Of course there is zero insurance for any crapcoin because nobody ever paid for that insurance and the risk was never brought down to a level that is actually insurable. Because the thing is that insurances are a
'stable' coins (Score:3)
Every 'stablecoin' will collapse when stressed, just like Terra did. Because it's all built on smoke and mirrors with a ton of lies for spackle. Given that they can't do the one thing they're supposed to do and also have all the other failings of cryptocoins, they're fit for very little except fleecing the suckers like Do Kwon has repeatedly done.
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Unfortunately, the same is true of the banking system. Banks loan out more money than they have in assets, so if there's a massive default they CAN'T cover the accounts. That's what the FDIC, etc. is about, but what that means is that it takes a more massive collapse to cause a severe problem, but that the severe problem will suddenly get a lot worse all over the country.
One can reasonably argue that a stable, secure, monetary system is impossible. All I can say is "I've never examined one.". Gold stand
Well, at least no harm was done. (Score:3)
The stuff (whatever it was) had no value to begin with, and it had no value to end with. All the real money's long gone. Not deleted or erased . . . just not here anymore.
Hawking was right. Neither information nor currency is destroyed by being thrown into a black hole - it just becomes no longer accessible to us.
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Indeed. All that "money" was not money in the first place. Money is an illusion, but it needs to be a stable, persistent and credible illusion to fulfill its purpose and it needs to be backed by some (relatively large) amount of real-world assets. No crapcoin ever came close, because gambling and manipulation was far too easy and. because there are no backing real-world assets, volatility killed all potential use as a means of payment.
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I've not seen it proven that "it needs to be backed by some (relatively large) amount of real-world assets". That seems highly plausible, but currencies with that characteristic have also collapsed, so I'm not sure.
Consider the currencies in virtual worlds. (Yeah, none currently qualify as stable, but there *might* someday be one.)
More likely a stable currency is impossible. People will gimmick it for their own advantage, and over time this will increase until the currency becomes unstable.
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If it's "not ready", after over a decade... (Score:2)
... that means it was never fit for purpose.
Sure, "stable???" coins weren't around a decade + ago, but cryptocurrency was - in its early stages.
In all that time, all we have seen happen is speculation - that's it.
It has solved zero problems, it has added problems in the form of excessive energy usage and ridiculously easy scams.
Governments globally will NEVER allow an uncontrolled, decentralised financial network to take shape, even if the "industry" can get its shit together.
Any sniff of success and they'l
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... that means it was never fit for purpose.
I would not go quite that far. Sure, the current wave is complete and utter crap and not even really suitable for gambling, money laundering and financing crime (its main uses), and proof-of-work is a completely broken idea. The core idea may still work eventually, but not before the current wave has died and it will be regulated and there will need to be more than hot air behind it and gambling will need to be made completely impractical. That obviously needs more than the wide-eyed enthusiasm and mindless
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That's not clear. Casinos can do quite well for extended periods of time. So I can imagine a cryptocurrency where there was gambling built into the system and the gambling paid for running the system. (Analogous to taxes.) You'd need to be able to (or need to) trust the groups that ran it, though, and that's the difficult part.
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Casinos have winning limits, bans on pathological gamblers and are tightly regulated. Apples and oranges...
"A lot of people" are just greedy (Score:3)
A lot of people thought that a stablecoin was just going to be as good as a dollar,
Unless you're trying to launder money, or try to hide illegal transactions, there is no reason to buy crypto which is always 1:1 with some FIAT currency. Bank transactions are just so much easier, faster, reversible (in case of theft), and cheaper to execute (especially to end users). In the case of USD you can put it in FDIC insured accounts which offer up to $250K coverage, something not present for your crypto wallet either. So why would you buy $100K worth of crypto as an investment if you really, truly thought it would always be worth $100K, no more, no less? Any savings account would beat it, even if it paid only 0.1% APR interest, and it could be FDIC insured. This is why I'm thinking those "a lot of people" didn't think is was "as good as a dollar", but rather were just greedy, hoping "stable" crypto meant "perpetually gaining in value" crypto - in other words get rich quick scheme.
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That is pretty irrelevant. The question is how many real dollars. As there are no other assets (unlike a bank or a state), it pretty much needs to be a 100% coverage to be effective.
Re: "A lot of people" are just greedy (Score:2)
It is.
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So what you're saying is that buying and selling crypto with cash is so incredibly hard, or expensive, or both, that there exists a need for a new crypto backed 1:1 by cash? No wonder crypto didn't take off as a payment method repla
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Well there's 2 ways to do it, with a custodial wallet like binance (you have to submit government id), and with a non-custodial wallet where you don't but it's really not easy or fun to on-ramp / off-ramp. Even with binance I imagine there's tax implications for "cashing out" vs swapping your tokens for stablecoins. I'm not a trader but I work in this space.
There is probably tax implications for swapping your tokens too. When I trade my Amazing Spiderman 27 for Teenage Mutant Ninja Turtles, or when I swap my New York City Condo for a cottage in the Hamptons, or if I trade three shares of AAPL for four shares of TSLA, those are tax events that require cap gains or losses to be reported. I think the real estate folk (ie Trump) have managed to get legislated loopholes it so that big players can "roll over" business real estate purchases to avoid some or all of th
Duh (Score:2)
And whoever thought "stable" crapcoins were actually stable or suitable for regular consumer payments needs to have their heads examined.
The Burn Model (Score:2)
Perhaps it would work if the backer had some sort of "edge" like a casino. [wikipedia.org] If casinos didn't have a statistical advantage, a sufficiently financed gambler could wipe them out over time. That's what happened here.