The truth behind "stable" coins \ stacker news ~econ

pull down to refresh

825 sats \ 14 comments \ @byzantine 16h econ

Stable coins are the only way that the US Treasurey can provide an alternative to "federal reserve notes". (what we call US dollars)

Federal Reserve notes are the paper currency in circulation, including denominations from $1 to $100. They serve as legal tender,-backed by the US government's credibility rather than physical commodities like gold. The Fed regulates the money supply by printing and distributing these notes.

The Fed distributes these notes through banks and they can be used to clear $1 of debt per feral reserve note unit.

Bank Ledger money - digital or recorded funds within bank accounts, distinct from physical currency. It encompasses all types of deposits, such as checking, savings, and time deposits. It is fractionally reserved with federal reserve notes and can be used to pay off an equivalent amount of dollar debt. It is regulated by the Federal reserve and is an extension of bank deposits and bank reserves.

Bank Reserves - Reserve money is the funds that banks must hold either in their vaults or as deposits at the Federal Reserve. It serves to meet reserve requirements, clear transactions, and act as a buffer against financial shocks.

Banks issue "money" via loans which are essentially ledger money with rates derived from the feds overnight rate and influenced by counterparty risk and duration.

Stable Coins - a full reserve token backed by a US treasury bills.

The widespread use of stable coins and their issuance takes the creation of money away from the ledger based banking system and the federal reserve notes system and puts it in the hands of the US treasury. Eventually this means the market demand begins to dictate interest rates on the short end rather than the Fed. Then as interest rates fall on the short end, with a normal yield curve, interest rates on the long end will also fall.

For the first time, fiat dollar issuance originates from the Treasury rather than the Notes issued by the federal reserve.

We are witnessing the slye roundabout way of making the Fed less and less relevant and perhaps ultimately defunct.

This is the real reason Scott Bessent wants stable coins. He gets to be in control of the money supply and ultimately the interest rates.

view all related items

147 sats \ 4 replies \ @k00b 15h

Why are we so confident that stablecoins won't evolve to have fractional reserves? Does the current legislation regulate them so?

128 sats \ 1 reply \ @byzantine OP 15h

seems like rehypothecation is not permitted but even if eventually fractionally reserved the issuance originates from treasury debt rather than Fed Notes and bank lending.

Their origination will be a direct competitor to bank dollar ledger money.

For example, get a house loan in USDC, the interest rate is set by the bank and the creation of the USDC that the bank loans you is backed by US treasury debt rather than the banks balance sheet (which is backed by federal reserve bank reserves)

10 sats \ 0 replies \ @optimism 13h

That's true. So now I call it anything different than a stablecoin and i can do fractional reserve? Call it a meme coin. JPMlulzcoin to the moon.

50 sats \ 1 reply \ @Undisciplined 15h

I was assuming fractional reserve banking would occur on top of stable coins. There’s still no reserve requirement for banks, so why would they constrain their lending to the stable coins in reserve?

0 sats \ 0 replies \ @Solomonsatoshi 13h

Being a member bank of the FED enables you to create bank ledger money which is IOUs for the physical FED notes.

It does not give you the power to create bank ledger versions of stablecoins.

105 sats \ 1 reply \ @seashell 10h

Why is nobody talking about what happens when stablecoins become the default rails outside SWIFT? Then the whole US banking system will get sidelined, and Treasury backed money will move globally without needing anyone’s permission. This is way bigger than just Fed vs Treasury

5 sats \ 0 replies \ @byzantine OP 10h

you won't have to worry about any of that because as the dollar starts to destroy other currencies, the only way to fight back will be to adopted bitcoin.

as countries adopt bitcoin they will destroy the stable coins.

then we reach hyperbitcoinizarion

100 sats \ 0 replies \ @hasherstacker 14h

Stablecoins = CBDCs = Fiat

https://xcancel.com/BitcoinNewsCom/status/1935869092550021132/mediaViewer

10 sats \ 0 replies \ @ExponentialBTC 13h

We are witnessing the slye roundabout way of making the Fed less and less relevant and perhaps ultimately defunct.

This is the real reason Scott Bessent wants stable coins. He gets to be in control of the money supply and ultimately the interest rates.

That connects some dots in a way I hadn't considered before.

26 sats \ 0 replies \ @justin_shocknet 14h

The merger of the Fed and Treasury has been foretold, you can't just end the fed overnight, easily a decade long pivot behind the scenes.

Remember how hastily they needed to get stimmies and the PPP dollars into checking accounts, and therefore the banking system? I'll never forget Mnuchin looking like he was about to shit his pants when they were trying to stimmies out, the Treasury and Fed were consolidated into a single entity that day. #492749

the Fed and Treasury have basically merged to keep the music going #531830

The most important thing no one seems to be talking about is Bessent having told us they plan to re-leverage the banking system via the SLR so that treasuries are more cash-like. This is how you monetize the debt without sending velocity through the roof (and therefore inflation).

Also important to understand why Bitcoin was so importantly launched when it was, as an equity based savings system it's been and will continue to be a battery to soak up a lot of would-be inflation and keep the US atop the financial world.

Debt ceiling / budget drama isn't over by a long shot, and the fake pandemic probably wasn't the only black swan needed to sweep some of this shit under the rug. Let's see what the script has in store for WW3 emergency measures. Long pocorn. 🍿

0 sats \ 0 replies \ @3c2dd6cfe2 1h freebie

Most reliable

0 sats \ 0 replies \ @flat24 12h

This is the real reason Scott Bessent wants stable coins. He gets to be in control of the money supply and ultimately the interest rates.

more control of the one they already have about money? Wow once again the importance of money that does not depend on the State comes to light. (Bitcoin) Freedom 🗽 at its maximum expression.

freedom and true control over my capital. (Ancient 4 pecetas)

Thanks for sharing 🤝🤠

0 sats \ 1 reply \ @jakoyoh629 14h

It really seems like they're setting a trap, and a ton of people are biting. CBDCs are the next move. Heads up, everyone!

0 sats \ 0 replies \ @Solomonsatoshi 13h

Stablecoins are a privately issued equivalent of stablecoins but they are not issued by the central bank and do not provide the central bank with the powers a CBDC does. Stablecoins could be a way of competing with (or linking to) Chinas mBridge and CIPS trade payments protocols which provide near instant and very low cost trade payments outside of the antiquated USD/SWIFT analogue system.