What is the Point of Stablecoins? (Financial Times, Robert Armstrong) \ stacker news ~econ

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What is the Point of Stablecoins? (Financial Times, Robert Armstrong)www.ft.com/content/9d28a28a-064c-44b7-bfd6-f11e2e78df0d

1296 sats \ 10 comments \ @denlillaapan 11 Jan econ

Yes, indeed... why do we have the digital blockchain dollars?

Intuitive, quip answer: to arbitrage a dollar system with, globally speaking, pretty high barriers to entry.

In this FT piece, newsletter columnist Robert Armstrong makes some observations:

Over the holidays, stablecoin issuer Tether made the news when the big crypto trading platform Coinbase announced that, for regulatory reasons, it would restrict traders in the EU from buying Tether’s coins. The market cap (number of coins in circulation multiplied by their value) of Tether’s USDT, the world’s largest stablecoin by a mile, fell a bit, and other stablecoins perked up on the news...

What is the market’s ongoing use case for stablecoins? Specifically, will stablecoins like Tether have an important role to play in cryptocurrency trading as crypto becomes more mainstream, more liquid and better integrated with fiat finance? ... We don’t use an intermediary to trade stocks, bonds, currencies, gold, grain or real estate. Why should crypto be different?

This, would seem, to be the point of Tether (profitable effing business, btw), but not its users:

the stablecoin issuers are harvesting returns on the users’ fiat (plus transaction fees!) in return for holding the cash and issuing the token. There is a lot of economic friction here.

In the long run, I don't disagree with him... yeah, bitcoin bridges like Tether or USDC don't have much purpose. But for now, in a dollar-dominated world, they do. Good luck having the EU of all irrelevant international institutions regulate them out of existence.

nonpaywalled here: https://archive.md/NNQbU (scroll down to the second portion of the newsletter)

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27 sats \ 1 reply \ @Aardvark 11 Jan

Having something easily attainable pegged to the USD is an absolute gift to people in countries battling high inflation.

It's not something people with stronger currency really think about often.

0 sats \ 0 replies \ @denlillaapan OP 11 Jan

...or, it would seem, until weeeell down an article even explicitly thinking about it. nono, bad; money laundering

87 sats \ 1 reply \ @TheBTCManual 12 Jan

I think the two main selling points for stablecoins is getting a USD based account in any part of the world, it's a pretty killer app for most countries, just getting out of your local shitcoin is a blessing in itself

Stablecoins are cheaper to remit and do business, not that they are cheap in general, just cheaper than a PayPal or whatever service you're forced to use with tradFI. if your doing cross boarder trades or you work remote stables allow you to settle faster and give up less margin so you can charge cheaper prices locally

Then they also allow provide a global liquid market that you to settle at the same speed as Bitcoin which is great when you finally figure out that fiat isn't worth holding long term. instead of having to find your currency pair to swap into BTC you just get stables and you can buy Bitcoin from anyone in the world

0 sats \ 0 replies \ @denlillaapan OP 12 Jan

All good reasons

22 sats \ 0 replies \ @sasasuina 12 Jan

Most goods around the world are priced in USD, and stablecoins, as a digital version of USD, take on this role. This is pretty helpful. Until bitcoin is widely used as a way to pay, stablecoins work well as a backup.

22 sats \ 0 replies \ @SwapMarket 11 Jan

The use case for Tether is to bypass currency controls in some countries

22 sats \ 0 replies \ @022fbc9cef 11 Jan

The demand for United States Dollar is high. The demand is met. Easy.

17 sats \ 0 replies \ @grayruby 11 Jan

I get the argument for stablecoins in emerging markets and regions where access to dollars is limited, difficult or expensive. My wife donates monthly to a church in Africa that helps provide food and necessities to the local villagers. She sends USD through a local financial services company and they charge I believe around 16% fee. That takes a big bite out of what they end up getting. I contacted the food distributor by email and asked if they would take bitcoin instead of USD. They said no they could not they needed USD or whatever the local currency is (I don't even recall but they mostly dealt in USD) to pay their suppliers.

I can see the use case for a USD stablecoin in this type of instance. They would get the money right away and for very little fee and if all the local suppliers agreed they could pay them in USD stablecoin as well.

The only question would be when they need to port out of stablecoins and into tradfi banking system USD or the local currency, how easy would that be.

0 sats \ 0 replies \ @SimpleStacker 11 Jan

Many markets and products are driven simply by:

Interoperability
Regulations

My sense is that's true of stablecoins as well. The regulatory barrier for trading in dollars is higher, so they invented "stablecoins" which falls into a new regulatory category (and at first had no regulations at all.) Secondly, it's just an interoperability layer for all the different networks and chains.

0 sats \ 0 replies \ @Ge 11 Jan