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Tag Archives: stablecoin

Tether, a bigger badder PayPal

My recent article on Tether, a stablecoin, was just published at Coindesk. In the article I commented on Tether's recent settlement with the New York Attorney General's office. Because the settlement forces Tether to adopt a bunch of new practices, I think it's a win for stablecoin consumers. Why have I been focusing so much of my time on Tether stablecoins? Diligent readers will recall I wrote about it twice last month. (1 | 2 ).First, I've been writing about stablecoins for a long time...

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Defining the “regulated” in “regulated stablecoin”

1/n This is a thread on what is means to be a "regulated stablecoin." (This was originally meant for Twitter, but I didn't feel like wrestling with the 240-word limit and threading, plus it got a bit long, so now it's a blog post). 2/n People in the cryptocurrency space often use the term of art "regulated stablecoin." No one has a monopoly over what "regulated stablecoin" means. It is a community-defined term. It's not terribly well-defined. But it should be.  3/n It should be well defined...

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The fabrication of trust in various types of dollars

How are we consumers to know whether the dollars that financial institutions provide us aren't fraudulent dollars? On what basis can we assume that the funds we hold at PayPal, for instance, or in Cash App, are "good money"?It's an age-old problem. If you were alive in 1889 and someone offered to pay you with a $10 note from Banque d'Hochelaga (see below), a privately-owned Montreal-based bank, how could you know the issuer wasn't a fraud and that it had enough assets on hand to always...

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The unbanked, the post office, and fintech in the 1880s

"A large population of people are excluded from the financial system because they don't have bank accounts. Fintechs compete to connect them and parallel plans emanate from the government to reach the unbanked, including postal banking." What year am I describing in the above paragraph? It could be 2021. But it also describes 1870s. It's 2021 and the U.S. still has a large population of unbanked, those who have so little money that banks would rather not serve them. An astonishing 5.4% of...

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Stablecoins as a route into Venezuela?

Over the last decade, few nations have experienced as much monetary and payments chaos as Venezuela has. Fans of bitcoin, Dash, and other cryptocurrencies have all tried to help by introducing Venezuelans to their preferred coin. But even with Venezuela's bolivar currency entering hyperinflation stage, cryptocurrency adoption never happened. Circle, a U.S.-based company that issues the stablecoin USDC, is the latest to join the Venezuelan crusade. Last week it belatedly announced that it had...

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18 things about Tether stablecoins

Before I start my list, a bit of introduction.Tether is a stablecoin. It happens to be the most popular stablecoin in the world.A stablecoin is a digital IOU that is implemented on a blockchain. In Tether's case, it takes the form of a U.S. dollar-denominated IOU implemented on the Ethereum blockchain. Tether holds U.S. dollars in a traditional bank account. It issues digital blockchain-based Tethers that are convertible into those bank account dollars at a 1:1 rate. This promise is what...

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From unknown wallet to unknown wallet

Antony Lewis recently published a useful article on stablecoins. In it he describes something called "permissioned pseudonymity". In traditional payments systems, people only get to access to payments services after opening an account. This requires that they provide suitable identification. So these systems are not pseudonymous. Usage and personal identity are linked.Stablecoins operators, on the other hand, sever this link. Users can transfer stablecoins to other users without providing...

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Why the discrepancy?

Vitalik Buterin had a thought-provoking tweet a few days back about interest rates. Lending DAI to Compound offers 11.5% annual interest. US 10 year treasuries offer 1.5%. Why the discrepancy? — Vitalik Non-giver of Ether (@VitalikButerin) August 23, 2019 Today's post explores what goes into determining interest rates, not blockchain stuff. So for those who don't follow the blockchain world, let me get you up to speed by decoding some of the technical-ese in Buterin's tweet.DAI is a version...

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Revisiting stablecoins

Source: Gravity Glue (2014) Cryptocurrencies were supposed to destroy the traditional monetary system. Ten years on, where are we?Bitcoin has been wildly successful, but as a financial game--not as a medium of exchange. It's a fun (and potentially profitable) way to gamble on what Keynes once described as what "average opinion expects the average opinion to be." But no one really uses it to pay for stuff. It's nature as a gambling token makes it too awkward to serve as a true substitute for...

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Kocherlakota on cash

Narayana Kocherlakota, formerly the head of the Federal Reserve Bank of Minneapolis and now a prolific economics blogger, penned a recent article on the abolition of cash. Kocherlakota makes the point that if you don't like government meddling in the proper functioning of free markets, then you shouldn't be a big fan of central bank-issued banknotes. For markets to clear, it may be occasionally necessary for nominal interest rates to fall well below zero. Cash sets a lower limit to...

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