[beefield]

Out of curiosity, in the hypotethical future case where the custody accounts would start to "pay" negative interest, what would happen to USDC?

To me, there are only a limited set of options:

1. the peg fails

2. the custody accounts are switched to riskier assets - with or without knowledge of USDC holders. This, of course, has implications to the "stablecoin" status. One could even argue that USDC becomes a de facto fractional reserve bank at this point.

[meltedcapacitor]

If they redeem tokens net of negative interest, it may not be pegged at 1.000 (as the cumulative negative interest is then rolled into the price of token) but it would still behave the same as competing forms of "electronic USD deposits", so one could argue the peg is not broken.

[dan-robertson]

What would happen if the bank accounts paid interest and the trust wanted to share some of that interest with holders? I think the answer would either be some complicated stock-split-like mechanism, or just have, say, USDC-fixed as the “true” coin and USDC quoted at a floating value to the former such that e.g. 1 USDC-fixed = 1.01 USDC, and creations/redemptions of USDC-fixed happen at $1.01 to capture a compounded interest of 1%

[vukk]

You can check how EURS deals with this, for better or worse https://eurs.stasis.net/transparency/