[nikanj]

It’s trivial to mint tokens that are on a fixed rate to USD - assuming you are ready to keep the full amount of USD locked up somewhere.

Disaster strikes when someone sees the mountain of money and thinks ”If we invest this money, we get to keep the gains”

[MichaelBurge]

It's not a theoretical problem, but there's a practical one: Banks themselves loan out the money, so a run on a stablecoin can cause a run on actual banks. And FDIC isn't enough to cover the full amount.

This can be mitigated by using many banks, but it's hard to find banks willing to deal with cryptocurrency. So in practice all the deposits are at 1-2 banks.

A stack of paper USD in a safe would work, but there's risk of theft/fire/etc.