Point taken. But since it's short-term, as long as they delay deposits for a short time period, there is no problem.
Comparison with bank deposits: Consider March this year, when Circle-issued USDC stablecoin had a "bank run". It wasn't because of their treasury holdings, but because they put reserves in Silicon Valley Bank, which had a bank run. A transitive bank run, if you will. It only recovered because of FDIC insurance, which went above and beyond their legal $250k/person limit.
Treasuries are backed by the full faith and credit of the US government, without any per-person or monetary limits.
Isn't the whole thing conceptually the same as or very close to a money market fund then (absent the specific regulations there)? What is the advantage?
I mean conceptually this is just VUSXX (with a lower interest rate probably), but you can buy something online with it through a PayPal checkout page, or send it to a friend through the PayPal app, or send it across borders in seconds. I do think that has value from an ease-of-use standpoint.
That only helps if the treasuries get redeemed by then (and it also isn't quite what people would expect in terms of liquidity, I suppose. Kind of similar to other options then, e.g., looking at some recent situations, FDIC stepping in also doesn't seem to take forever for retail).
Sure, but doesn't that business model kind of exist then in the form of money market funds (and somewhat related in bank deposits) anyway? What's the new thing from a customer and business perspective?
US treasuries are probably the one thing you can liquidate in huge quantities at par at almost any time. I suppose you're vulnerable to stupid duration mismatch issues like SVB.
If everyone in the street knows you are under pressure, watch what happens - even getting $0.9999 back on the $ of your "deposit" would probably have people being upset. And 7 days to get your money is probably longer that what people expect.
You wouldn’t need to wait 7 days. The price of a short-term treasuries is purely based off of the current interest rates. Given that expectations for rates are generally priced in over a 7 day period, there is very little risk.
Comparison with bank deposits: Consider March this year, when Circle-issued USDC stablecoin had a "bank run". It wasn't because of their treasury holdings, but because they put reserves in Silicon Valley Bank, which had a bank run. A transitive bank run, if you will. It only recovered because of FDIC insurance, which went above and beyond their legal $250k/person limit.
Treasuries are backed by the full faith and credit of the US government, without any per-person or monetary limits.