[tm-guimaraes]

Stablecoins are actually the future of remittances, the problem is which stablecoin is safe and has enough adoption. (When a big or central bank decides to have a stablecoin, things will change a lot)

I work in “traditional” (as in, non crypto) payment systems, and i can tell you that plenty of companies are looking into using cryto rails for complex remmitance routes.

The problem is swift network/correspondent/intermediary banking. When you want to send money abroad to badly connected banks of badly connected countries, you might have a big route chain (multiple times intermediaries), fees can be huge , and settlement can take a long time. For these “small” banks it can be extremely hard to get better banking partners for better network (as in banking not IT) connection (multiple reasons, from price to available business partner, and company bandwith to go with the project)

Stable coins are much simper by comparison, you just need a wallet, and you ate a n a global network with automated settlement. Now whats lacking is standardizing how to send a message “ your crypto X received money from our crypto wallet Y, from our customer with acct number yyy, intended to your customer with acct number xxx”

Still some guys send iso message via swift to semd those intents and then settle via crypto.

This is a non existing problem for intra-eu payments due to all eu members being part of TARGET settlement system, and there are pan-EU clearing systems, but as soon as you get to more “disconnected “ countries, or “smaller” banks cross continent, it’s a pain.

[hiq]

> The problem is swift network/correspondent/intermediary banking. When you want to send money abroad to badly connected banks of badly connected countries, you might have a big route chain (multiple times intermediaries), fees can be huge , and settlement can take a long time.

But why is this complicated? Isn't it mostly about regulations / KYC / AML, rather than anything technical?

Stablecoins are much simpler because they don't do anything with respect to regulations, they're just a dumb ledger. For those who don't want to bypass regulations and the legal system, stablecoins bring as much as yet another database / ledger, which are not the problem in the first place.

[tm-guimaraes]

No. It’s about connectivity.

Payments basics: Simplest scenario (details overly simplified) When you send money from account A on bank X to account B on bank Y, what happens is that Bank X debits account A on its system and credits bank Y’s account on bank X (let’s say it’s Xy account) Then bank X sends message to Bank Y to credit account B, so Bank Y debits X’s bank account (Yx) and credits B.

As you can see this is an issue, it means that every bank has to have an account on every other bank in order to have funds moving around, and even keep liquidity there.

That’s where Clearing And Settlement system comes in, they act as a centralised force.

So instead of bank X having an account (with enough liquidity ) on bank Y so that its customers can transfer money to Bank Y customers, both of these banks have an account on some Clearing/Settlement third party (usually it’s a system by a Central Bank) and interact with that system instead, so instead of N*N bank accounts on outer banks, you have N accounts on central system.

EU has TARGET from ECB for settlement of euros across EU.

But there is no central bank of the whole world of every currency.

So what happens when too far away banks interact?

They have to search through the graph of all the world banks how they can get money to a particular bank. Add currency conversion as an extra complexity, because every connection is on a currency.

So it’s quite the graph search with many constraints, clearing and settling such stuff is hard because of that.

Regulation and AML is just one of the difficulties in linking nodes, but other exists, for example liquidity, a small bank can’t just spread multi currency accounts on many places.

The benefit of stablecoin on a blockchain, is that it kinda gives you “whole world central bank”, more correctly, it makes everybody share the same ledger, instead of each bank having its own that needs reconciliation with everybody else.

The only thing extra needed for stable coins, is space for encrypted messages is a transfer(so that a bank can tell other bank to credit customer B) and a public mapping from Bank Bic to crypto wallet id.

[hiq]

> As you can see this is an issue, it means that every bank has to have an account on every other bank in order to have funds moving around, and even keep liquidity there.

I don't see how a stablecoin solves this. You still need all the actors involved to agree on the stablecoin, just like you'd need them to agree on any non-blockchain-based system. You added an extra step, namely going through this new currency, which presumably is backed 1:1 to an existing one, but that adds some overhead on its own. Every country using USD (or equivalent stablecoin) would remove some friction, but it's not like this will happen.

> EU has TARGET from ECB for settlement of euros across EU. > But there is no central bank of the whole world of every currency.

So how come one exists and not the other yet? And why do you expect the whole world to agree on a stablecoin-based solution if they can't or don't want to agree on a TARGET-like one?

Besides, we usually don't even know how much it'd cost to just use a stablecoin for everything, since there are so few actual legit uses. I'm not sure you'd even end up being competitive with current solutions.

Right now as a consumer (meaning for lower amounts), I can trivially convert between most currencies using wise.com. The fees are not negligible but fine for one-offs, and I can get much lower going through IBKR and I guess others. I'm still to hear of a stablecoin-based solution beating that.

Another hint that the stablecoin solution you describe is not one is that it wouldn't require a public blockchain, since it'd be between actors knowing each other. Quoting https://www.schneier.com/blog/archives/2019/02/blockchain_an...:

> Private blockchains are completely uninteresting. (By this, I mean systems that use the blockchain data structure but don’t have the above three elements.) In general, they have some external limitation on who can interact with the blockchain and its features. These are not anything new; they’re distributed append-only data structures with a list of individuals authorized to add to it. Consensus protocols have been studied in distributed systems for more than 60 years. Append-only data structures have been similarly well covered. They’re blockchains in name only, and—as far as I can tell—the only reason to operate one is to ride on the blockchain hype.

In other words, the solution you seem to describe could have been implemented way before Bitcoin was even invented; the fact that it's not indicates that it's not actually the missing piece.

[bigbadfeline]

> And why do you expect the whole world to agree on a stablecoin-based solution if they can't or don't want to agree on a TARGET-like one?

I didn't read anything about tm-guimaraes "expecting the whole world to agree on a stablecoin-based solution" and you didn't bother to quote him, if he did say it. In fact, multiple stable coins and quick arrangements between individual banks are a big part of the value provided by stable coins.

The point here is that stables do provide a lot of value and convenience for banking, two banks can agree and use a stable in no time at all, they are traded 24x7 on multiple exchanges where every bank has accounts.

I'm not sure what are you trying to argue, the convenience and speed of stables is there for all to see. They have one slight problem, namely they might not be properly regulated and introduce some risks. However, how much can you trust regulations themselves, given that unstable coins, being de facto criminal fraud, are not only legal but perpetrated at the highest level of government.

[hiq]

> I didn't read anything about tm-guimaraes "expecting the whole world to agree on a stablecoin-based solution" and you didn't bother to quote him, if he did say it. In fact, multiple stable coins and quick arrangements between individual banks are a big part of the value provided by stable coins.

Why would that go faster than agreeing on existing currencies? If you want to go from, say, EUR to USD, going through more currencies just adds overhead. And again, why do you expect quicker arrangements when stablecoins are involved (and all the other elements still are)?

> two banks can agree and use a stable in no time at all

If they can (meaning they're also legally allowed to) agree to that, then they can agree to using their main currencies as well. Let's not pretend that EUR -> EUR-based stable currency -> USD-based stable currency -> USD is somehow simpler than EUR -> USD.

> the convenience and speed of stables is there for all to see

Where can we all see that? Which product has stablecoins as part of their implementation instead of as a marketing point? I gave examples above that seem to do what you both seem to argue stablecoins are good for, namely transferring money independently of currencies. AFAICT Wise does not use stablecoins, and I'm pretty sure they would if it could make things more efficient to reduce their fees while still increasing their margins. The fact that they don't and are still in business years after stablecoins have been out (and again, legal stablecoins traded by known actors could have existed before proof of work was created anyway) indicates that it's not the competitive advantage you think it is.

OP was talking about legal money and how banks could use stablecoins to improve their connectivity for legal money flows. Regulations are a given constraint for them, so the risk and lack of compliance you mention is actually a deal-breaker here.

I also fail to understand this notion of "unstable coin" to refer to currencies "stable coins" are pegged to.

[soco]

And there it is: the first valid use case for a coin I have ever heard! (nb: I'm not much into crypto, there may be more I have missed)