[titanomachy]

> A shadow dollar system, newly blessed by federal statute, is quietly migrating the savings of the global poor onto the balance sheets of a handful of opaque private companies.

I'm out of the loop on this one. Is he talking about some crypto thing?

[deweller]

I assume he is referring to the uptick in stablecoin adoption. USD Stable coins are US dollar-backed cryptocurrency tokens that are intended to always hold a value of $1 USD.

Stablecoins are not backed by a central bank. Instead their source of value comes from a private company that holds actual US dollars or USD-equivalent reserves (like treasury bills, etc).

[RobotToaster]

I've always wondered, how do the companies that run stablecoins make a profit? Are they buying treasury bonds?

[koolba]

Each $1 of stable coin is supposed to be backed by $1 of dollar or short term equivalent. So the issuer is making money by collecting interest on it.

3-4% of billions (USDC alone is $80 billion) would itself be billions of dollars of annual interest. Easily covering the operating cost of these companies.

However, they don’t keep it all. Nobody is going to let you hold their cash in size without getting a slice of the interest. All the big players (like an exchange holding USDC of its patrons) cut deals with the stable coin issuers for a revenue split of that interest.

[Ekaros]

Well if you pay 0 on deposits and then loan money out even just to treasuries there is money to be made. Get enough volume and it is big. Next step is riskier investments and not being fully backed... After all it is just IOU you minted yourself...

[luke5441]

The profit created from issuing currency is called seigniorage. It is madness letting private companies capture this.

[kikimora]

Yes, bonds, sometimes corporate debts, often money market participation.

[nytesky]

Is it similar to WildCat banking?

[andy81]

More than similar. Another word for the same thing.

[l23k4]

When you go outside of the nice countries, local money becomes worthless. Nobody wants it, they'd much rather have dollars instead.

Stablecoins for the first time offer a reasonable way for the global poor to store value in dollars, or in the form of any relatively stable currency.

Obviously this comes with all kinds of issues, but it's still better than the original situation where "savings" simply didn't exist except in the form of physical dollars or gold bought at a significant premium.

[pjc50]

While this has a very reasonable point about access to dollars, it's also funny to contrast it against the breathless propaganda from crypto advocates that the dollar itself is going to be the victim of hyperinflation Real Soon Now.

[ryanjshaw]

Crypto advocates are not one homogenous blob.

[dragandj]

The global poor already had ways to store value in dollars. They could simply exchange whatever meager savings they had into... real dollars! And they have been doing that for decades. I don't know whether anyone in the west really believes in this bullshit of cryptocurrencies that give the global poor options.

[ryanjshaw]

This is simply not true. In South Africa, one of the largest African economies, you cannot hold foreign currency unless you are traveling and then you have to sell it back within 30 days of returning to the country. You can open a foreign currency account with a minimum of eg R1500 which is half the monthly minimum wage. Then there are the exchange fees to talk about. You are oversimplifying.

[luke5441]

So having foreign currency in stable coins is allowed in South Africa?

[salmonik]

I am pretty sure he's talking about the TrumpCoin.