[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.

[sunshine-o]

> 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).

Yes but the problem is there are already a lot of US dollars and the pandora box was opened since the end of WW2 at least.

Is the US dollar you hold in a bank outside of the US the same as the one in the US? no...

Are they all insured and backed by the Federal Reserve? absolutely not.

In a sense if you are abroad the USDC you get from Circle on a blockchain are much closer to a "real" dollar than most of us can get their hand on.

[nytesky]

Is it similar to WildCat banking?

[andy81]

More than similar. Another word for the same thing.

[l23k4]

I'd argue that the poor capitalization was a core part of wildcat banking, that's not really the case here.