Follow the money: Who's banking on IOU stablecoins? - #CryptoTrading

Published in Reports · Labeled as ·

Why is suddenly everyone in such a rush to create a regulated IOU stablecoin?

While some of the marketing speak surrounding stablecoins revolves around creating a fully independent crypto ecosystem without the greedy banks, banks are the ones capitalizing here.

Adopted from the Weekly Market Commentary from TradeBlock, October 15, 2018:

Circle recently launched its own IOU stablecoin, USDC, backed by USD reserves. Circle has built out a separate entity, CENTRE, to act as a governance structure and networking entity that financial institutions opt into in order to mint new USDC stable coins. CENTRE is not the issuer of the stablecoin, the member institutions are.

According to CENTRE white paper, these member institutions are then responsible for issuing the coins and are audited by CENTRE to make sure the reserve is there.

This process works in a similar way for all IOU stablecoins: Verified customer sends a cash deposit to a member of CENTRE, the member then mints the stablecoin equivalent and sends the amount to the customer.

The issuing member now holds the cash deposit, the customer holds the stablecoin.

The issuing member is a money business or a bank: In the case of CENTRE, the only issuer (for now) is Circle. In other IOU stablecoin solutions, as well as with USDC in the future, the deposit may go to a regular bank. Circle itself is actively looking to become a federally licensed bank in the US.

But unlike with a regular customer deposit, in this case the bank is not paying interest to the depositor.

TradeBlock suggests that for USDC these banking institutions would hold the cash deposit with the Federal Reserve Bank: “As the FED raises interest rates (another rate hike is expected in 2018 and three rate hikes for 2019) these banking institutions could stand to benefit as greater interest is paid on these cash holdings.”

In other words, according to TradeBlock banks lucky enough to partner with an IOU stablecoin might stand to earn more money on customer deposits than they would if you simply held your fiat with them, because then they’d have to pay you interest.

Tether is in a vulnerable position

This fact suggests that banks would now want to compete for depositors. Decreasing trust in a vulnerable competing stablecoin solution is probably very good news everyone else in the same line of business.

The CENTRE whitepaper mentions the problems we have seen Tether have, albeit without naming any names. It simply states that they created a separate governance structure with independent stablecoin issuers to increase transparency and minimize adverse effects should issues arise (although it seems dubious to have a single, supposedly fungible token issued and backed by different independent institutions).

Tether seems to be too inter-related with Bitfinex to salvage any transparency for now: The executive members of both organizations are the same people, both companies are BVI entities, most information is tied up in non-disclosure agreements and on top of it, due to banking problems it appears that Bitfinex is now the actual issuer/de-issuer of Tether. Which is fine, if the USD reserve is there, but that is an information that is not to be publicly disclosed.

It cannot be said convincingly whether Tether is solvent or not but given the current situation it would be strange if nobody attempted to profit from this vulnerable position that Tether and Bitfinex are in.

Category: Reports · Label: · Author: Karlvonbahnhof (contact author)

 

Last added to Crypto Airdrops, Bounties & Opportunities
Airdropped Token or Opportunity Airdrop Date About the airdrop Link
Phemex $60 Deposit Bonus Reward (+$20 Trading Reward) Open The crypto derivative platform Phemex gives away $60 USD bonus for deposit over specific amounts. The minimum deposit is 0.2 BTC or 2k USDt or 10 ETH or 10k XRP or 500 LINK. Additional bonuses are available for making a trade at spot and contract markets. All bonuses here
Bitfinex KSM Staking Launched 25 Feb Bitfinex opened staking of Kusama tokens with expected staking rewards of ~8% p.a. To start staking KSM, deposit your tokens into your exchange wallet on Bitfinex, or buy the tokens on the exchange. First payout will arrive on 3rd March. sign up with fee discount
DOT and GRT trading fee discount (reliable exchange, easy KYC) Until 9 March Polkadot and The Graph trading has been enabled on the Aussie exchange Independent Reserve in fiat pairs with AUD, NZD, SGP and USD. (International deposits available, KYC individual). The trading fee is 0.1% flat for accounts without premium or volume discount for the first two weeks of trading. info
Pulse Network Reward Competition Until Mid March Pulse network is opening a competition where the most active social media shills get rewarded from a prize pool of 10k+ USD. Top 50 shills get at least 430 USD worth. info
Staking without KYC on WhiteBit New! WhiteBit opened 17 different staking plans with 9 different currencies to choose from. 40% APR, available to the users without KYC. (Be mindful of risks) sign up
PheMex Twitter Bounty Live Phemex is a crypto derivatives platform (new and therefore not to be trusted too much) that is trying to fill the hole after BitMex. They do not require KYC for now, word of caution. PheMex is trying to build up their Twitter account and promise to give away the total of 1x 10k worth of BTC as well as loads of smaller prizes in gift cards and such, if you help them shill their Twitter handle. Phemex account is needed, sign up with code H7QPW to get welcome bonus. sign up with bonus and view the prizes
Blockchain Space Telegram Bounty Until June 2021 Blockchain Space runs a Telegram activity bounty. The most active users will be paid 50 USDT every 15 days. info
Armor Network Early Mining Opportunity For a few weeks now Armor Network is a fast, anonymous and untraceable cryptocurrency integrated into Telegram ecosystem. No ICO, no premine. Genesis block 21 Jan, mining rewards are still high. WARNING: Right now uses a Telegram wallet, so you don't own the private key. info
Opportunity: DeFi Tokens on reputable exchange with lower fees 14 days after listing The Aussie exchange Independent reserve is listing new DeFi tokens these days. For each of the new markets has the fee reduced to 0.1% for the first 2 weeks. Currently those markets are yearn.finance, Aave and Kyber Network Crystal. sign up
Earn YoBit's YoDefi tokens Live YoBit set up their own defi project for liquidity on the exchange. The exchange pays out 777 YoDefi Tokens proportionally for all users every 10 mins. sign up