Comment by krrishd
5 months ago
It's a good question - Stripe's Stablecoin Account documentation is good reference here (they denominate balances in USDB, one of these "custom stablecoins" from Bridge): https://docs.stripe.com/crypto/stablecoin-financial-accounts...
"It’s always backed one-to-one by the equivalent value of US dollars held in cash and short-duration money market funds at BlackRock."
So while there are other (potentially novel) sorts of counterparty risks - the backing is definitely more robust than (and pretty much entirely decoupled from) Bitcoin/the rest of the crypto sphere, and is closer to dropping funds off in a Fidelity money market.
Another good (early - 2023) read on this topic: "There are now two types of PayPal dollars, and one is better than the other " https://www.moneyness.ca/2023/09/there-are-now-two-types-of-...
Fairly sure money market funds have risks and carry interest (interest = risk).
People found that out the hard way in 2008.
This is correct and addressed with diversification. Is money is spread across multiple safe instruments your chances to get in trouble is minimal. If you do get in trouble then your exposure is small too.
Indeed, and good call out; one likely source of the "novel" counterparty risk I allude to (though really not even novel - "different" is probably the more reasonable word).