Comment by krrishd
5 months ago
> But then can you have a world where all the money is only stablecoins and backed by "something"? I think that has interesting implications for monetary supply and central banking
This strikes me as among the biggest macro risks, and (IIRC) is one of the reasons banks are fighting to prohibit stablecoins from granting yield (to keep the banking system working).
A different primitive that is related to stablecoin but not the same thing, popular among banks, is the "deposit token" - basically a stablecoin, but backed by bank deposits rather than 1:1 cash reserve, and operated by banks. eg. JPM's "JPMD": https://www.jpmorgan.com/payments/newsroom/kinexys-usd-digit...
Not sure how popular / active they are yet, but I imagine they will become a bigger deal as stablecoins are further regulated / banks push harder on their own interests.
Why would a stablecoin granting yield keep the banking system from working?
The theory, at least, is that everyone would eventually be incentivized to move deposits out of the banking system and into this.
(I am not sufficiently expert here to comment on the odds of an outcome like that)
Considering that stablecoins don't pay interest to the holder, I don't know why anyone would be incentivised to move their funds into stablecoins.
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In that case, wouldnt sp500 or vanguard be bigger risks to banks existing?
I think most people think banks make money by holding your money and giving you some interest when they actually make money by bringing money into existance out of nowhere when they issue mortgages.
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