Nobody wants to transact in an inherently deflationary currency with high fees, unless they are speculators or money laundering. It's a store of value at best, which is more like gold than a currency.
The gold standard was dropped for good reasons. It couldn't expand at the GDP growth rates and storage/transport fees were significant. Gold backed fiat solved the latter, but not the former.
If the alternative is fiat currencies printing themselves out of existence, then yes, people will happily transact in hard money with high fees. See Turkey, where you basically take on debt to buy anything (including commodity items like iPhones) that you can sell later, simply because the currency is spiraling out of control and you need your networth divested out of it.
FWIW, the costs for transporting gold bullion are marginal. A fully-laden Boeing 747-400F cargo plane can carry 396,900 kg, or 12,760,000 troy ounces. At the current price of $1,936/ozt, that's over $24 billion in value transported for perhaps 0.1% overhead. These are perfectly reasonable sums to be expected in the realm of nation-state debt settlement.
I agree those costs may not seem that high, and I think the transport costs in that case would be dominated by security. Daily BIS is ~$6T, and I'm not sure how much net would need to be transported, but even $1B/day in costs starts to seem significant.
The problem is that even smaller quantities of $100M or $100k would have larger relative overheads. Once you're down to $1000 or toz size quantities where security is less of an issue, the testing and weighing costs become significant.
What are you talking about? Is this purely hypothetical or is there a nascent independent financial systems that you think has potential to become the ~3rd largest in the world?
I watch that space out of personal interest and I currently see very little indication that this could even happen. There is some interest in bypassing existing dollar supremacy, but currently only China, EU and maybe BRICs as a whole could threaten it. And that does not even touch the digital aspect of it.
BRICS is a joke. Russia has a growing pile of Indian rupees and complains to India that they don't want any more. India will never agree to use the Chinese yuan as a dollar replacement because Xi Jinping is flashing his junk on their borders. China looks down on uppity India since they have a massive trade surplus with them. South Africa with water shortages and 16 hour power outages is not going anywhere economically. None of them want Russian currency because of sanctions. That leaves Brazil - which is looking to team up with nearly bankrupt Argentina for a common currency.
Meanwhile Brazil (22B), India (122B) and China (380B) run multi-billion dollar trade surpluses with the U.S.
> currently only China, EU and maybe BRICs as a whole could threaten it
Only theoretically. The USD is the cleanest shirt in a pile of dirty laundry. Neither the euro nor any of the BRICS currencies are getting any cleaner.
Tin Foil hat time: some crypto natives have claimed the SEC is going after Coinbase etc specifically to "clear the way" for big entrants like this (or even NYSE etc).
No, they've released press releases about this many times.
When it came to their actual court filings, when it's time to put your money where your mouth is, they ... didn't really say much about a lack of guidance:
> We disagree that the majority of digital assets are securities. For those digital assets that are securities, registration under the current rules is, for many market participants, either not possible or not economically viable given
the associated and unnecessary compliance burdens
i.e. "it's too much work, and/or not profitable for us".
The SEC isn't obligated to make securities/commodities trading profitable for exchanges.
“It’s not a crime as long as you keep writing letters asking for clarity.” is such a cool perspective. Outside of selling unregistered securities, what other criminal activity enjoys the “But I asked about it!” defense?
If there is no contract for future performance, can there be a securities contract?
Is this correct?: If there is no written contract, the state and defendants may refer to Statute of Frauds. (If there is no written contract for future performance valued at greater than like $500, defendant can motion to dismiss due to Statute of Frauds?).
Do the States and the SEC have any statuory duty to provide `def is_a_security(asset) -> bool` service; wherein securities are assessed according to the Howey Test and other case law pertaining to what constitutes a securities contract? Or only after 40+ states (n exchanges per asset per state) have reviewed each asset for list?
That's fine but then they will surely go after this entity too, since it is doing the exact same thing (running an unlicensed exchange in something the SEC has deemed a security)...
The SEC doesn’t consider a firm’s business model when it goes public. The SEC does make sure that they’re making the necessary disclosures and providing audited financial statements.
The initial registration form is Form S-1. One of the things you disclose in Form S-1 is the risks your firm faces that may affect its valuation.
Coinbase disclosed the following risks in their Form S-1 SEC filing [0]:
> We are subject to an extensive and highly-evolving regulatory landscape and any adverse changes to, or our failure to comply with, any laws and regulations could adversely affect our brand, reputation, business, operating results, and financial condition.
> A particular crypto asset’s status as a “security” in any relevant jurisdiction is subject to a high degree of uncertainty and if we are unable to properly characterize a crypto asset, we may be subject to regulatory scrutiny, investigations, fines, and other penalties, and our business, operating results, and financial condition may be adversely affected.
> As we continue to expand and localize our international activities, our obligations to comply with the laws, rules, regulations, and policies of a variety of jurisdictions will increase and we may be subject to investigations and enforcement actions by regulators and governmental authorities.
Coinbase was acutely aware of the risk that their business may not exactly be legal, they disclosed it in their initial SEC filing. It’s not the SEC’s job to tell Coinbase that what they’re doing might not be legal, it’s up to Coinbase to hire lawyers to advise them.
Coinbase is the "big entrant". They were backed by a ton of deep-pocketed VCs that are tied up with dizzing array of powerful LPs that range from government pensions to sovereign wealth funds. It then went public and is now probably tied up in everything.
I wonder what this will do to crypto - my guess is that it will result in a lot more crypto trades and be bad for crypto exchanges
Many institutions want to trade crypto but don't want or can't use the crypto financial system without a lot of effort. If they can buy coins and use the same (trusted, separated, and audited) exchange, clearing, and custodian systems they use for other trades then crypto trades can be added with little compliance effort.
If retail traders can buy and sell bitcoin using their existing retail broker they'll do so rather than open accounts on a crypto exchange.
A USD tethered coin offered by a major institution that used this would likely kill tether etc.
I think this is slower companies being late to the party. It's possible that people will hold some BTC or ETH in their accounts as a hedge like silver or REITs. But I think the busy trading that is really profitable for exchanges was driven by the alt coins, pump and dumps, wash trades, and all the things regulated exchanges can't really do. I think it will make crypto boring, but not in a bad way.
> I would love for Tether to die, personally. So many lies and violations have surrounded them from Day 1.
Weirdly enough under a FOIA request it came to light that tether provided documents proving (unless they gave false documents to the state of NY) they had 40.6 billion out of the 40.8 billion of tether printed back somewhere in 2021. Including the names of all the (big name) banks where they had gold/ETF/commercial papers/treasuries etc. in custody.
They're definitely more than shady. If they've got the USD backing the tether they say they have, it's probable it all started by printing their way into solvency, creating USDT out of thin air.
But it's also possible a big percentage of the USDT circulating are actually backed by real things. Which came as a surprise to me.
I mean either that or they sent fake documents to the NYAG. But I doubt it because I take it these big name banks have been contacted by US authorities that, I take it, verified the numbers tether gave them?
So, thanks to a FOIA request, it looks like tethers/USDTs were at least up to 2021, backed nearly 1:1.
Now they pulled 40 more billion, doubling that amount, since then, out of some hat. Real or not: I sure have no idea.
Even when it was true, it was more like they wanted to have a small presence in crypto just so they could say they're hip with the times. For others, it was FOMO. None of them were true believers.
I feel like there was also real money to be made, as in any bubble, as long as you weren't a true believer and you got out before the pop. I'm just not sure there is any more.
You can start an E-Money Institute in the EU and get a license to issue a stablecoin under MiCA.
I looked at the laws and there is genuinely no way to earn money except from the difference between the interest payments you get on the custodial accounts (at a normal bank). The only exception is if the contract contains an explicit duration. Then you are allowed to charge a "reasonable" fee for trade ins to Euro. E-Money is not allowed to pay interest. It is basically irrelevant unless you want to do a radically different form of banking.
Exactly! The whole point of stable coins is to avoid USD transactions. That's not a problem for a broker who is doing KYC and reporting to regulatory bodies. Why pay a fee to use a stablecoin when you can just hold $s or Euros?
FWIW I still keep about six figures on Coinbase in crypto
The day the SEC sued Coinbase back I made a large purchase of $COIN when the stock tanked. This is my personal risk/conviction level.
The SEC is bought and paid for, I wouldn't trust the SEC to protect me from anything.
I'll take off my tinfoil hat now. Everyone have a nice day. I'm not a financial advisor and I'm not shilling anything for coinbase
"""
EDX Markets, a non-custodial cryptocurrency exchange backed by Citadel Securities, Fidelity Investments, and Charles Schwab, is live as of today, June 20.
EDX differentiates itself from traditional crypto exchanges by not directly catering to retail investors as it focuses on institutional traders. Additionally, trading access is via API and does not offer a front-end or trading graphical user interface.
WSJ reported that it relies on retail brokerages to route investors’ transaction orders for cryptocurrencies to its marketplace.
EDX Chief Executive Jamil Nazarali reportedly said FTX’s failure had heightened demand for crypto exchanges that do not possess the inherent conflict of interest associated with storing customer funds.
"""
EDX CEO's comment on FTX is pretty funny; so customer don't want a fraudulent system, makes sense...
So, any institutional investors out there who would care to comment on the interest level on this? What's the goal? Surely, Wall St. loves an opportunity to make money...
> One major difference: EDX is a “noncustodial” exchange, meaning it doesn’t directly handle its customers’ digital assets. Instead, EDX runs a marketplace where firms agree to execute trades of coins and dollars, using its platform to agree on prices. Then the firms move crypto and cash between each other to settle the trades. Later this year, EDX plans to launch a clearinghouse to facilitate the process of settling trades, but even then it plans to use third-party banks and a crypto custodian to hold customer assets.
> In contrast, crypto exchanges typically require their customers to park their digital coins in wallets run by the exchange, creating the risk that the exchange could lose the funds or be tempted to misuse them.
The projects are all here and are open source, it's a competitive market, it's easy to make an announcement, it's harder to come up with the projects all in the open ;)
Great! EDX will trade crypto without actually having any of it. What will they invent next, 2 day settlement times? Why do real time settlement when we can go back to the clearinghouse model which has been with us since the early days of stock brokering...
