Jump to content

Stablecoins and Banks


Recommended Posts

7 minutes ago, lysistrada said:

Thank you for bringing this up. I have heard some version of this before as a criticism of Ripple/XRP.  It's - in my opinion - one of the better ones.  

I think it depends upon the culture of the bank itself.  My experience with banks - which is extensive, though admittedly skewed in favor of banks in the US - is that they tend to like to depart the least from their core business, which if not just straight up traditional usury is some variant of using money to make money (intentional oversimplification).  There are many, many exceptions to this.  Goldman has a tremendous legacy of principal investing within its iBank, for instance.  But at the end of the day, most banks just want to make money with their money.  I don't think most of them want to be in the business of developing and maintaining complex technologies including and especially distributed ledgers and cryptocurrency.

Does that mean there aren't banks who will strike out in this way?  Of course not.  But I think most of them will not want to.  Banks have massive sums of money and they can do a lot of things if they wanted to depart from their core mission of simply being a bank.  I don't think this technology is any different and - in the end - it's better left in the hands of developers like Ripple, R3 and others.  

But in deciding if I truly wanted to longterm hold XRP, this thought experiment was definitely one I focused on a lot and I think this is one of the better areas of exploration in looking at Ripple and XRP's long-term viability.

 

 

Your thoughts make me consider further, if the banks were to venture out from making money with their/our money, would they be regulated out of that idea? There is already a lot of regulation that prevents banks from being too risky with their/our money. 

Link to post
Share on other sites
  • Replies 77
  • Created
  • Last Reply

Top Posters In This Topic

Top Posters In This Topic

Popular Posts

Yes! this is exactly what I was saying... Thanks @KaaKaRmA for this link  Brad Garlinghouse from the article: "Scenario one: all banks around the world put aside competitive and geopolitical

That sounds like something a bank chief techie may actually say.  It's a great idea in principle, but in practice banks are not software development shops nor do they have the ability to keep up with

Many will try to build their own, as they think it’s a simple solution. Reality is Ripple and XRP are disrupting the industry, which isn’t always a good thing. The battle Ripple and XRP face is twofol

35 minutes ago, zenkert said:

Who is He?

He was part of our innovation team. Admittedly specialising in trade finance. His proposals go directly to senior management for funding. 

Re liquidity - perhaps a lack of knowledge on my part. Wouldn't a xrapid transaction involve fiat xrp fiat conversion. Couldn't this be achieved by a DA to DA? 

Link to post
Share on other sites
2 minutes ago, Stellios said:

He was part of our innovation team. Admittedly specialising in trade finance. His proposals go directly to senior management for funding. 

Re liquidity - perhaps a lack of knowledge on my part. Wouldn't a xrapid transaction involve fiat xrp fiat conversion. Couldn't this be achieved by a DA to DA? 

Euro exim Bank specialises in trade finance and they plan to use xrapid 

Link to post
Share on other sites
3 hours ago, Stellios said:

He was of the impression that banks will build their own shared private DLT supported by a universal DA/Stablecoin to facilitate money movements.

If they fund this business they should know the window of opportunity will slam shut once each domestic Central Bank issues fiat CBDC, and be ready to offload the investment to a greater fool before hand.

Additionally...

There is a corollary here to the mistake Corporations made at the beginning of the internet, where they all tried to make intra-nets. Which in hindsight just seems misguided.

I'd honestly expect a few $10s of millions of dollars to be thrown at this. Which will spark a long term battle between the Open vs Closed payment networks, with the closed networks being started/funded by the major nodes in the international financial networks.

Ultimately the closed network will be shut down, but the goal (if they are smart) will never have been to "win" a losing battle, but rather to extend the life of the dying business model/systems.

---

I've looked at these Stablecoin systems and believe they are setting up the crypto/btc/eth markets for a crash like the flash crash. Once all these systems are interconnected and start to crash triggering auto executed margin calls and liquidating collateral, triggering more margin calls and more liquidation... My god :bad:

Edited by KarmaCoverage
Link to post
Share on other sites
6 minutes ago, Stellios said:

He was part of our innovation team. Admittedly specialising in trade finance. His proposals go directly to senior management for funding. 

Re liquidity - perhaps a lack of knowledge on my part. Wouldn't a xrapid transaction involve fiat xrp fiat conversion. Couldn't this be achieved by a DA to DA? 

 

Link to post
Share on other sites
2 hours ago, Stellios said:

How I interpreted it was that the big banks will just create their own DA and trade it with each other. Why share the spoils when they can maintain the monopoly. 

You and I could create our own DA and trade it with each other. It takes 5 minutes to create an ERC-20 token. There'd be zero benefit to either of us; the token would be a rather unnecessary metaphor. 

 

Edited by jcdenton
Link to post
Share on other sites
20 minutes ago, Stellios said:

He was part of our innovation team. Admittedly specialising in trade finance. His proposals go directly to senior management for funding. 

Re liquidity - perhaps a lack of knowledge on my part. Wouldn't a xrapid transaction involve fiat xrp fiat conversion. Couldn't this be achieved by a DA to DA? 

 

As per my understanding of stablecoins, they have to be pegged to the value of something and - most often - that is USD.  Therefore, let's say you have $1T in some stablecoin.  There has to be  $1T tied up somewhere in order to back those coins, thus creating the same liquidity bottleneck present with nos/vos accounts.

With Xrapid, the partner exchanges hold the XRP and - as needed - it is bought and sold in pretty much real-time to facilitate the transaction.  That bottleneck being freed up allows banks to use their money for much better purposes such as lending rather than securing the value of stablecoins.

This is why a private DLT and stablecoins answer the issue of competing technology but not liquidity. 

Please someone else put it better. 

Link to post
Share on other sites

So why can't a country like the US just make all their cash into a USD coin? Then you can use all the liquidity that is already there? Why does it seem so hard to take a local currency of a country and be able to use it in the same way as a cryptocurrency?

 I suppose a lot of other countries/banks might be against holding and using USD coin... but a lot of them already have a big pile of USD anyway, right?

Link to post
Share on other sites
1 hour ago, lysistrada said:

I will note that Ripple's recent reply to Fed's RFI related to faster payments seemed to indicate that Ripple would be very into the idea of the US Central Banks building out their own DLT and - ideally - with use of the interledger protocol

This is essentially how I think of CBDC. 

A Rippled, run with each of the Fed's branches acting as a validator.

Wish I had the details on how Japan's banking consortium is doing their domestic inter-bank settlement? using Rippled??

Link to post
Share on other sites

Holding stablecoins means paying taxes ("inflation") in the jurisdiction that issues the coin to which the stablecoin is pegged.

Most people don't like to pay taxes, so I think that on a level playing field, non-inflationary currencies will win. Particular those currencies that are well integrated into software platforms, and have features that make them very well suitable for global value transfer across software platforms. XRP has a huge headstart in that integration process, compared to stablecoins that don't yet exist, and probably won't exist within a few years.

Link to post
Share on other sites
1 hour ago, thetamind said:

So my question stands.... How will banks get their liquidity for their own digital currencies?  If someone comes up with an answer that scares me... I'm selling my XRP lol

They can "sell forward" the expected cashflows of their Corporate clients, based upon statistical data from each Corp's payment history.

In short, they can frontrun their corp clients future payment needs... and sell providing that liquidity forward, at a discount.

Shifting the value exchange in between units of time, aka "Finance"

Link to post
Share on other sites
1 hour ago, Trickery said:

The problem I see with private stablecoins is they are no better than a messaging system because they have no external value.

You also cant have a "stablecoin" without an underlying "base currency", which to date have been digital assets living on a blockchain.

Remember Banks expand the supply of Fiat when they make a loan. Then they earn interest on the new money they created via the loan. That is how the fractional reserve business model works, and it is difficult to accomplish that with a DLT with a fixed supply.

Edited by KarmaCoverage
Link to post
Share on other sites
2 hours ago, KaaKaRmA said:

Many will try to build their own, as they think it’s a simple solution

Thanks for the link in the post as I've read through it. 

"They expect banks will initially use the coin for post-trade settlement and clearing by early 2018, after they secure blessing from regulators and central banks."

"Scenario two (the more likely scenario): banks not in the issuing group issue their own digital assets with their own sets of rules and governance.

We’re kinda seeing this already, as the FT points out, with Citi’s Citicoin and Goldman Sachs’ SETLcoin."

It looks like they tried to build it, but not much as came from this OR at least I haven't heard anything on this. 

BTW this post is from 2016. It looks like Brad's first half of his second statement (the more likely scenario) is standing the test of time. 

Edited by ObeyTheWafflehouse
Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now


×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.