I often enjoy @knifefight's takes (no idea if the SN account here actually was started by him). While there's not any revelations in this piece, he makes a number of thought-provoking observations.
The strangest thing about dollars is that if you look closely they turn out not to be interchangeable at all. You can’t use bank dollars to buy drugs and you can’t use paper dollars to buy a house. You can transform bank dollars into paper dollars (or vice versa) but they aren’t quite the same thing.
I've heard people say that the dollar can't be used natively on the internet before, but I hadn't extended that lack of fungibility to any other realms. Stablecoins are a somewhat extreme form of this:
For ordinary people to get their dollars out of a stablecoin network they have to sell them to someone who wants that kind of stablecoin, usually at a discount.
Since most stablecoin issuers have hefty minimums for withdrawal, once you buy in to the system, the only way you get out is by trading. It's interesting to think of a dollar working like this. It would be like if wanted to withdraw money from the bank but had to find someone else who wanted to have a similar balance at the bank and was willing to buy you out.
The trust model for a stablecoin is closer to a bank account than it is to a private bank note.
Also a great distinction. Private bank notes were at least bearer assets. Stablecoins are not and can be frozen at any time.
Stablecoin is a marketing term. They’re just bank accounts.
I think I've heard other people remark how awesome the term
stablecoin is. Reminds me that I really need to figure out who coined it.Knifefight leaves us with this summary:
I suspect the passage of the GENIUS act means the following things:
- Stablecoins will eventually replace traditional bank accounts / payment networks
- The global dominance of the U.S. Dollar will continue to accelerate8
- Smaller / weaker global currencies are likely to weaken and collapse
- Banking surveillance and KYC / AML regulations will be renegotiated
- In the short run this will weaken surveillance (as stablecoins use regulatory arbitrage to undercut traditional payment networks)
- In the long run it will greatly increase surveillance (as America takes advantage of the greater demand for dollar access to impose stricter surveillance and controls)