Carter attempts to lay out a summary of what stablecoins are and how they function in the world of payments. He begins with this list of qualities
- They can be held self-custodially.
- Payments are push and final.
- Users have unfettered read/write access to the underlying database.
- Bearer in nature.
- They follow the permissioned pseudonymity model.
Curiously, all of these qualities have some pretty major caveats:
They can be held self-custodially.
Carter notes
For some non GENIUS-regulated stablecoins, it remains true that in many cases holders are effectively unsecured creditors of the issuers.
I may be wrong, but I'm pretty sure that USDT (~60% of the global stablecoin market) is not currently "GENIUS-regulated" -- which is to say a super-majority of all stablecoins are "effectively unsecured" notes.
Payments are push and final.
Carter notes
This is like wires, and unlike, for instance, credit card payments.
While he acknowledges that stablecoins can be frozen, I think he discounts a little too strongly how much "freezing" can end up looking like a non-final payment.
Users have unfettered read/write access to the underlying database.
Carter notes
But it is true that the blockchain is only an “indicative” ledger, and the “real” ledger is maintained by the stablecoin issuer.
Unless I'm missing something here, this means that users do not have "unfettered read/write access to the underlying database. Perhaps Carter is trying to say that users have access to the transport layer (whatever chain the USDT is on), but in cases like TRON or Solana, I'm not even sure this is true.
Bearer in nature.
This reminds me of the debate about ecash tokens that are backed by bitcoin. The tokens themselves are bearer instruments, but they don't have any guarantee to the thing that backs them. Bank accounts are definitely not bearer instruments (you hand someone else a portion of the money in your account), but ecash tokens have a significant edge on stablecoins in the bearer asset world in that they can't be frozen. The only thing an ecash mint can do is freeze the whole mint. A stalecoin issuer can freeze a specific coin. This seems to be an improvement on a bank account, but is it actually a bearer asset?
They follow the permissioned pseudonymity model
Carter notes
Issuers have a direct relationship with only a tiny percentage of stablecoin users – the entities creating and redeeming the coins. The remainder of the users, whether its firms or individuals transacting on the network, are pseudonymous, and so the issuer doesn’t have a clear sense of who they are or what the transactions are for.
This is interesting: I wonder how easy it is to acquire USDT or some other stablecoin from a decentralized exchange or a non kyc source. I get the concept that you can move USDT on ethereum or on TRON and it can be sent to any address on those chains (as long as the stablecoin issuer doesn't freeze it), but I doubt that it is as easy to onboard to this network as Carter makes it sound.
It's a good read if you want to learn about stablecoins, but you might do well to read it with a critical eye, as I think Carter's enthusiasm for stablecoins has led him to be a little expansive in his definitions.