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Barry Eichengreen and Stable Coins

Barry Eichengreen has an article on Project Syndicate where he is very dismissive of Stable Coins. Now Barry Eichengreen is an eminent expert, and he is not entirely wrong, but I think he did jump the shark a bit in his classification. Granted, his assessment of partially or uncollateralised stable coins is spot on. However, here is what he has to say about fully collaterailised coins:

This points to yet another problem with this model: expense. To issue one dollar’s worth of Tether to you or me, the platform must attract one dollar of investment capital from you or me, and place it in a dollar bank account. One of us then will have traded a perfectly liquid dollar, supported by the full faith and credit of the US government, for a cryptocurrency with questionable backing that is awkward to use. This exchange may be attractive to money launderers and tax evaders, but not to others. In other words, it is not obvious that the model will scale, or that governments will let it.

I mean, a fully collateralised stable coin is essentially a money market fund, or possibly an ETF -- or a certificate of deposit if it is a general liability of the issuer as opposed to be backed by specific assets. There are ways of making money from this -- typically paying less interest to the depositors than is being received on the assets (arguably that is easier when rates are 5% than when they are 0.5%). But anyway -- money market funds manage, stable coins can manage as well. Ultimately all this boils down to

that is awkward to use

and I think this is where Barry errs: a stable coin is essentially a dollar with a web3 API -- and for everyone operating in this space this is much less awkward to use than the dead-tree variety

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