The regulatory sweet spot for a financial institution is to escape paying for insurance while gambling on an implicit “too big to fail” guarantee if anything goes wrong. That’s what happened with money-market funds in 2008–’09. These funds were theoretically unguaranteed, but when they all teetered on the edge of failure, the federal government stepped in. In the end, the federal government guaranteed $2.7 trillion of money-market liabilities—for funds that had not paid a cent for this federal protection. That’s the likely future for stablecoins as well.
Posted by WHY_DO_I_SHOUT
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Crypto and AI bubble at the same times? Stupidest things will ruin so many lives
Fortunately crypto is way too small to cause a financial crisis, and stablecoins are basically only useful for facilitating crypto trading in countries like America with functioning financial systems and currencies. Sophisticated investors don’t have any exposure to them, and even retail investors have little use for them because by design they don’t do anything for degenerate gamblers.
So I don’t worry about a financial crash. If we want to talk about what’s worrying about crypto, we could talk about the administration [turning a blind eye](https://www.sec.gov/newsroom/speeches-statements/atkins-111225-securities-exchange-commissions-approach-digital-assets-inside-project-crypto)to companies issuing securities on the blockchain that don’t comply with securities law, or new [unregulated gambling products](https://cdcgaming.com/brief/fanatics-reportedly-in-prediction-market-talks-with-crypto-com/), or perhaps the [president taking bribes](https://www.jacobsilverman.com/p/the-president-took-a-75-million-bribe) via his own crypto token.
There’s plenty to be concerned about in the crypto space with an administration that sees it as a piggy bank for personal and party use, but a systemic threat posed by stablecoins is not one of them.