Comparing the stablecoins of today with the free banks of the past is a category error. Stablecoin issuers are not lending against collateral, they are selling chips to punters who want to play on the crypto casino. The correct model for stablecoins is thus casinos, not banks.
the fact that banks of the past issued their own banknotes backed by gold reserves is interesting but not remotely relevant to the stablecoin phenomenon. Issuing notes was not their primary purpose. But issuing tokens is the ONLY purpose of a stablecoin issuer.
Whether Zhang and Gorton's paper got the history of free banking right is neither here nor there. What is clearly incorrect is applying a free banking model to stablecoins, as Nic Carter attempts to do.

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More from @Frances_Coppola

20 Jul
Reading Zhang and Gorton's paper on stablecoins. Already finding problems with it. This, for example, is massively out of date. Cheques are still used in the US but almost nowhere else, and use of physical cash is declining, replaced by contactless cards.
Er no, it is the price that adjusts in a bank run. The bank maintains par value until it runs out of money, then closes its doors, effectively reducing the price to zero. This is in contrast to MMFs which can deliver less than par value.
Useful table. Imho the BIS's recently-published regulatory framework for stablecoins effectively recommends the second of these - which Gorton & Zhang think would be inadequate. The STABLE Act would be the third. Why is a floating rate (as for MMFs) not included?
Read 36 tweets
18 Jul
The pond I cleared out last year and the area round it. Basking in the sunshine today. ImageImage
And this is what the meadow I sowed last year looks like today. Image
Sweet peas Image
Read 4 tweets
13 Jul
Refreshing to see a Tory admitting that his party's willingness to accommodate or enable racism is a huge problem.
Eviscerating UKIP by endorsing racist and nativist policies has brought the Conservatives resounding political success, but at the price of sacrificing whatever was left of their moral compass. They are becoming the party of everything that is hateful in British society.
Mercer voices the dilemma that honest Conservatives now face - indeed have faced for the last five years. Whether to stay with the party and try to reform it from within, or leave it.
Read 5 tweets
11 Jul
At some point people realise they are being scammed and stop depositing money. At some point, too, regulators realise people are being scammed, and stop people depositing money. For Binance, that point has now been reached. But too late to save those who have been scammed.
Gizmodo's research suggests that this is a very large scam. Numerous reports of people being unable to withdraw their funds, having their funds withdrawn from their accounts without their permission, and being ghosted by what passes for a customer service department.
What I found particularly troubling in Gizmodo's research was the number of ordinary people depositing money on Binance that they couldn't afford to lose, clearly thinking Binance could be trusted to keep it safe. NO crypto exchange can be trusted to keep your money safe!
Read 4 tweets
29 Jun
Again, this is widely misunderstood. Your funds in Coinbase ARE AT RISK even if they qualify for passthrough insurance. If Coinbase lends them out and the loans turn sour, you could lose all your money and FDIC will not save you.
I would strongly advise anyone who has USD or USDC on deposit at Coinbase, or any other exchange that claims to qualify for passthrough insurance, to read this explanation of FDIC passthrough insurance for brokered deposits. sewkis.com/publications/f…
I really wish regulators would clamp down on this blatant mis-selling of high risk crypto products to retail investors. We've seen this movie many times before and we know it does not end well.
Read 14 tweets
29 Jun
This piece focuses on the poor take-up of Pension Credit, but never mentions that extending the New State Pension to older pensioners would eliminate the need for many of them to claim Pension Credit. It is a scandal that older pensioners were excluded from the new scheme.
Women who paid the "small stamp" are particularly at risk of poverty, because the "small stamp" pension does not include SERPS/S2P. It's vital that these women are upgraded to the New State Pension regardless of their NI contributions.
No-one should be in poverty in old age because of choices they were encouraged to make by previous governments.
Read 4 tweets

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