A "stablecoin bank" could take many diff forms, but the one we explored in the piece resembled a narrow bank where deposits are 1:1 backed with T-bills --
- Customers could automatically earn T-bill yield on their deposits
- Credit issuance itself could be done in stablecoins
- From a UX perspective, customers would still just be tapping a piece of plastic ... when a customer spends at a retailer, it would functionally just be sending money from one wallet to another.
The challenges would be --
- If a stablecoin bank (or a narrow bank) became large enough, the Fed and treasury would likely be concerned (because it takes money out of banks running the fractional reserve model where the Fed can implement their monetary policy and create net new money).
- To do loans, a banking license is needed — but if a stablecoin isn’t backed 1:1 by true dollars, then it’s not really a stablecoin anymore and defeats the whole purpose. This is where the fractional reserve model “breaks.”
In theory, however, a stablecoin could be created and issued by a federally chartered bank (that has a Master Account) which operates a fractional reserve model. This is the "deposit token" model that is beginning to be explored
- Customers could automatically earn T-bill yield on their deposits
- Credit issuance itself could be done in stablecoins
- From a UX perspective, customers would still just be tapping a piece of plastic ... when a customer spends at a retailer, it would functionally just be sending money from one wallet to another.
The challenges would be --
- If a stablecoin bank (or a narrow bank) became large enough, the Fed and treasury would likely be concerned (because it takes money out of banks running the fractional reserve model where the Fed can implement their monetary policy and create net new money).
- To do loans, a banking license is needed — but if a stablecoin isn’t backed 1:1 by true dollars, then it’s not really a stablecoin anymore and defeats the whole purpose. This is where the fractional reserve model “breaks.”
In theory, however, a stablecoin could be created and issued by a federally chartered bank (that has a Master Account) which operates a fractional reserve model. This is the "deposit token" model that is beginning to be explored
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