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Comment by gridlockd | Hacker News Reader

That's probably because systematic bank failure to you is just a fairly tale and you don't understand the risk exposure you have at an actual bank. Open your history book!

To be clear, I wouldn't prefer to put my money with either. But if push comes to shove, would you prefer to have an account at a failed bank that holds 10% in reserves, or a private company that holds close to 100% of reserves, because it is not a bank?

Before you answer, please imagine for a second that you had a decent amount of money to retire on, not whatever FDIC and the already bankrupt state promises to reimburse you with.

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This seems to be a false either-or because FB is probably not holding 100% reserves as actual paper cash in a giant Scrooge McDuck vault underneath their HQ. It's holding them at a bank, so that it can get the interest payments.

Thus, a user faces systemic banking system risks plus all firm/stablecoin-provider risks. That combined risk will almost certainly be strictly larger than the systemic banking system risk you'd face by just depositing funds in a bank account that you directly control.

I'm arguing the principle here, so for that purpose it might as well be a Scrooge McDuck vault.

Otherwise, you do have a point, a systematic bank failure would likely cause issues here as well. However, I highly doubt they'd be storing significant amounts of money as cash deposits in banks for the interest. There's better options, such as short-term treasury bonds.

Right - I believe the whitepaper says it'll be a mix of bank deposits in various currencies plus short-term government securities. Still my point stands: you can have lower systemic risk in a serious crisis by holding t-bills or whatever directly, rather than indirectly via FB or any other stablecoin provider. Plus you'll get the interest payments.

Storing serious amounts of money in any of these stablecoins for any real length of time is economically irrational because by exiting their walled garden, you can obtain a higher return in exchange for reduced risk. Withdrawing is even better than a risk-free reward; it's a risk-reducing reward.

Again, I'm not pitting this against all other options, I'm pitting this against bank deposits specifically and in principle.

My point is that bank deposits aren't as safe as people like to believe they are, at least beyond what is insured.

In a systemic crisis, chances are the government will just print whatever money needs to exist and bonds too will take a hit as a result. Plus, whatever happens in the US will impact the whole world. You can't realistically hedge against this with any currency/bond.

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