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Comment by jejeyyy77 | Hacker News Reader

Uhm, hate to break it to you, but you can only have a run on the bank as a result of fractional banking - which is systemic in the fiat banking system due to regulations only requiring they hold 10% of customers' deposits.

You literally cannot have a bank run on USDC or BTC because they do not do fractional banking (i.e loan out the money you deposited).

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With stable coins you can have insolvency which is worse than a bank run probably (because no government insurance). Stable coins are the worse to keep cash - higher risk than a bank account but no interest. The only logical uses for them is online gambling and money laundering.

You don’t own a USDC. Instead some random offshore company owes you a dollar.

How can a stable coin be insolvent if they have proof of reserves showing they have assets that match total deposit value?

1. Do they post daily proof of reserves?

2. Are their bank accounts locked down to strictly the blockchain activity?

Proof of reserves means everyone was safe yesterday, at best.

Same way you did with svb. A stable coin is basically a bank. They take in assets and generate tokens against them. If there is a mass withdrawal they would need to sell assets possibly at a loss to cover it. If they a duration mismatch then they eat the losses come withdrawal time. Go too fast and they depeg and boom

You can't give out loans really without fractional banking either. I mean you can. But not really.

You could.

Banks, bolstered nightly with USD loans from this Fed, could not.

Well, you technically can, but few individuals will be issuing mortgages to the average joe.

The majority of business capitalization isn’t a loan, but invested savings in return for equity. All of venture capital, the stock market, small business using their own funds, etc.

Mortgages are collateralized, and business loans can be secured with assets or equity. I suspect the majority of bank loans are mortgages (?). Interest rates do not need to be high without fractional banking, since loans can be secured.

Who is going to issue mortgages, if not banks?

Banks only do community and jumbo in the us. Most mortgages are owned by the federal government

The federal government originates mortgages? TIL

Apparently the Fed owns 1/3 of all mortgage bonds.

https://mishtalk.com/economics/the-fed-now-owns-nearly-one-t...

… and ~25% of the Feds entire balance sheet is mortgage securities.

They don't originate those loans.

Banks can issue mortgages without fractional banking… Investors pool capital and start a bank. The bank loans money for homes and makes a profit from interest.

I suppose, but wouldn't really need a bank for that. And you need a lot of money - more money I'd wager than investors will want to pool together.

But, I guess if your goal is less people being able to get mortgages and loans, maybe it will be a good thing!

Yes you can with stable coins, the money held to back USDC was held in regular banks like SVB, some of which would have gone poof if not for the Fed has not guaranteed all SVB deposits. That’s why USDC depegged before the deposit guarantee was announced

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