"It’s always backed one-to-one by the equivalent value of US dollars held in cash and short-duration money market funds at BlackRock."
So while there are other (potentially novel) sorts of counterparty risks - the backing is definitely more robust than (and pretty much entirely decoupled from) Bitcoin/the rest of the crypto sphere, and is closer to dropping funds off in a Fidelity money market.
Another good (early - 2023) read on this topic: "There are now two types of PayPal dollars, and one is better than the other " https://www.moneyness.ca/2023/09/there-are-now-two-types-of-...
People found that out the hard way in 2008.
It's easy to unravel the entirety of crypto:
Who is willing to spend any money for crypto? It's the same people who want to profit from reselling crypto at a higher price.
That's all there is to it. If you understand this, you also understand why the system eventually has to fail, leaving holders with trillions in losses that funded the profits people took out of the system.
- The obvious: these are stablecoins, whose value is pegged to and 1:1 backed by fiat currency / is not capable of the cliche pump&dump dynamics of other crypto tokens.
- To the extent that (eg. today) they are coupled to a network like ETH or Solana (whose holders stand to gain) - both Stripe and Circle are building L1 blockchains right now whose native gas tokens are stablecoins, and are therefore also decoupled from any of the bagholder stuff. Merits of those chains aside: the big players want to further eliminate that dynamic and are putting their money where their mouth is.
- Stripe (and other legitimate fintechs) want to use stablecoins specifically because they legitimately make cross-border payments much easier, and because there is serious/earnest usage emerging. SWIFT actually does suck (not just to the cliche engineer-who-wants-better-APIs way, but even a banking professional would tell you), international payments are more unsolved than you think outside of a few fintechs who are basically just managing massive ledgers + a ton of liquidity around the world.
(In short: I think your take is something that may have made more sense 5-10 years ago, when Stripe themselves ditched crypto for the reasons that it didn't work for anything useful and was primarily a means of gambling)
I don't trust stablecoins that are built on the same technology, by the same actors, and are then used to facilitate most of crypto's trading volume.
I am not convinced of their backing, and I think it likely that together with the crypto collapse stable coin issuers are going to fall like dominos too.
As for Stripe, they announced that their first customer for this is some Argentinian bike importer. We will see if it's that useful a tool in the future. It's not yet the case.
While that particular company might have a good reputation for crypto standards, it still is no bank.
It faces less strict requirements and for example doesn't include an ICFR opinion or recurring supervisory on-site exams.
Here's how a buyer of the coin should see it - I have 1 USD and I can put that money into a bank, into my pocket, or under my bed mattress.
If I buy a crypto stable coin.. I can hope that the coin doesn't fall over (as others have), and, uhhhh, that's about it.
The owner of the stable coin might be able to trade it with someone else, for goods or services, but the only reason either party would switch from the fiat currency to the crypto is to avoid regulation, whether that be because the goods/services are controlled, or because the transfer of money is controlled.
Any thought of "investing" the dollar into the "stable" coin is void, because it's a stable coin that's supposedly fixed to the value of the dollar, one goes in... one comes out
Payment of interest for holding the dollar, that's regulated, and the risk of the coin disappearing, or being shut down by the feds means that the reward would have to be high to make it worthwhile (IMO)
Only when it's because the other methods are highly restricted.
I make cross border payments quite regularly, and it's cheaper, faster, and safer, using the regulated systems (denominated in fiat currency).
> When crypto is in a bull cycle demand for stable coins raise as short term interest, sometimes up to 50%/year (for a few hours or a day).
And, pray tell, what happens when the reverse happens, and a death spiral begins?
> Stable coins generate yield for their operators, they won’t run with your money due to the same reasons why a bank CEO won’t.
From Wikipedia: Tether's USDT is currently the world's largest market capitalization stablecoin. Tether initially claimed their stablecoin is fully backed by fiat currency. However, in October 2021, it failed to produce audits for reserves used to collateralize the quantity of minted USDT stablecoin.[44] Tether were fined $41 million by the Commodity Futures Trading Commission (CFTC) for deceiving consumers.[45] The CFTC found that Tether only had enough fiat reserves to guarantee their stablecoin for 27.6% of the time during 2016 to 2018. Since then, Tether began issuing assurance reports on USDT backing, although some speculation persists regarding the use of Chinese commercial paper for reserves.[46] As at March 2025, Tether had never completed an audit by an accounting firm.
Edit: The reason that crypto is most often presented as an alternative is because it's "Not regulated"
The reason I have faith in a fiat currency, and not crypto (of any kind) is the regulation - the handlers are regulated, the way that the banks invest the money that they hold is (supposed to be) regulated.
When banks have had the regulations on how they can use the money they hold relaxed is what has caused the last two DEPRESSIONS - 1930s, and 2010s (GFC)
There's zero advantage to use crypto except, as stated before, when the goods/services being exchanged are restricted, or the cross border trading is restricted.
Those border trades, you're dealing with countries where the banking system has failed (because the government has failed), or you are at risk of breaking sanctions or financing terrorism.
Edit: Used restricted where I'd previously used the word regulated to try and make the point clearer
Interest drops to 1%, nothing else. We talk about USDC on Kraken or Coinbase, both regulated by SEC, FINRA and having ATS license (only 50 such licenses granted in US).
> I make cross border payments quite regularly
This is easy only between very few countries. Try Africa, India, former Soviet republics. You can send them money, they might not be able to receive.
> Tether's USDT is currently the world's largest market capitalization stablecoin…
This is why I only talk about USDC and others, not Tether.
> The reason I have faith in a fiat currency, and not crypto (of any kind) is the regulation
Stable coin is a different form of fiat operated by a regulated institution. They actually much more regulated compared to banks. For instance, they cannot use fractional reserves, everything must be 1-1 backed by cash equivalents (bonds and friends).
> There's zero advantage to use crypto
Wire cost me $27, USDC transfer cost $1. Wire takes 1-2 days, USDC transfer - 15 seconds. I can get 2-10% interest on my crypto holdings without any commitments, I can make 0.5% with savings account or 3% if I commit to a yearly deposit. I cannot get USD nominated debit card, but can from a crypto exchange. So on and so forth. Life is easy when you are a US Citizen, much different if you come from Russia, Iran, India, most of Africa, most of the world, really.
I am one of the few dozen people on the internet that is not from the USA.
So you pay little to nothing, and get interest.
Ever think about where the money comes from?
[1] https://www.congress.gov/bill/119th-congress/senate-bill/158...