{"id":1444501,"date":"2023-12-18T11:30:00","date_gmt":"2023-12-18T16:30:00","guid":{"rendered":"https:\/\/bugaluu.com\/news\/?p=1444501"},"modified":"2023-12-18T11:30:00","modified_gmt":"2023-12-18T16:30:00","slug":"it-would-be-the-ultimate-irony-a-gold-standard-returning-through-the-backdoor-of-crypto-markets","status":"publish","type":"post","link":"https:\/\/bugaluu.com\/news\/it-would-be-the-ultimate-irony-a-gold-standard-returning-through-the-backdoor-of-crypto-markets\/1444501\/","title":{"rendered":"It Would Be The Ultimate Irony – A Gold Standard Returning Through The Backdoor Of Crypto Markets"},"content":{"rendered":"

It Would Be The Ultimate Irony – A Gold Standard Returning Through The Backdoor Of Crypto Markets<\/span><\/p>\n

\n

By Marcel Kasumovich, Deputy CIO, Coinbase Asset Management<\/em><\/p>\n

Markets forced crypto to clean up, inviting institutional participation. Stablecoin is making its way to the main stage for the most ironic of reasons \u2013 its inherent stability.<\/em><\/p>\n

1. Be clear. <\/strong>Your words may not be welcome. But they also won\u2019t be misunderstood. Elon Musk isn\u2019t the only one who excels<\/a> in this department. SEC Chair Gensler has that superpower, too. \u201cIf Tom or anybody else wanted to be in this field, I would say, \u2018Do it within the law.\u2019 Build the trust of investors in what you\u2019re doing and ensure that you\u2019re doing the proper disclosures \u2014 and also that you\u2019re not commingling these functions, trading against your customers.\u201d<\/p>\n

2. \u201cTom\u201d is Tom Farley, the former President of the New York Stock Exchange, and Chair Gensler was responding to speculation that Tom was interested in rebooting FTX. Almost on the first anniversary of the beginning of the end of FTX, the FTT token more than doubled<\/a> its value in a day. The market celebrated that serious institutional players were seeing value in the crypto ecosystem \u2013 even in assets and brands left for dead like FTT and FTX.<\/p>\n

3. It goes without saying, Tom would do it within the law. And Gary might actually\u00a0accept it. <\/strong>US lawmakers and regulatory bodies may not be first-movers in the crypto space. But it is also not a static position. The 2022 crypto carnage is a gift to policymakers. The ashes of the weakest links formed the launchpad for institutional players to confidently send their rockets into crypto\u2019s orbit. They are fueled and ready for launch \u2013 Blackrock, PayPal, MasterCard, and Visa are engaged.<\/p>\n

4. Crypto is cleaning up within its ecosystem, too. <\/strong>Not long ago, Tether was considered the greatest systemic threat to crypto. The largest and most active user application in the ecosystem, uncertainty about assets backing USDT and Tether\u2019s commitment to working with law enforcement were routinely called into question. Now, Tether plans to release real-time data on their reserves and has supported<\/a> the Department of Justice in arresting illegal activity.<\/strong><\/p>\n

Figure 1: USDT Banned on Ethereum<\/strong><\/p>\n

<\/a><\/strong><\/p>\n

5. The calm after the storm is precisely why institutions feel comfortable exploring. <\/strong>If it didn\u2019t die in 2022, crypto isn\u2019t a fad. US dollar stablecoin and payments dominate attention for an ecosystem keen, almost desperate, to tell positive use-case stories. It\u2019s also where stablecoin shines. Take Argentina. The official peso exchange rate devalued<\/a> by nearly 50% against the US dollar this week. Crypto asset markets tell us there\u2019s more to come.<\/p>\n

6. In openly traded crypto markets, one US dollar yields<\/a> 25% more Argentinian pesos than the official rate even after the devaluation.<\/strong> Why the difference? Policy. Some economic players are mandated to trade at the official exchange rate. It\u2019s a tax. But it\u2019s also a policy feedback tool, as well-functioning markets ought to be. Argentine policy is compelled to execute reforms with brutal immediate outcomes from currency devaluation for the sake of a brighter future.<\/p>\n

7. Skeptical voices ring loudly in our ears \u2013 Argentina shows that crypto use cases are fringe scenarios. <\/strong>It\u2019s an understandable criticism, though not compelling. For one, rich countries have shunted the growth of crypto use cases \u2013 crypto\u2019s DNA is not the problem. Traditional banking also fails at fat left tails, not crypto. Deposit insurance and CBDCs cease to function in extreme instability, leaving the central bank printing presses \u2013 inflation \u2013 as the policy of last resort.\u00a0<\/p>\n

8. Fate loves irony, especially in finance. <\/strong>Stablecoin is recognized by its users as the premier narrow bank. A fully reserved stablecoin has virtually no risk of a bank run. And if those reserves are in the form of deposits at the central bank, as now contemplated<\/a> by the Bank of England yet rejected by the US Federal Reserve, the risk is literally zero. Traditional banks can\u2019t compete \u2013 a run leads to a sudden stop of access to deposits and especially foreign currency.<\/p>\n

9. But what if the stablecoin or the US dollar were the source of instability? <\/strong>This is exactly where free markets shine, adjusting without intervention.<\/p>\n

10. Imagine a confidence crisis in an individual stablecoin. <\/strong>Stablecoin can exchange hands many times in a single day. Its high velocity makes the move to an alternative swift\u00a0\u2013 good collateral migrates to stablecoin where investors are confident. We lived this in 2022. And if the collateral were insufficient to guarantee a 1:1 value, those holding the \u201cbad bank\u201d coin bear the loss. Not surprisingly, proof of reserves is in high demand to guard against this threat. <\/strong><\/p>\n

11. Next, imagine a confidence crisis in the US dollar more broadly. <\/strong>More complicated, you say? Yes and no. The same principles of collateral migration apply \u2013 only the collateral changes. In the case of a currency crisis, users are swapping US dollars for hard assets. It\u2019s still a migration from one stablecoin to another, only the other is likely to be an asset like gold to negate the risk of inflation or devaluation. <\/strong>This \u201cflatcoin<\/a>\u201d would be a move away from fiat currencies.<\/p>\n

12. It would be the ultimate irony \u2013 a gold standard returns through the backdoor of crypto markets. <\/strong>It\u2019s not a matter of likely or not. It\u2019s a possibility. And creative minds are building in this direction. Like Quorium<\/a> and its stablecoin backed by gold reserves that stay in the ground. <\/strong>In essence, the owner has a claim on proven reserves, with Quorium transforming an in-ground gold asset into a high-velocity store of value.<\/p>\n

13. Pay attention \u2013 it\u2019s the price of knowledge.<\/p>\n

\u00a0<\/p>\n<\/div>\n

Tyler Durden<\/a><\/span>
\nMon, 12\/18\/2023 – 06:30<\/span><\/p>\n

\u200bhttps:\/\/www.zerohedge.com\/crypto\/it-would-be-ultimate-irony-gold-standard-returning-through-backdoor-crypto-markets<\/a>\u00a0<\/p>\n

\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"

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