That is misleading. Banks are no longer required to hold a certain fraction of their deposits in their bank account at a Federal Reserve bank--that's the reserve requirement that was reduced to 0%. Keep in mind that only money in the bank account qualifies as reserves that requirement; a literal pile of dollar bills would contribute not one cent.
Instead, banks are required to keep on hand sufficient equity for a percentage of their risk-weighted assets--money that, if the assets go to 0, can be raided to make up the losses. The requirement here starts at I believe 8%, and increases if you're a more important bank.
(If I'm computing it correctly, Tether has disclosed a capital ratio of approximately 0%, FWIW. Were Tether actually held to the same standards as a bank, Tether would be considered dangerously undercapitalized if not outright insolvent.)
Define "sufficient", give it an actual number...
> Tether has disclosed a capital ratio of approximately 0%
NYAG accounted for 90% of their assets with that big case last year didn't they?
Stablecoins don't offer that. They have their own stabilizing mechanism where in a crisis, the peg collapses so quickly that it's not even worth trying to take any out after considering peak traffic tx fees.
Glorious.
The FDIC has a track record of payouts and they keep meticulous of every bank they insure, going back to the program inception in 1933.
Which, I believe is correct and also about as stabilizing as a deadman’s switch on an explosive vest held by an gorilla. Which, hey, gorillas are pretty smart, if they know they aren’t supposed to let go, they’ll try. But it’s not a good idea to spend much time in their vicinity in such a situation.
I’d assumed it was an attempt at dry humor, straight man/ad-absurdism style, which I appreciated.
They simply do not have your money nor could they realistically insure every persons savings if their was bankruns, it's a system built upon nothing more than trust. When that trust dwindled in recent times, they brought in FDIC to create more trust out of thin air.
Banks do have strict Capital requirements.
The "reserve" requirement going to zero is different.
For the posterity of this thread American banks are no longer required to hold any reserve requirements at all[1].
Though I guess that is a "different" issue depending on who you ask here.
Ask yourself this - can everyone in the country take their money out at the same time
For these shitty stablecoins: nearly everyone
For the actual money you use everyday: Maybe 2-3% of people can cash out of the system properly.
A system built on trust works until it doesn't.
[1] https://www.federalreserve.gov/monetarypolicy/reservereq.htm