Bingo!

I looked into the business of issuing a stable coin back in 2018 and found that the only way to make it work so I could cover the costs of running the business was to invest the fiat into other ventures that could offer yield. At that point though the stable coin isn’t stable.

You could maybe make a stable coin work by having a progressive claw back tax on it for anyone but the bank.

I.e. after 1h the tax is 10% and down to 0 coins left.

Then there is a limit on how much outstanding coins (debt) there can be.

I've always been curious about this, if you have a stable coin that's in the billions like some are, can't they just put the fiat into a bank account and live on the interest rate?

You can, now that most (all?) interest rates are significantly above zero again.

This would have been significantly harder e.g. in the Eurozone before 2020.

Yes. For example-

The Wall Street Journal "Cantor Fitzgerald helps manage $39 billion Treasury portfolio that makes up lion’s share of stablecoin’s reserves"

https://archive.md/HL307 (https://www.wsj.com/articles/wall-street-firm-oversees-billi...)

(I am NOT endorsing that company, Tether / Bitfinex, or suggesting that anybody invests in it in any way. Just agreeing that if you have a lot of money, then you might profit from it)

a $1B high-yield (3.5%) savings account yields $35,000,000. Sounds like plenty to operate what is essentially a shell company plus app for managing monopoly money :)

How much yield (return) do you need? In 2018 interest rates were still very low. Now treasuries yield much more. Of course that fluctuates, but still.

What does the cost structure look like? It's not the tokens, is it the KYC?

I don't understand how this could be true: can't you just charge fees for the things which require your effort? Tether, for example, charges 0.1% for every withdrawal.

Yes you can.

But smaller the profit, smaller the motivation to do it.

Bigger the profit higher the amount of other companies.

Too high of fees and people won't do it. And than upkeep costs also money.

Now you have inflation build in.

This has very little to do with stable :)

With rising interest rates it should be making plenty of money

> $16b BUSD issued, 3 month tbills ~4.6%, so $713 million run rate divvied up between Paxos and Binance, of which a decent portion probably subsidized user trading fees on the /BUSD pairs

https://twitter.com/BowTiedIguana/status/1625069835645497344

That’s exactly what they’re doing if you trust their balance sheet.

They have less than a billion in cash and the rest is t-bills and Treasury RRP.

But they don't have access to the Fed so what they are doing is operate a pseudo bank with no deposit insurance.

This is one of the things that is weird when people insist on free bank accounts at their banks.

Yes sure as a secondary bank account with little usage, sure, but as your primary account? How do you expect your bank to stay around if they don't make money from the basic product they offer? They will try to upsell you, charge hidden fees and reduce interest rates, make risky loans and investments and all sorts of things that aren't aligned with your interests.

True and you know what? They do the same thing but regulated.

And that system is old and grown and fine tuned