Why Every Company Suddenly Wants To Become a Bank (msn.com) 62
Cryptocurrency companies and fintech startups are applying to open banks in the United States. Ripple, Coinbase and the UK payments company Wise have submitted applications for national trust charters this year. Trust banks cannot take deposits or make loans but charge fees for safekeeping customer assets and are not FDIC insured. The applications have reached 12 so far this year, more than any of the preceding eight years, according to data compiled by Klaros Group.
Comptroller of the Currency Jonathan Gould said last month that cryptocurrency activity should be done within the banking system if legally permissible and safe. His agency regulates nationally-chartered U.S. banks. The Bank Policy Institute and the Independent Community Bankers of America oppose the applications. BPI sent letters urging the Office of the Comptroller of the Currency to reject the Ripple, Wise, and Sony applications. The group said approving Coinbase could significantly increase risks to the U.S. financial system.
Comptroller of the Currency Jonathan Gould said last month that cryptocurrency activity should be done within the banking system if legally permissible and safe. His agency regulates nationally-chartered U.S. banks. The Bank Policy Institute and the Independent Community Bankers of America oppose the applications. BPI sent letters urging the Office of the Comptroller of the Currency to reject the Ripple, Wise, and Sony applications. The group said approving Coinbase could significantly increase risks to the U.S. financial system.
Stable Coin (Score:1)
Stable coin like Circle is the answer to the crypto madness and should put all these others out of business.
Re:Stable Coin (Score:4, Insightful)
Re:Stable Coin (Score:5, Informative)
There's no need for a "backing", what matters is that it's impossible to "print money". Physical metal coins are only one way to do so, and not even the best (as they can be mined, and take up metals that could be put into useful work). Of course, current cryptocurriences are not that good, either -- waste of electricity, waste of disk space (Bitcoin currently needs 700GB to meaningfully participate), transaction costs, etc. Metal coins are merely the most traditional one.
Too bad, those in power (and money = power) have grown too attached to the ability to pull money out of thin air. Debasing of coins was popular for thousands of years, most countries defaulted in early 20th century (Germany 1914, UK 1925, US 1933) then successively removed remaining safety barriers (US went into freefall in 1971). And most of money from nothing is "produced" by banks rather than governments.
We are told that "inflation is good" by economists -- for me, it's nothing but a tax. Asking an economist whose very paycheck comes from inflationary measures is same as asking a christian Bible scholar whether the Bible is trustworthy.
Re:Stable Coin (Score:5, Insightful)
We are told that "inflation is good" by economists
Economists don't say this, what they say is a small amount of predictable inflation is better than deflation. That's pretty much every central bank has one of it's mission statements to maintain inflation as 1-2% YoY. They target a low number so if things swing back it doesn't go negative.
Now whether this is correct or good policy, that you can debate, but they don't just take the position of "inflation is good"
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Yet the world's average inflation goes around 5%, not 1%. Surely, they wouldn't be so incompetent if they meant it?
They don't claim that an inflation of 20% is good, indeed -- but only because with the economy hurting so much even financial institutions can't reliably make money. But, their claim is that any deflation, even of 1% or lower, is worse than a runaway inflation. And that's pure bullshit.
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We don't have a second USA or planet Earth to run controls on, economics is fuzzy at best and central banks really only have a couple of tools to work with. Incompetence or not is whats up to debate, not the statement "economists say inflation good".
I'm not here to argue about deflation versus inflation, personally I can see both ends of the argument, like is a couple points of deflation in a quarter the worst thing? I can't say but your statement was not what economists say or represent so if you're going
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Economists can attempt to build a model that has some predictive power. And we can wait a year, a decade, whatever and throw out the models that don't fit reality. We've theoretically been doing this for 250 years but there is also a very good reason most of us think economists are full of shit.
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Well sure, that natural fuzzyness of economics and it's predictions makes it susceptible to bad and stupid actors and like a lot of academeics many economists struggle to translate their concepts into something the layman can process.
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Economists don't run govt's, moronic politicians do, and moronic voters vote them in place.
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Economists don't say this, what they say is a small amount of predictable inflation is better than deflation.
Anyone who takes a lower division intro to economics class in college gets taught this. I might have even picked up on this before then but economists definitely say this when the topic comes up.
Re: Stable Coin (Score:4, Informative)
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All you've done is take an absolute statement and qualified it with a time, a cause, a measure and a place.
Congrats, your an economist now because if you asked an economist "is inflation good?" the answer you wouldn't get is "yes" you'd get "one, define good. after that it would be questions of how much inflation, whats causing the inflation, what is the state of the greater economy. These are relevant and important questions.
It's like asking a physicist "is gravity good" its sortsof dumb and pointless wit
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Inflation is not a tax, despite many holding onto this notion.
Some inflation is good, when it is no more than 1-2% per year.
In our current Western economies that are based on continued growth, if there is deflation, then people will defer spending since the money they have to
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If inflation is not a tax, then where does the value of newly printed or fractionally lent money come from? Money has no intrinsic value, it's a mere token -- if you add more tokens, the value of every existing token is suddenly lowered.
People not spending money is bad... how? This doesn't slow the economy any, nor does it freeze any value -- all it freezes is some _money_. Any money that's temporarily out of circulation increases the value of any actual assets that are in use.
As for borrowing costs, you
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Our modern Western economies are messed up.
But even before modern economics, inflation was a fact of life.
See what a house sold for in 1850 vs. 1900 vs. 1950 vs. now.
The modern era of economics started with unpegging of paper currency from gold started this cascade of events.
From that point, money was worth what the country as a whole produced.
And we have this continued growth imperative, otherwise it is called a recession.
That is why people not spending money is 'bad' in the view of modern economics.
Becaus
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People not spending money is bad... how? This doesn't slow the economy any,
The economic activity is the movement of money, broadly speaking. Without spending of money there cannot be economic activity, so not spending is literally slowing the economy.
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No. Economy is movement of value, not of money. That's just speculation.
As little kids in a socialist country, we got fed the following tale:
Heating fuel in a mining town was very expensive. So the protagonist took a cart and a friend, went to the other side of a forest to buy wood cheaply, and with much effort, hauled it home. When asked why he won't haul another load and sell it at home, the guy answered: "I'm a worker not a speculant".
Abstracting from the nonsense of the price difference of wood bein
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To me, it is asking an answer why deflation is bad over inflation. The response from the people the parent mentions, is usually along the lines of "we are used to giving raises and assuming our currency is worth less", to "the people that matter have their assets in other things that count... it is only the poors that have their money eaten by inflation."
Having deflation doesn't sound like a bad thing, especially with one's currency holdings gain in value over a time interval. Inflation seems to do is har
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Re: Stable Coin (Score:1)
Stablecoins can be taken by force ($5 wrench) or fraud (stablecoin theft a growing problem, look it up)
Texas has a bottom tier government.
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To what end? To just exist? As a financial security product? As a transaction system? All coins stable or not seem to claim to want to be all of those.
If a stablecoin want's to exist as just an open alternative to Visa/MC then great, focus on that and eschew the other parts, develop a real ecosystem. Otherwise it all feels like a scam, at least to me. The fact there are dozens of stablecoins makes me feel as they are all smuggling alternative motives (make the coin minters $$$)
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I can see one advantage of that type of transaction system is that it could in theory be decentralized from a single entity, much less a for-profit entity.
That said that actual and possibly noble goal of a decentralized, easy to access a cheap to operate global transaction network is nowhere close to ready and none fo the stable coins seem to have a genuine interest in developing it so when its brought up it feels like a lie (because it is a lie)
Re: Stable Coin (Score:1)
armed robbery impossible you say? The thug with $5 wrench will have a word and some thumps...
So-called stable coins aren't. (Score:4, Informative)
You give them your money and they agree that they will hold on to it. That's a bank.
Multiple stable coin providers have been caught giving out the underlying assets when they're not supposed to. Often by taking extremely high risk bets with the money.
Because they aren't Banks you don't have any recourse when they do that and because they aren't Banks you aren't insured and because they aren't Banks there are reams and reams of regulations and paperwork they do not have to file with anyone so they can hide things on their books a bank can only dream of.
It's something that a functional civilization would nip in the bud by applying the same banking regulations but more and more we are a failed state.
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The problem with the stable coin is they aren't stable. It's basically a bank but without regulation.
That's why I specifically called out Circle. A publicly traded U.S. company, on it's way to being a bank.
Asset backed coin, banking regulator oversight...
It seems to be the lowest at risk of the fraud that you describe.
Granted, it is not FDIC insured in it's current form. Hopefully that will come too.
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However you can bet your ass that they are going to advertise that they are banks and heavily imply that your deposits are FDIC insured.
If a Democrat is in the White House at the time they implode some of them might go to jail but you're still not going to get your money back.
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Except stablecoins are being used as collateral to buy more
--
crypto-collateralized stablecoin bla bla bla decentralized finance (DeFi) bla bla bla crypto loans bla bla bla smart contracts bla bla bla collateral
To get bailed out (Score:1)
Because banks get bailed out.
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Competition (Score:2)
The Bank Policy Institute and the Independent Community Bankers of America oppose the applications.
Easy to see why. They would hate the competition.
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The Bank Policy Institute and the Independent Community Bankers of America oppose the applications.
Easy to see why. They would hate the competition.
Bank doesn't mean retail banking services, jackass, it's a regulatory thing. Are you going to have your paycheck deposited in your Coinbase checking account? Financing your home or auto loan with them? Then in what way are they competing with ... Independent Community Bankers ...
Mainly this is happening because there aren't enough Banks willing to partner with and take on risk of all the various schemes going around. The regulatory environment for scams and schemers is hot right now.
Willie Sutton said it best (Score:5, Interesting)
Because that's where the money is.
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Because that's where the money is.
Pretty much this.
Banks and payment processors are making money for doing next to nothing every time someone uses a card... other organisations, especially merchants want in on this as they're the ones paying (directly, you're still paying indirectly)
US Crypto Acceptance (Score:1)
Trump seems to like crypto - he's opened up the crypto market in the US, and so people are inevitably coming to make some money out of it.
That crypto companies are applying to be banks is telling though. It means they think they can operate with enough maturity and safety that they can meet the banking license requirements. In return, they get to say "we're a bank", which gives them some exposure to the general public who will get some consumer protections if they become customers. I'm not really sure what
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"Trump seems to like crypto - he's opened up the crypto market in the US, and so people are inevitably coming to make some money out of it."
The reason el Bunko did that was so that he could cash in. He doesn't give a flying rat's ass about anyone else. It also has foreign policy implications. Pakistan wanted tariff relief and turned to funding crypto-lobbyists because the knew el Bunko would "appreciate" their support of his scam.
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Note that not all of the businesses mentioned are about crypto. Wise is an international transfer service which AIUI works by matching people wanting to transfer in opposite directions and so minimising the actual currency exchange, which allows them to charge very low commissions. It's already registered as a bank in Europe. The application in the US is probably linked to its plan to move from the London Stock Exchange to the New York one, because the UK is less happy with founders having a different class
I thought this is what giftcards were for (Score:5, Interesting)
Sell gift cards for $x, pay out all but $0.44, but do it 800000000 times. you now have a gargantuan pile of cash that you can't touch, but can use as collateral. This is what Starbucks and every other company that sells gift cards does.
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You very much can touch that money
This is true, but it's also dangerous. On the other hand federal law allows you to expire them after 5 years. Some states don't allow them to ever expire, but most do. So eventually you do get some of that money back.
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Sell gift cards for $x, pay out all but $0.44, but do it 800000000 times. you now have a gargantuan pile of cash that you can't touch, but can use as collateral. This is what Starbucks and every other company that sells gift cards does.
Does anyone actually do this? Sounds like an urban myth to me.
The benefit of gift cards to shops is that they encourage people to spend more precisely because people donâ(TM)t want to lose that 44p. So if you've a gift card for £20, you spend £21 and pay the rest in cash/card.
Already headed that way... risks (Score:2)
For one there the repeal of Glass-Steagall. Secondly With 30+% of the S&P 500 tied up in seven AI companies' stock as of a month ago (think I recall in recent weeks it went up) that seems like putting putting most your eggs into the same hand-basket to hell while running over bumpy path to trip up said hand-basket. With my first point of Glass-Stegall I am no lawyer but think there already a mixing of (like the summary mentions with this types of applications are) non-FDIC insured and FDIC insured inte
Current Stage: The Great Grift (Score:1)
The grand master plan of crypto
The plan for all cryptocurrencies isn't what they want to make you think it is. It's more sinister than the egalitarian image the crypto boys portray for it.
After the 2008 financial meltdown, cryptocurrencies were born out of it, declared to be the means by which people could be freed from banks/governments, and promised to avoid any such future meltdowns from happening ever again.
But the crypto boys watched closely the result of that meltdown, and formulated their plan: c
So they can create money (Score:3)
Banks, these days, don't borrow to issue loans, they add the numbers to their data... effectively creating money out of nothing. That way, they don't have to borrow and pay interest.
Show me a company that doesn't want to do that... esp. since the stock valuations have no relation to reality.
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Companies want to become banks they realize that they can make more money financing sales than by making sales. Prime example is GMAC.
The same reason (Score:2)
For the same reason bank robbers rob banks: "It's where the money is."
Then all employees have be paid (Score:2)
Less Regulation (Score:2)
Biggest reason is less regulations. Currently they need to get money transmitter licenses from every state and territories which all have slightly different requirements. Wise can't even legally get one in every state because some states require US Ownership. By getting a federal charter they can leverage that across the entire country. Don't need to worry about compliance to 50+ jurisdictions.
Less bank regs, heard that tune before (Score:2)
Banks are financial infrastructure. If they break, they take lots of businesses and customers with them. I'm okay with lone failures, but banks have lots of hooks.Please don't gamble with infrastructure!
We've already done this (Score:2)
In the 1800's where anyone could start a bank. The result was several collapses of the financial system until they came up with the central bank because people don't like it when they lose money. They whine and complain. Expect more of the same with history repeating itself with crypto. I'd expect one big financial event that has collateral damage on crypto, and currencies that don't have ties to something else could go defunct if they hit zero (who is going to buy if they hit zero?).
Also do you think peopl
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I thought Willie Horton had this one (Score:2)
But, no. It's Leslie Fish who has the answer:
Robbing the Poor [youtube.com]
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D'oh! Willie Sutton, not Willie Horton!
Anyhow, I stick by Leslie Fish's answer.
Large and unregulated (Score:2)