As the deadline for banks and crypto firms to resolve the “stablecoin yield” debate draws near, I believe it's an appropriate time to reassess what roles the banks want to play in a blockchain-based economic world.
Stablecoins, as the name implies, are an attempt to achieve some sense of stability for crypto or blockchain-based economies.
Although the execution of the idea of stability is largely flawed, the heart is in the right place when it comes to stablecoins.
Economic systems need stable hedge against everything else. They need something that remains in place when everything soars in value and also when they crash.
In most cases, the argument falls heavily on the need to have a stable currency to battle inflation and all of that, but the truth is that the real value comes in something far more simple: accounting.
The biggest reason a stable currency is needed is so it's easier to account for the value of something at any given time. That comes first. Inflation and whatever else are all secondary and tied back to accounting.
It's like units of weight, if you weighed 70kg and ate a big meal, to know your present weight, you need to have a unit of accounting that's stable enough to trust that the figures account for potential gains from the big meal.
When we look at it from this angle, it's easier to understand the importance of a stable currency such as intended for stablecoins.
Stablecoins is how we measure the value of Bitcoin. It is how we understand the standing of debt in DeFi protocols. It is how we understand blockchain usage fees. It is also how we understand the inflation cost of individual chain economies.
It's rooted stability is an accounting solution. Even when we are storing wealth in them, the idea isn't that said assets are wealth instruments but that they are a valid "store of account" for what we own or control.
The banks want control, not competition
This is obvious to most people but at the same time, I think many don't truly understand it.
When the banks complain that the Genius Act has loopholes that allows certain entities provide yield on stablecoins, they act of though they are somehow restricted from assuming those roles either directly or indirectly.
There's truly no reason why anyone shouldn't be allowed to offer yield on stablecoin balances, the problem is that the banks do not want to compete with people who probably will beat them at the game of yields, when it comes to digital currencies.
When the banks fight to ensure that none of these platforms can offer yield, they intend to secure an unfair advantage to pull users onto their platform, even in an era of decentralized finance.
The comical part is that they hold this argument that platforms such as Coinbase and crypto wallets have an unfair advantage with the Genius Act loopholes, whilst trying to get the government to give them as much more unfair advantage.
Funny people, this bunch.