I am becoming convinced the people at the previous SEC under the Biden administration are essentially the Alex Jones' of financial regulation. It's all insane disconnected sound bits and deranged theories that collapse upon investigation. I'm just waiting for someone from that cabal to accuse crypto founders who are hacked of being crisis actors at this point. But let's dive into today's problem. What is said here is a wild set of statements and demonstrates a very deep and very sad level of misunderstanding / active unwillingness to learn. If a Genius-style stablecoin has a run, it's because America was already fucked, and the country collapsing causes the run, not the other way around. First, the Fed is saying they will take direction from Congress which, well, I mean, good? You wouldn't want them going rogue and saying yes or no to this. Second, there are stablecoins that are backed by MMFs literally right now. Go look at what Blackrock is doing behind USDC for Circle. We're all aware this is already a gov't MMF, right? People know this, yes? However, do you know what type of MMF they are? Let us come back to that. Third, in terms of the Fed providing support to the MMF complex, the main things that consistently need support are the prime money market funds. Why is that? Well, I will remind everyone of the big difference between prime funds and goverment funds: the former can hold bank commercial paper and the latter cannot. Interesting, right? I will leave it as an exercise to the reader why in times of financial stress, like 2008 and 2020, it is the prime money market funds that consistently need support from the Fed to keep short term markets working. Fourth, the Genius act currently constrains stablecoins to looking like government money market funds. Let me list some things they cannot own: ABS, CMBS, credit, and commercial paper. Essentially, the NYDFS looked at the money market reform efforts of major regulators (incl. the Fed), a thing for which our regulators honestly do not get enough credit as here is one area where they did a genuinely good job, and said ah! That's great! We are going to copy it. So they did. I will take this moment to remind readers that since 2018, zero NYDFS stablecoins have had any peg stability issues or broken the buck, a fact that folks like Amanda completely gloss over because if they had to confront this fact, it would annihilate their arguments against Genius. Why? Because the Genius act steals the homework of the NYDFS, who stole the homework of the Fed and previous-era SEC (you know, back when they were competent, which is before Amanda's time), and thus is a literal straight line of reform from 2008 to present to put stablecoins squarely into the best-performing post Dodd-Frank framework for cash stability products: government money market funds. Fifth, this means that the holdings of a Genius stablecoin work as follows: They are basically composed of t-bills, tri-party reverse repo secured by US gov't debt, and bank deposits. Obviously the most vulnerable of those is the bank deposits, but that also makes it a transparently insane argument to say "we should make them safer by making them into banks" when banks are the riskiest part of the thing. The other things are literally US gov't securities. If those fail? Well, the entire US financial system is collapsing, and the stablecoin is a very small tail on the gargantuan dog of the complete implosion of the entire US political system. You'd expect a dollar stablecoin, what with the whole being pegged to the dollar, to do poorly in that case. They are also bankruptcy remote and segregated. This is something I think a lot of people don't understand, because they don't understand bank deposits are not bankruptcy remote, and they don't understand FDIC insurance is limited, not guaranteed to be there in a major crisis (you know the FDIC doesn't have enough money to cover the deposits), and would rely on Congress bailing it out, at which point, well, we're back to 2008 and all kinds of things being bailed out. Lastly, we have banking regulators sitting on top of them. Again, if we have concerns here with the Fed or the OCC, then we need to have a discussion about the entire banking system. If we think they aren't competent to regulate unlevered money market funds, we can't then go "oh but they'll do fine with JP Morgan". So we are coming all the way back around to the insane view that stablecoins can only guarantee a peg with a Fed master account, while now also understanding that regular way MMFs and banks are less safe than the stablecoin. This means either Amanda genuinely believes the entire US financial system is Fucked with a capital F (and should be getting insanely long BTC and gold), or she doesn't know what she is talking about because she thinks the less risky thing can't hold a peg but the more risky thing magically can? Sigh. I guess the upside of these public crashouts by our previous regulators are that they reveal to everyone that we should not believe the SEC under Gensler had good intentions, good faith, or good information about what was going on. It's becoming increasingly clear in retrospect this whole thing was a total fiasco, and if the Democratic party wants to win back trust, these people need to be repudiated and permanently ejected from the halls of power. Anyone still taking meetings with @BetterMarkets should be the number one primary target for @standwithcrypto and, given the behavior here, @TalktoBPI and the other bank policy groups, as this sort of unhinged nonsense is how you accidentally cause the regional banking crisis and spark bank runs because you have become the purveyor of disinformation.
