In a recent analysis published on Coindesk, attorney Daniel Wheeler advocates for the potential game-changer in the crypto realm – a U.S. dollar pegged deposit coin exclusively backed by cash in a bank. Wheeler argues that such a deposit coin could not only broaden the money supply without triggering inflation but also inject significant improvements into the banking sector.
S&P's recent scrutiny of eight leading deposit coins revealed substantial deficiencies, prompting Wheeler to propose an alternative approach. He envisions a true deposit coin that not only enhances the money supply but also acts as a catalyst for U.S. economic growth by bifurcating the money supply into two distinct components.
The first part, the pegged deposit coin, would streamline transactions, making them faster and more cost-effective. Meanwhile, the second part involves U.S. dollars held in bank accounts, strategically positioned to mitigate the costs associated with borrowing USD.
Wheeler emphasizes the need for a specific deposit coin category that refrains from promising yields, earnings, or dividends, aiming to avoid classification as a security and the ensuing capital gains tax implications. Even structures similar to Tether, which S&P criticized, could fall short unless their portfolios strictly adhere to assets confined to dollars in a bank account.
The critical flaw identified in deposit coins like Tether lies in the potential for a "run on the bank." Any deviation from investing solely in U.S. dollars in a bank account jeopardizes holders' assurance of redeeming their deposit coin at any time, in full, at face value.
In contrast, a genuine deposit coin, unwaveringly valued at $1, promises stability without yielding or appreciating. Wheeler dismisses the notion of "hodling" such a deposit coin, emphasizing its primary function as a high-velocity transaction tool, outpacing fiat currency in terms of speed and efficiency.
Wheeler envisions a true pegged deposit coin as a double-edged solution – expanding the money supply without inflation and concurrently lowering the borrowing costs for fiat currency. This innovative concept, he argues, avoids the pitfalls associated with central bank digital currencies (CBDCs), fitting seamlessly into existing legal frameworks, safeguarding the banking system, and resisting government exploitation for surveillance and control purposes.
Coindesk Article:
The Tether Killer? A True Stablecoin Would Enhance Banking and Crypto
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