Crypto assets in Asia, and some random thoughts on "Eurodollars" vs stablecoins

[johnarb]

I was going to just post a reply on this thread https://elitetrader.com/et/threads/post-for-redduke-on-usdt-funny-business.375543/ but I wanted expanded topic

To start off, I wish there were more posters on the Crypto Assets forum from Asia or even from places like Turkey, Argentina and other nations with active crypto assets financial system native blockchain usage

US, Canada and other western nations do not have real crypto assets usage. Let's face it, they are very happy with Venmo, PayPal, Apple Pay, etc

When I was living in the US, I was only relaying what I've read so not first-hand experiences

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Anyway, TL;DR, warning

Eurodollars, EuroEuro, EuroYen, Asiadollars, et al

https://en.wikipedia.org/wiki/Eurodollar

This highly complex over $13T financial beast that the US Federal Reserve doesn't have much control over turned out to be a little too simple

I opened a local bank account, to store local currencies, to pay living expenses and my bank rep was offering different types of accounts, one of which is a $ account, wait, is that what I think it is

I mentioned Eurodollars? but she doesn't know the term, but it quacks like a duck, it's Eurodollars (or Asiadollars) and she also said I can have Euro account (EuroEuro) or Yen account (EuroYen)

But what if I don't have any US $ (I do, but want to keep them in paper form) and she said it's no problem, they will allow me to purchase any currencies as part of bank services (forex services) and they will keep the currency in the account

So, I said thanks but I already have US $ bank accounts in the US banks and she said it allows transfers from US bank accounts more easily (faster)

[Personal thoughts, stablecoin USDT is better than Eurodollars]

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Stablecoins (i.e. USDT)

I started with Eurodollars because now think about this, USDT is fucking superior. You don't believe me, well I'm here, speaking on first had experiences

Eurodollars in banks means it's limited by banking hours and holiday schedule. Full stop

And, stablecoins like USDT are bearer assets. Full stop

But you can't spend it in stores, well, true, if you're an idiot who can't use simple mobile apps

In Asia, you pay with QR. full stop

Where I'm at, there's a dozen mobile apps, actually a lot more, lol, and some have crypto integration. full stop

You can transfer funds from any mobile app

Click click, boom boom pow. You got that dinner paid, hotel bill paid, Mcdonalds bill paid, local utility paid, etc etc

In Binance, there's a section for P2P, you can have higher exchange rates than forex rates on USDT vs US $. full stop

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Crypto assets

Everything is regulated. All crypto assets are securities
Exchanges will be shutdown if they are not in compliance with regulations. AML-KYC are very strict

No worries on banks closing down your account

 

[NoahA]

And, stablecoins like USDT are bearer assets. Full stop

Although I think its more of a bearer asset than cash in a US bank, I think everyone should realize that this isn't really the case when compared to something like a true bearer asset, like bitcoin.

There is still huge counterparty risk with USDT, since its centralized, and correct me if I'm wrong, but since its an ERC-20 token, it can easily get caught up in the blacklist issue. If your address is flagged at being "bad", then validators can easily refuse to process your transactions, and since I think well over 60% of validators do openly follow this blacklist, it might be a while until your transaction gets through, and maybe one day, never.

So although I understand that its perhaps easier to use USDT vs. USD, I wouldn't think that this will always be the case and that 5 years from now, if kept in cold storage, it will function just as it did before.

 

[johnarb]

Although I think its more of a bearer asset than cash in a US bank, I think everyone should realize that this isn't really the case when compared to something like a true bearer asset, like bitcoin.

There is still huge counterparty risk with USDT, since its centralized, and correct me if I'm wrong, but since its an ERC-20 token, it can easily get caught up in the blacklist issue. If your address is flagged at being "bad", then validators can easily refuse to process your transactions, and since I think well over 60% of validators do openly follow this blacklist, it might be a while until your transaction gets through, and maybe one day, never.

So although I understand that its perhaps easier to use USDT vs. USD, I wouldn't think that this will always be the case and that 5 years from now, if kept in cold storage, it will function just as it did before.

USDT is not only an ERC-20 token, it also exists on other chains as a BSC-20 for example or TRC20

It is horrible having to pay more than a typical local laborer's day wage in Ethereum fees, iow most Asian crypto users avoid the Ethereum network like a plague when they can help it

USDT is centralized and even Paolo himself has tweeted that they will comply with an international court order, but honestly, if you have that problem and you're in Asia, you're fucked

And yes, don't hold any USDT, only hold bitcoins and get out of Asia to some place like Dubai or Russia

But for the normal , law-abiding, Asian, Lebanese, Argentinian or Turkish crypto users, holding USDT is much easier and much better than holding Eurodollars in the bank... and this is much better for their savings than holding the local fiat currencies

USDT is a bearer asset and if we're talking about counterparty risks, then sure, everything has a risk of collapse, even Tether

That's been an ongoing cycle of circular fud and I choose to side with Tether and choose to use and hold USDT

https://twitter.com/x/status/1685993811774738432

 

[johnarb]

Interesting...

https://twitter.com/x/status/1685778898414379008

 

[NoahA]

But for the normal , law-abiding, Asian, Lebanese, Argentinian or Turkish crypto users, holding USDT is much easier and much better than holding Eurodollars in the bank... and this is much better for their savings than holding the local fiat currencies

This I can absolutely agree with. But we also cannot discount the slim chance of Tether going bust. So while holding USDT might make much more sense than a local currency, and especially if inflation is 50% per month, you do have to consider that stablecoins do still represent some risk.

Obviously the risk for people in poor countries is nothing compared to the guaranteed debasement of your currency, but I'm not sure why someone in the developed world would hold 100k in USDT vs. in something like treasuries earning 5%. Maybe getting in and out is difficult, or maybe its only a temporary holding that you plan to use shortly to buy more crypto, but I'm just not sure if I could sleep at night holding Tether if a significant portion of my wealth was in it. There is literally zero upside, and we in the west have better options for holding USD, and have easy access to it. So yes, I understand the world needs USDT since its a better option than what they have, but it comes with trade-offs.

USDT is a bearer asset and if we're talking about counterparty risks, then sure, everything has a risk of collapse, even Tether

I would almost argue against this. Yes, its a bearer asset because you have the keys for it, but the issuing company has to agree that you have it, and they have to approve your right to transfer it. I would almost argue that cash is a better bearer asset than USDT, even though it is of course still a liability of the FED. But at least with cash, anyone will take it and they can't stop you from using it in small amounts all over town. But your ability to use USDT can easily be taken away via the sanctioned addresses issue I mentioned. Of course you know this, but people reading this should be aware that USDT being a cryptocurrency that you can easily transfer isn't anywhere the same as Bitcoin being a crptocurrency that can also be transferred. The underlying mechanism of the bitcoin blockchain and truly permissionless network is like night and day compared to USDT running on its respective networks.

As for the update on Tether financials, it got me thinking... what would things look like if Tether was like a bank who held those bonds from a few years ago which only earned 0.25% and all of a sudden, people wanted to redeem tether. There was enough talk of their commercial paper, which really isn't that riskless, but after all these banks collapsed, and we learned it was because of holding the safest asset in the world, I do wonder if Tether could have stayed solvent.

Of course now with 5% yields on 10s of billions in treasuries, they are sitting in a good position, knowing they don't need to pay any dividend and can keep all that interest income for themselves and hence be over-reserved, but I do wonder how things could have turned out if history ended up being just a bit different.

Now don't get me wrong, I don't think Tether is at risk of collapse. But there are enough questions to warrant caution. Its probably like the recent bombshell about Ledger. I know you don't use hardware wallets, but this story was huge. Ledger introduces a service to allow for your private seed to be exported to 3 different parties, so you if ever lost it, it could be reconstructed. The uproar was warranted because people thought there was no way for a Ledger device to ever send out the seed, even if it is encrypted. But now that we see its possible, I'm not sure who ever wants to trust Ledger again.

This brings me to the final point. Ledger doesn't open source their firmware, so there is no way to verify what its doing and how its doing it. This is much like Tether.... we just have to believe them. Other hardware wallet makers who are truly open source have lots of coders verifying the firmware, to make sure there are no bugs or malicious bits of code injected. So bitcoin is like the open source software, and Tether is like Ledger, closed source, with the expectation being that the consumer just trusts them.

 

[johnarb]

Bitcoin being a crptocurrency that can also be transferred. The underlying mechanism of the bitcoin blockchain and truly permissionless network is like night and day compared to USDT running on its respective networks.

I'm a Bitcoiner so this thread is not about USDT vs bitcoin, in fact, I did not mention bitcoin in the title nor in the OP

...but I'm just not sure if I could sleep at night holding Tether if a significant portion of my wealth was in it. There is literally zero upside, and we in the west have better options for holding USD, and have easy access to it. So yes, I understand the world needs USDT since its a better option than what they have, but it comes with trade-offs.

Nope, I would not recommend holding "a significant portion of wealth" in USDT, or USD paper cash or USD in banks. Only hold in fiat what is needed for liquidity, living expenses, risk management through money management, nfa of course

This brings me to the final point. Ledger doesn't open source their firmware, so there is no way to verify what its doing and how its doing it. This is much like Tether.... we just have to believe them. Other hardware wallet makers who are truly open source have lots of coders verifying the firmware, to make sure there are no bugs or malicious bits of code injected. So bitcoin is like the open source software, and Tether is like Ledger, closed source, with the expectation being that the consumer just trusts them.

I'm not a fan of Ledger or any hardware wallet, but I don't argue for or against them on the forum, simply because I don't use them, I am not qualified to pass judgement

However, this is just completely inappropriate to compare a crypto asset like Tether to a hardware wallet (manufacturer). Seriously, this is a big stretch. Crypto assets which is the title of this forum are digital assets that are used on the blockchain

There are many crypto assets, Usdt, Eth, Dai, Gusd, Btc, Ltc, Uni, Aave, Pepe and on and on. Some are more decentralized than others, and some are completely centralized. Usdc, Usdt, Gusd among others, but comparing any of them to Ledger, a hardware manufacturer, I just cannot wrap my mind around that argument

I would almost argue against this. Yes, its a bearer asset because you have the keys for it, but the issuing company has to agree that you have it, and they have to approve your right to transfer it. I would almost argue that cash is a better bearer asset than USDT, even though it is of course still a liability of the FED. ... But your ability to use USDT can easily be taken away via the sanctioned addresses issue I mentioned. Of course you know this, but people reading this should be aware that USDT being a cryptocurrency that you can easily transfer isn't anywhere the same as Bitcoin being a crptocurrency that can also be transferred.

As for the update on Tether financials, it got me thinking... what would things look like if Tether was like a bank who held those bonds from a few years ago which only earned 0.25% and all of a sudden, people wanted to redeem tether. There was enough talk of their commercial paper, which really isn't that riskless, but after all these banks collapsed, and we learned it was because of holding the safest asset in the world, I do wonder if Tether could have stayed solvent.

Now don't get me wrong, I don't think Tether is at risk of collapse.

Your post does sound like you think Tether is on the brink of collapse

I'm in Asia and we use crypto assets like Usdt natively on the blockchain. A lot of the misconceptions that you have are simply due to the fact that you don't use Tether or any

If you have 1,000 Usdt, or 10k or 100k or even 1M usdt there is never an approval or permission to use the usdt on the blockchain. I do not know where you're getting this idea, this is not how crypto blockchain work

Usdt like any crypto assets works on a block per block basis

As far as blacklisted addresses, I cannot comment on why you think this is a common occurrence?

Redemptions of USD from Usdt is not something you have to worry about or anyone that has less than 10M Usdt

The thread is about Usdt vs Eurodollars and now you're including Treasuries, but that is a contract, not a liquid spendable asset

Comparing Usdt to cash, because they are both bearer assets, fine let's go there. How would I use physical cash at exchanges to trade for bitcoin or any other crypto asset? you see my point, comparing digital USD vs physical USD

Look, your post is very much anti-usdt and I get it, you don't trust Tether...

But the crypto users outside of your country or the US trust Tether and we use it just like many other crypto assets

I've said this before and I'll say it again, I hope the western governments continue to restrict and ban crypto assets, through Operation Chokepoint 2.0 and other measures

There is no need for the citizens of those countries to use the crypto assets natively, they can just use Venmo, Apple Pay and Blackrock etf's and other centralized derivatives of bitcoin and crypto assets

Do you agree with this? It would be much safer for you and everyone

 

[traider]

what about other stable coins

 

[johnarb]

what about other stable coins

There are other stablecoins, but Usdt is the biggest one with the most liquidity and wide acceptance in all markets

 

[NoahA]

As far as blacklisted addresses, I cannot comment on why you think this is a common occurrence?

Its not a common occurrence, but simply the fact that it can happen has to be taken into account when assessing your risk model. It is actually difficult to dig up information relating to this, which means that it really isn't happening, but there is this headline from a year ago.

The reason I bring up hardware wallets is because they were always thought of as devices that would never allow the private seed to leave them. That is their only job... to keep the seed private. But now Ledger comes along and says "look at this great service where we can back up your seed phrase". The shock of course is that people thought the hardware wallet could never do this, and here the company is advertising this exact "feature". So when people think of blockchains, like bitcoin, and computers doing all the validating of blocks, they may not understand that in the middle of all of this, for the ERC-20 chain are validators that can be programmed to blacklist certain addresses which would render your USDT perhaps worthless.

The parallels are quite striking, and hence what I was pointing out. I wouldn't say I'm against USDT, and truth be told, my experience with it is very limited. And I do understand how important it is for many people around the world, but everyone needs to understand the nuances and limitations.

 

[johnarb]

Its not a common occurrence, but simply the fact that it can happen has to be taken into account when assessing your risk model. It is actually difficult to dig up information relating to this, which means that it really isn't happening, but there is this headline from a year ago.

View attachment 319980

The reason I bring up hardware wallets is because they were always thought of as devices that would never allow the private seed to leave them. That is their only job... to keep the seed private. But now Ledger comes along and says "look at this great service where we can back up your seed phrase". The shock of course is that people thought the hardware wallet could never do this, and here the company is advertising this exact "feature". So when people think of blockchains, like bitcoin, and computers doing all the validating of blocks, they may not understand that in the middle of all of this, for the ERC-20 chain are validators that can be programmed to blacklist certain addresses which would render your USDT perhaps worthless.

The parallels are quite striking, and hence what I was pointing out. I wouldn't say I'm against USDT, and truth be told, my experience with it is very limited. And I do understand how important it is for many people around the world, but everyone needs to understand the nuances and limitations.

I'm having a difficult time to have a discussion with you on this because we do not have a proper baseline and when you bring up similarities to Ledger, I just don't know what to say

You are using hypotheticals to fud the whole crypto assets ecosystem, except Bitcoin,

You've chosen erc-20 Usdt as a basis of what's at risk of being blacklisted and censored by the validators, but just so you know, you've basically fudded the whole Ethereum project

Did you think that blacklisting an Ethereum address is only specific to a single erc-20 token on that address?

To be clear, that applies to all crypto assets on that Ethereum address including nft's and Eth stored on that address

What you're really arguing is that no one should be using Ethereum... and perhaps any blockchain project that has Usdt tokens

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To get back to the topic of the thread, which is blockchain crypto assets in Asia... It's working as designed. Crypto users are transferring, trading, using smart contracts

An example is the p2p on binance. Usdt market makers are a buyer and a seller 100 basis points spread

To me, that's a pretty fucked up "business", sure I can do that, too, very easy job, receiving funds (fiat) or transferring funds (fiat) and maybe these guys churn $10K worth each day (I doubt it) but that's $100/day, nah, I'd rather do something else, like read and shitpost on ET

Anyway, since we're back on the thread topic, let's explore on crypto assets operations on the blockchain a bit more

Before stablecoins and even before Ethereum, the native currency and unit of account for the whole cryptos was bitcoin/btc

People experimented with altcoins (Bitcoin OG's did not refer to them as shitcoins until later) and traded to gain more bitcoins in their stack

Fast forward to today, let's be honest, most of the cryptos community unit of account is stablecoins (Usdt). Fiat mindset, but also people from poor country cannot handle the volatility swings of btc, eth, and others

There's also a lot in the community that has chosen Eth as their unit of account

Speaking for myself, my unit of account on store of value (savings) is bitcoin and my unit of account for expenses (checking account) is Usdt and fiat. I need to have enough fiat/Usdt otherwise, I'm being irresponsible for my family

If you're not using crypto assets on the blockchain there is no framework for discussion on the topic of this thread