Singapore opens to stablecoins – once they jump through some hoops

The Monetary Authority of Singapore (MAS) endorsed the use of stablecoins on Tuesday, when it released a regulatory framework for the digital assets that allows their use provided their operators implement protections for owners. "When well-regulated to preserve such value stability, stablecoins can serve as a trusted medium …

[Catkin]

Worst of both worlds

PoW is definitely not without a laundry list of issues but a pegged cryptocurrency with a central issuer is just fiat with extra steps and risks. The only real advantage I can see is a block chain letting others verify account balances but, against that, seeing this value doesn't verify that the underlying fiat actually exists at any given time.

To clarify, the two advantages of PoW are democratisation (a move to conduct a 51% should become aparrent and drop the value, limiting its utility) and wallet control, that is, a user could theoretically encode their private key in something as mundane as stitching in their underwear and later use it to resume use of their tokens while loss of said underwear without backup would theoretically render their wallet unrecoverable. Essentially, any cryptocurrency where the user can appeal to a central authority to rectify errors doesn't offer that user total control over their tokens.

[jmch]

Re: Worst of both worlds

The one 'end user' benefit of using a cryptocurrency that is highly regulated in this way is that the issuer / broker needs to keep sufficient capital at hand to cover their liabilities (ie the users' deposits). Doesn't seem as safe as a 'real' retail bank where most western countries have government-backed deposit insurance, but certainly safer than a SBF-style wild west where customers deposits are treated as company money. Also, this type of backing only really works for stablecoins with pegged-to-fiat value... if a customer buys $100 worth of crypto that becomes 'worth' $200 a month later and they want to cash out, where is the bank or broker going to get the money from???

"the two advantages of PoW are democratisation...and wallet control"

Wallet control is possible with Proof of Stake, the real advantage of Proof of Work is the impossibility of a central authority to control or issue any currency. As you say, any PoW system where a single entity has control of 51% of the network is worthless.

[tony72]

Re: Worst of both worlds

The one 'end user' benefit of using a cryptocurrency that is highly regulated in this way is that the issuer / broker needs to keep sufficient capital at hand to cover their liabilities (ie the users' deposits). Doesn't seem as safe as a 'real' retail bank where most western countries have government-backed deposit insurance

Your "real" retail banks don't have sufficient capital at hand to cover their liabilities, it's called "fractional reserve banking", and your government deposit insurance schemes are mostly smoke and mirrors designed to try to prevent bank runs from happening in the first place - if a widespread loss of confidence in the banking sector were to occur, you would quickly find that those schemes don't have nearly enough money to handle it. I also recommend looking up the "bail-in" rules that have been put in place in most countries since the last financial crisis, and find out whose money will be used to rescue the banks next time around.

Also, this type of backing only really works for stablecoins with pegged-to-fiat value... if a customer buys $100 worth of crypto that becomes 'worth' $200 a month later and they want to cash out, where is the bank or broker going to get the money from

If the bank is acting as a bank, then you withdraw your funds in the same form you deposited them; if I deposit pounds in my bank, that's what I spend or withdraw, and it would be the same for bitcoin, stablecoins, or other cryptocurrencies. If I deposit one bitcoin, the bank custodies one bitcoin for me, and if I want to withdraw it, the bank gives me back my one bitcoin. What that bitcoin is worth in dollar terms is irrelevant to them.

If, on the other hand, the bank is acting as an exchange, then they are market-making, i.e. matching buyers and sellers. Thus they don't have to " get the money from" anywhere; your $100 worth of crypto is now worth $200 because someone else is willing to pay that for it, and the bank simply takes a fee, or adds a little margin on the bid-ask spread (or both), in facilitation the trade.

Those two functions are distinct and separate, and do indeed require different sets of regulations to protect customers, but in neither case should the bank itself be exposed to price volatility of any crypto on its books.

[Anonymous Coward]

Re: Worst of both worlds

A 51% attack on the Bitcoin network is no longer financially viable. It is technically possible, but the cost to pull it off would require Elon Musk levels of wealth...and even then, it would bankrupt the backer.

Other networks though BitcoinSV etc...waaaaay cheaper.

[Catkin]

Re: Worst of both worlds

I also expect that, in the run up to a 51% of that scale, people would notice the enormous hardware hole it would create and the subsequent glut of hash rates would tank the price. After that, there would be a drop if the attacker tried to sell off any quantity of tokens and a final massive loss when the 51% becomes apparent.

In short, it seems cheaper easier and more financially damaging to covertly acquire a nuke and more profitable to acquire a conventional bank, depending on the aim.

[Anonymous Coward]

Re: Worst of both worlds

"where is the bank or broker going to get the money from"

The open market, just like selling stocks and shares...your broker would give you a quote (based on market conditions), open a position on an exchange and execute the trade. The difference between the quote and what the market provides, are not your problem...they are the brokers problem...that is how decent brokers make money. They give you a quote, they achieve a percent or two of margin, they profit. A shitty broker charges you a fee as well, because they don't have the skills or capability to execute a profitable trade.

Some brokers may decide to just buy the asset off you, because the market conditions may allow them to sell it again quickly to another customer without hitting an exchange, leading to more profit.

This is how brokers work. They have several options available to them depending on market conditions, their liquidity and their current asset portfolio. It all depends on their current overall strategy, cash in hand, asset portfolio etc.

The one thing you'll never get from a broker, is the best possible deal. With a broker, you're paying to get the job done faster and more efficiently...they are a convenience, they aren't there to secure you the best possible deal. Because for them to be able to do that, they would make no money.

It's a similar story with mortgage brokers, you don't go to a mortgage broker because you want the best possible deal, you go to a mortgage broker because it's easier and they will have knowledge about the mortgage system that you do not which makes it easier to secure a mortgage.

If you want the cheapest mortgage, and you are an uncomplicated customer, you go straight to the bank or building society.

The SBF style wild west sort of setup existed because of lack of regulation...he was able to use a dubious asset he created as collateral on loans. With proper regulation, this can't happen.

Even better, with a wallet on a proper PoW chain, you have no reason to use an exchange as your custodian for your asset. That is greatest benefit at play here...but for some reason, legions of people still leave their assets sat on the exchange...which leads to arseholes like SBF putting their hand in the cookie jar.

If you take your assets off the exchange, the exchange cannot take what they don't have...there is absolutely no reason to leave your assets on an exchange...whatsoever.

Every man + dog has been saying for years and years to not leave your assets on exchanges. We're so far down the line now with crypto that if people get fucked by an exchange, it's becoming really hard to sympathise with them.

When people come to me for advice, one of the first things I tell them is to make sure they have their own wallet set up and to never leave funds on an exchange...and yet, people still do it...it's a lesson that dates back at least as far as Mt.Gox which was 10 years ago!

Outside of regulation, the other problem we have is governments refusing to acknowledge cryptocurrency as a part of modern life. They seem to have a lot of inclination to put out threats on radio ads for crushing your car if you don't pay your road tax, and sending arseholes with clipboards to your door if your TV license isn't paid, but they haven't put out one jot of public awareness advice around cryptocurrency.

A fucking simple government radio/TV campaign advising people to not keep money / coins on an exchange would go a long way...but it would mean that the government would have to acknowledge that cryptocurrency is a thing and for some reason they are extremely coy when it comes to that.

A fucking BBC Panorama episode would go a long way as well focusing on major exchange implosions and how people could have protected themselves, rather than just hounding the c*nts that took advantage of them. If Panorama spent less time on "oh man, this guy is a fucking crook, look what he did" and more on spreading actual awareness of how to protect yourself, it would be a BBC asset...not just some show where they send a fucking idiot journalist out to follow some wanker walking his dog, who is obviously not going to say anything...because he has been fucking advised to say nothing by his lawyers.

[Anonymous Coward]

Re: Worst of both worlds

All of the governments studying this appear to want a fiat currency, just a digital one. So that's a feature for them, not a bug.

[Pascal Monett]

Re: Worst of both worlds

"any cryptocurrency where the user can appeal to a central authority to rectify errors doesn't offer that user total control over their tokens"

I don't see where users had total control over their tokens in the various funny money "exchange" crashes we've seen recently.

But hey, if you want to play with fire, go right ahead. Just don't come crying when you get burned.

[Catkin]

Re: Worst of both worlds

I didn't mean to suggest that PoW currencies automatically provided total control to the user, just that it's possible (which it is not for stable coins, nor is it possible to prove mintings are valid). We've also seen poorly implemented wallets result in currency being stolen. To use a gold analogy, what you've described is the same as people who "buy" bullion at exchanges which hold it for them. Unless the key/gold is in your hands, you don't have ownership: this might be further complicated for the former as keys can be duplicated.

The ability to fudge the numbers is precisely why the exchanges threw up incentives to leave crypto in their wallets, rather than transferring it.

[mpi]

Re: Worst of both worlds

> PoW is definitely not without a laundry list of issues

I'd say a laundry list isn't even required. The first item is damning enough. A currency, that can only perform a miniscule fraction of the transactions that credit cards alone manage, but eats up the electricity requirement of a western industrialised nation to do so while also producing a small mountain of burned out hardware in the process, is already an extremely bad idea for that one problem alone.

> but a pegged cryptocurrency with a central issuer is just fiat with extra steps and risks.

I know, right?

It's almost as if there were really good reasons for all those rules, regulations and centralizations put on boring old fiat currency, and "crypto" has spent basically it's entire eixstence discovering that, and wasting an enormeous amount of energy and hardware in the process, to arrive exactly at the point it pretended to be able to replace :D

[Ian Johnston]

Coming up next: Singapore takes decisive steps to regulate the buggy whip, colza oil and linoleum industries.

Crypto is over, folks, It was only ever a scam and now it's a busted scam.

[tmTM]

Regulation

The death knell of the Crypto industry