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1) A good point someone brough up recently: really 'stablecoin' is used to mean multiple different things.

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Just as the outside view skeptics predicted, during a large market move a stablecoin blew out. Just not the stablecoin they predicted. Which was predictable, if you knew the details. This isn't a comment about good vs bad--it's about how important it is to know the details!

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2) One thing it can mean is "stablecoin backed 1:1 by USD in a US bank account". That's what current drafts of US regulations are looking to license, as a first step.

9:37 AM · May 12, 2022Twitter Web App

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3) Another is "stablecoin backed >= 1:1 by liquid debt assets, treasuries, and USD". Non-zero price risk, but generally they stay very close to $1 because they can be redeemed. E.g. USDT has stayed within a few % of $1 during this crash, and hearing $1b+ successfully redeemed

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May 12

4) A third is "stablecoin backed >= 1:1 by a very volatile asset". Those are 'algorithmic' stablecoins. If the underlying crashes they can go down. A lot. e.g. UST.

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May 12

5) Really we shouldn't use the same word for all of these things. What we call 'algorithmic stablecoins' aren't really stable in the same way that fiat backed stablecoins are. They're more like structured products, and they need upside if they want to justify the risk.

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May 12

6) This might not seem as important to people in crypto, because we already know that algo stablecoins are pretty different from fiat backed ones. But in the policy space, that message often gets lost. We need to be explicit about it.

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Generally speaking, it's unwise to package/"back" one instrument of debt in/with another instrument of debt. Wall St. showed us this very clearly in 08. 1:1 already isn't 1:1 (see USD), but it's as close as we're going to get at the moment other than PAXG. The rest is subprime.

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I believe and have always believed that the only ones who can mint stables should be state governments. By doing so, they would be forced to fully accept the crypto world.