All the people involved are institutional investors. 0% of people who have USD savings under $250k are affected by this. On the other hand, anybody who has a significant portion of their net worth tied up in cryptocurrency is affected by this.

If anyone doubts that this is just a theory, I can confirm it. I live in third-world countries and use USDC exactly for this.

The big one is that many countries do offer foreign currency accounts, but don’t properly hold reserves for them, so the security is there until it isn’t.

So you are saying that there are countries where USDC is legal while opening a foreign brokerage account like IBKR and converting your currency to USD is illegal? And this is not just a perceived loophole? Could you give an example of a country like this so I could google?

Except it does a lot more than that as highlighted here. It's not just a USD + exposure. It's pretend to be USD + its own set of risks. I'd rather buy USD or if you can't then do something else.

Having the entire reserve as cash wouldn't exactly help here - imagine if 30% of USDC's total reserves was in Silicon Valley Bank, rather than just 30% of their cash. (I think I've pointed out before in discussions of Tether etc that stablecoins can't safely just hold their rexerves as cash in a bank account because banks can and do fail and FDIC protection basically does nothing at this scale, but I wasn't expecting it to be demonstrated quite so spectacularly.)

The difference is at least with banks e.g. SVB here you get back your 250k. When these coins die you get 0.

And if only we're true to the "original idea" (whatever that might be). As seen with lots of coins / exchanges it's been a front to do something else.

> The original idea with a 100% collaterilised peg was that the entire reserve would be cash.

What is cash? Banknotes? You can't store 500 million pieces of $100 banknotes easily or safely.

Cash usually refers to deposits at accredited financial institutions like banks. Effectively this is an amount of money that the bank owes to Circle. The bank deposits money elsewhere, and the central place where all the money is distributed is the Federal Reserve Bank, the central bank of USA, that can never go bankrupt. OTOH, treasury bond is money that US Treasury owes to Circle, so they are not fundamentally different than cash, and in some cases it's even safer since US Treasury bonds are usually regarded risk-free.

Most stablecoins conform to TRC-20 standard, on TRON network. Ethereum use is being phased out because of high fees.

That doesn't make them stable. The 2008 financial crisis was literally caused by big US banks. They then had to be bailed out.

This is not a symptom of a stable banking system. It's a symptom of the banks having a disturbing amount of power over the government, which is not a good thing. They were able to conduct what is essentially fraud at a massive scale with impunity because they knew the gov would bail them out when shit hit the fan.

I really don't understand what's so "stable" about this.

On the other hand, you could throw a dart at a random non-US WEIRD country and find a more stable banking system..