> Commercial banks can be easily replaced? How so?
End user deposit accounts held at the central bank [1] and narrow banking [2]. The Fed does not like these ideas though [3] [4], which is why their policy is designed to support commercial banks.
The funny part is the Tether become the narrow bank outside of the traditional financial system; they hold mostly only US treasuries, at nation state scale [5]. Does it matter they don't have a master account at the Fed? I argue no, considering treasuries are backed by the full faith and credit of the US government, and that debt is backstopped by the Fed.
Consumer deposits are unnecessary for lending; credit can be issued by entities who issue debt into the bond market for capital.
[1] https://rooseveltinstitute.org/wp-content/uploads/2021/08/GD...
[2] https://en.wikipedia.org/wiki/Narrow_banking
[3] https://www.chicagobooth.edu/review/safest-bank-fed-wont-san...
[4] https://southerncalifornialawreview.com/2024/03/11/squeezed-...
[5] Tether is now the 17th largest holder of US debt - https://news.ycombinator.com/item?id=45747578 - October 2025
(jqpabc123 mentions in a sibling comment FedNow instant rails, which makes moving value trivial for a few pennies per transaction, up to $10M at a time)
