Why does USDC and USDT need to exist for this? What’s the benefit of not just having USD in your Coinbase/bitfinex acc if they’re meant to be pegged anyway?
Tax arbitrage, iirc. In some jurisdictions like the US, exiting your position into USD is a taxable event for capital gains taxes. I seem to recall stable coins were invented to avoid that. I can't imagine tax authorities allow that loophole though.
> Tax arbitrage, iirc. In some jurisdictions like the US, exiting your position into USD is a taxable event for capital gains taxes. I seem to recall stable coins were invented to avoid that. I can't imagine tax authorities allow that loophole though.
If they did, it looks like it's closed now. At least in the US, converting between two cryptocurrencies is a taxable event:
> There are plenty of questions about whether or not investors can claim a direct crypto conversion (e.g. bitcoin to ethereum) as "like-kind", avoiding taxes on those transactions. The tax laws changed beginning in 2018, and like-kind exchanges are only applicable to real estate transactions.
You send USDC/USDT to another exchange, use it to pay for stuff, store it in a hardware wallet, etc. USD can only be transferred back to your bank account.
Because many exchanges are in no way capable of holding a banking relationship with a legitimate bank that transacts in USD.
edit: Perhaps that was overly snarky - the issue is that the US requires legitmate banks to take certain efforts to identify their customers (KYC), and prevent money laundering (AML). Meatspace banks aren't perfect in this regard either, but many crypto exchanges are either unable or unwilling to do this, or are already proven to be engaged in fraud or other financial crimes.
No way interested and running an equivalent business with much less overhead and faster growing customer interest with higher returns, has nothing to do with crime or incompetence or imperfection
I don't fully agree with that.
- Cheaper: Well most decent banks I have been working with don't charge on USD wires, or they charge something like $20 flat, which happens to be on par or cheaper than the ethereum blockchain fees nowadays
- Faster: In my experience (in sending hundreds of wires every month), the actual "sending time" of USD wires via Fed wire or SWIFT is literally minutes, so that's on par with blockchains. Most of the time the funds are just stuck somewhere in the compliance department. The same would hold if you withdraw/deposit USDT/USDC to an exchange. Funds can still get stuck waiting for compliance approval.
- Easier: That's debatable. I guess some banking UIs are better than others. And blockchain is not particularly known to be UI/UX friendly either.
One definite advantage I could think of is that when you hold USDT/USDC in your wallet, then you have full control over them, but I bet 99% of the USDT/USDC is held on exchange, and exchanges are more and more starting to act like banks (with all the slowness that that entails).
Its like cellular service in an underground subway station: people tell you it arrived and use it and nobody thinks about it afterwards. There wont be a source about that whether you believed it or not.
