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  1. More along the lines of something additional being sent to a bonded warehouse on SP, and being released at a discount price re 'incorrect' labelling; subject to later receipt of replacement 'correct' labels. The old labels wash off in SP, the bottles do some travelling, and reappear with new labels in a povincial bonded warehouse. Needless to say, the Mrs is very good with paperwork SD
  2. The whole premise hinges on what the USD for Coin exchange actually is, and how accounting records it. The contributor got Coin, and a statement from the issuer that the coin is backed 1:1 by USD, it is inferred that the assets are US T-Bills and Bonds. However the contribution is NOT equity, it is NOT a segregated fund for some purpose, and it is NOT a secured loan - so what exactly is it? It is nearest to a crowd-fund; accountants/auditors will look to both precedent and the substance of the transaction. Becauase the USD received are NOT encumbured segregated funds, they can be comingled with the issuers funds, and pledged to banks without restriction. Hence no issues around custodians. As the USD received are NOT equity, and the coin can be converted back into USD, it must be an issuer liability. Absent any security documentation, it is an unsecured loan (paying 8% in Geminis case). As the liability is not expected to be repaid, it can be written off and the gain booked directly to equity. Were there security documentation, the funds would be segregated, and comingling prohibited. The result would be a mutual fund, similar to a BITGOLD, SALT, etc. Ultimately the accounting method is an interpretation of the transaction. Both accountant and auditor will be looking to FASB and regulator(s) for guidance. The regulators themselves will also have different views (China, BIS, US, etc) Different set of risks. SD
  3. It's just a different 'value' system, measured against different metrics. In their minds they are being entirely rational. Many years ago I had a great conversation with a kindred spirit who occassionaly smuggled liquor from St Pierre and Miquuelon, something of a sport on that part of the coast. He was truly gifted at it, often earning as much in 1-2 trips as he might otherwise have earned in an entire fishing season, but lived very modestly along with his Mrs and their family dog. He explained that he was in it 'for the challenge', and was so disappointed by the ineptutude of the coast guard officials, that he just gave it up! Fortunately, he agreed to have a nephew 'crew' on his boat one season, with a stop or two at St Pierre. The nephew gets sick as a dog on small boats, but suudenly came back with 1/2 the downpayment on a small house. I know, 'cause I staked him the other half! SD
  4. Variation on this .... In Canada, most people are entitled to a Canada/Quebec Pension Plan - payable anywhere in the world, at any time. The pension could be +/- 30% of the Age 65 amount, depending upon when the person choses to retire, and is in addition to subsidized health care if in the country for > 6 months/yr. Standard 'snowbird' stuff. Except ... keep going south, and fly on to the Carribean, South America, Africa, India, etc. The CAD pension goes a lot further in the weaker currency, local costs are materially lower than they would be in Florida, and its Summer when its Winter in Canada. Rent vs buy, visit with the relatives, pick a different place every year. Retirement looks pretty good! The shorter version is the 2-3 week cruise, with 1-2 month stopovers along the way. Use the cruise ship as a water taxi, where practical share your villa rental costs with others. Obviously not for everyone, and applicable only to the 'go-go' years of retirement. SD
  5. It is a very straight forward argument. Coin holders believe their coin is backed 1:1 by T-Bills/Bonds. Custodians/auditors confirm the T-Bills/Bonds exist - they are indeed owned by the company, they are indeed there, and they have been recorded in the books correctly. However, these are NOT segregated assets, verifiers are NOT confirming that coin holders have beneficial ownership of the T-Bills/Bonds. The coin IS backed 1:1 - but the coin holder is an UNSECURED creditor, and the coin is backed by an illiquid capitalized asset, the company's own unpledged assets, and a small amount of T-Bills/Bonds. If there are insufficient UNPLEDGED assets and T-Bills/Bonds to meet redemptions, the coin issuer has to sell the illiquid asset - and there may NOT be a market. All else equal, over time as more money is spent on development - the illiquid capitalized asset gets bigger, and the quantity of UNPLEDGED company assets and T-Bills/Bonds gets smaller. The coin issuer is becoming a progressively riskier backer of their coin. All that is required for collapse, is a sustained redemption large enough to exhaust the quantity of UNPLEDGED company assets and T-Bills/Bonds. I humbly put forward that the introduction of a US Federal Reserve backed digital USD, might trigger such a redemption. Why? The coin became obsolete as soon as the digital USD was introduced. Functionally, the coin solution still works - but it just doesn't have the acceptance, backing, or utility of a digital USD that can be used in/on everything. The coin users rational action is to to redeem the coin for USD, then exchange the USD for digital USD. Different opinions around introduction of the digital dolllar and CBDC. Look outside of the US and it is pretty clear that CBDC is coming - the only question is how long until arrival. Different opinions around the 'utility' of stable-coin - currency pegs are just one application. Simply segregate the T-Bills/Bonds, turn the coin into 1:10 units of the segregated assets, and you have the standard money market mutual fund at $10/unit. A fund that is materially cheaper to operate and distribute, and WITHOUT the myriad of intervening intermediaries. Different PoV. SD
  6. "It would also be fairly damning of State Street, Signature Bank, and BPM who custody and audit the reserves if they're allowing Gemini to pledge money it doesn't own as collateral for loans for its own benefit". The custody banks would all be on side, as a Gemeni would be putting up unencumbered assets that it does actually own - everyday business. The generic example just used Gemini as a name example of a USD stable coin issuer. No aspersions intended. SD
  7. The accounting quirk that underlies most stable coin …. I give XYZ company 1M USD, they give me an unsecured note paying X% interest/year – called 1M XYZ Dollar, backed by the full faith and credit of XYZ company, and denominated in one-dollar increments. XYZ company: Debit Cash, Credit Redemption Liability. In banking, if a customer deposits money and there has been no activity in the account for X years – the bank can reduce its liability (customers deposit) and credit its equity. However, the bank must then send the deposit to the nations central bank for safekeeping: debit equity, credit cash. XYZ company estimates that some of the XYZ dollar will redeem within 180 days (50K, or 5%), but the remaining XYZ (950K, or 95%) will never redeem. XYZ company debits redemption liability and credits equity. The balance sheet shows 1M in cash, 50K in liability, and 950K in equity – debt/equity ratio looks spectacular! XYZ puts up 100% of its unencumbered 1M in cash (T-Bills, Bonds) as security, borrows 900K and spends the money on IT development, capitalizing the entire cost (simplicity). The balance sheet shows 100K in cash, 900K in a capitalized asset, 50K in liability, and 950K in equity. The custodian will also show 1M in T-Bills and Bonds (collateralized against debt). Were you able to see the balance sheet you would see NO debt, as it is netted against the cash balance. I falsely think the 1M in custodian assets is securing the 1M in XYZ Dollars. Whereas the XYZ Dollars are actually an unsecured claim against 100K in cash and 900K in capitalized asset. Worth cents on the dollar in a XYZ Dollar to USD redemption run. The good news? If the redemption run can be met from an injection of fresh funds, the value of the capitalized asset materially improves. I give you the funds - you give me 95% of the equity; we survive the run; I get very rich and deal the company off into stronger hands. A well-worn robber baron technique. SD
  8. Re Tether: Where is the USD money? Lot of the wrong people beginning to doubt that it is actually there and asking what is real versus notional (ie: derivatives). Not a lot different to the early days of the ENRON collapse, and everybody really hoping that the financing structure is indeed 'OK'. SD
  9. Step back and look at stable coin objectively. Is Gemini not identical to the ‘weak’ country (ie: El Salvador) attempting to maintain a currency peg against a stronger standard (ie: gold)? Growth controlled by the net flow of standard (gold) into the country. Stable so long as the weak country can maintain the markets confidence. Currency collapses if/when the peg can be broken. The US used to have a gold standard, but ultimately couldn’t maintain it. The BoE famously had a currency peg, ‘broken’ by Soros. In both cases, it was a loss of market confidence in the US &/or BoE reserve bank ability to maintain the peg - that triggered the collapse. Stable coin issuers are multiple times out of this league. The market just has to be of the opinion that the stable coin issuer DOESN’T HAVE sufficient reserve of the standard to maintain the peg and calls the bluff. In practice – the issuer has cumulatively spent more of the standard than they have taken in and is no longer able to cover the shortfall via outside financing. Profit via a short sale of the overvalued currency Re GUSD? I surmise their cumulative net flow of USD will be negative, and sustainable ONLY if they can maintain external USD financing. When a US CBDC introduced, there would be a run on GUSD to USD redemption, which Gemini will not have the liquidity or USD assets to meet. Peg breaks, Gemini collapses. All other US based stable coin in a similar position, all at the same time. Market monetizes by breaking the tether peg and shorting BTC via CME puts. Federal Reserve intervenes by allowing Gemini to directly exchange GUSD for CBDC at a specified fixed exchange rate. Controlled chaos, and BTC proof of concept further enhanced. Long term? Few doubt that both stable coin and NFCs are highly desirable things, but there needs to be a widespread market cull. Until then … its risk versus reward, SD
  10. So many things just don't cut it .... The investor has Gemini Dollars, not USD. The investor has no FDIC insurance, Gemini does. My USD is backed by the US Fed and everyone accepts it. Their Gemini Dollar ... not so much. So why do I need them?, and why are they better than USD? Nobody else has a CBDC that I can use instead? If EVERY USD collected backs a Gemini Dollar, what currency are they paying that 8% interest in - Gemini dollars with NO USD backing them? Similarly, what currency is the landlord, the developers, the consultants and the staff getting paid in every month? - pretty sure its USD, and not Gemini Dollars! So .. where are those USD coming from? This only works if Gemini is acting like a bank. Borrows in USD, pays back in Gemini Dollars (your contribution). USD deposits offset with notional USD liabilities funded with notional Gemini Dollars. Risk managed via USD derivatives based on notional amounts - NOT actual amounts exchanged. Keep only enough USD to meet redemption demand, and MTM settlements - fund it via a credit line, and spend the rest? Scale it up and you have a Tether? The only way to benefit is to 'not engage'. Simply because as soon as a USD CBDC is announced, it would start a run on Gemini to USD conversion .... creating a lorced liquidation demand for USD that Gemini does not have, and cannot raise - BECAUSE it is liquidating. SD
  11. It is useful to think of cryptocurrency in terms of an 'upstairs' and 'downstairs' market. The upstairs market is BTC; of greatest value to the sovereign states, arms and drug dealers, dictators, and criminal elements. Setlle via BTC vs the USD. The downstairs market is the multitude of other crypto from sh1te coin to stable coin to Libra to CBDC. Like it or not, the downstairs market is going to primarily use zero cost CBDC vs BTC; individuals using a local currency CBDC to pay for groceries, plus a major CBDC as the store of value. Most expecting local currency CBDC to subsequently 'evolve' into local 'trading block' CBDC, ie: a 'south american' CBDC, a 'middle-east' CBDC, a 'carribean' CBDC, a 'african' CBDC, etc. The sh1te coin, stable coin, and Libra's made obsolete. Not a bad thing, but don't expect an elegant 'transition'. SD
  12. The 1st world just doesn't 'get' that the intent behind legalizing BTC is NOT to replace the domestic currency (Colon, Real, etc.), it is to COMPLEMENT it. and AVOID using USD. BTC used as a store of value, not something to buy your groceries with. BTC preferred over USD as a state 'work around' the use of USD as reserve currency. BTC to make your wealth both portable, and inflation resistant. BTC to make remittances easier SD
  13. One of the key implementation issues with blockchain is 'reliance upon the code'. Operational managers have long mocked this 'reliance', citing coding culture, and the reliable regularity of coding logic failures Coders code! get out of my way and let me code! - it's not my problem if you don't continually test the algorithm logic! Sure .... As long as developers/start-ups drive the bus (current state), expect more of this. The default position is to shut down crypto entirely (China), and a phased-in use, subject to layered and robust ongoing testing (China). Of course, the technology will roll out - but most would expect that it'll be atop a pile of developer skulls. Ideally, you don't contribute your skull! SD
  14. Nothing new here, but if you were hoping for great things from WeChat or Alipay, you might want to think again. You also might want to rethink stable coin entirely, and recognize that the US is not driving the bus. It's hard to find a trustworthy platform that can convert stable coin into digital yuan, and without digital yuan you're excluding the 2nd largest market in the world. SD https://oilprice.com/Finance/the-Markets/Is-Chinas-Digital-Yuan-The-Death-Knell-For-Crypto.html The crypto ban comes at the same time as the Chinese government’s roll-out of the Digital Yuan, its sovereign digital currency now either years in development. The digital yuan was envisioned back in 2014 and already has distributed some $30 million in digital currency. It’s a clear rival to unregulated cryptocurrencies. It also is the government’s way of challenging WeChat and Alipay, the two private giants dominating the mobile payments market.
  15. The flip side of China is that when the place gets into trouble ..... they implement solutions on a scale that few others can match, or tolerate. https://oilprice.com/Energy/Energy-General/Oil-Prices-Soar-As-Beijing-Orders-Energy-Suppliers-To-Stock-Up-For-Winter.html Bloomberg: government officials "ordered the country’s top state-owned energy companies to secure supplies for this winter at all costs." There are few things as powerful as a junkie on the edge, pushing hard for their next fix. The why you invest in the commodities a China uses, and not China itself. SD
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