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People think I’m wrong about stablecoins

Yesterday, after I wrote that stablecoin issuers are banks and that stablecoins are bank deposits, an above average number of people said I was stupid on the internet (not the highest recorded number; that level is reserved for when I write about gold or Warren Buffett).

The most common argument against me was that what I described, in laying out what a stablecoin issuer does, is not a bank but a money-market fund. Like a stablecoin issuer, a money-market fund takes cash from investors, puts that cash to work in shortish-term assets, and issues the investors a liability that it promises to redeem on demand and at par. The crucial difference is that banks — by virtue of the fact that they can hold fractional reserves — create money when they make loans. For many people, that is the defining feature of a bank, and stablecoin issuers (at least under the Genius act) don’t do it.