[rphlx]

This seems to be a false either-or because FB is probably not holding 100% reserves as actual paper cash in a giant Scrooge McDuck vault underneath their HQ. It's holding them at a bank, so that it can get the interest payments.

Thus, a user faces systemic banking system risks plus all firm/stablecoin-provider risks. That combined risk will almost certainly be strictly larger than the systemic banking system risk you'd face by just depositing funds in a bank account that you directly control.

[gridlockd]

I'm arguing the principle here, so for that purpose it might as well be a Scrooge McDuck vault.

Otherwise, you do have a point, a systematic bank failure would likely cause issues here as well. However, I highly doubt they'd be storing significant amounts of money as cash deposits in banks for the interest. There's better options, such as short-term treasury bonds.

[rphlx]

Right - I believe the whitepaper says it'll be a mix of bank deposits in various currencies plus short-term government securities. Still my point stands: you can have lower systemic risk in a serious crisis by holding t-bills or whatever directly, rather than indirectly via FB or any other stablecoin provider. Plus you'll get the interest payments.

Storing serious amounts of money in any of these stablecoins for any real length of time is economically irrational because by exiting their walled garden, you can obtain a higher return in exchange for reduced risk. Withdrawing is even better than a risk-free reward; it's a risk-reducing reward.