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A stablecoin is a stablecoin, much like a cigar can be just a cigar. But which non-crypto thing does it most closely resemble? A bank deposit? A money-market fund? A cash ETF?
Over on Unhedged, the question has been causing Robert Armstrong a little trouble over the last couple of days. On one hand, stablecoins certainly look and act like they’re doing things that banks do, like issuing runnable liabilities and facilitating payments. On the other hand, it would be extremely inconvenient for a lot of people if they were to be regulated as banks, and a lot of those people are mad online.
Perhaps the thing to do is to take inspiration from a similarly insoluble question: “Is a hot dog a sandwich?”
The definition of a bank, whether you look in Lombard Street or the Capital Requirements Regulations, seems to be based on two characteristics: it takes deposits from the public, and it makes loans. So everything really depends on how strict you’re going to be about these two criteria.
We therefore present the “Bank Alignment Chart”, which not only answers the question of whether stablecoins are banks (yes, as long as you’re prepared to give a little on both sides), but also provides handy answers to a lot of other questions about the perimeter of what might be called a bank:
