Do you know why people would choose to use stablecoins, rather than trade shares in an ETF that held government bonds, or something like that? That's what stablecoins are, effectively just a share in the holding company's bank account.
I think for the same reason that most people hold cash in a bank account rather than putting all of their money in ETFs/bonds. Convenience, stability, and security.
Consider living in a country with an unstable and fiscally irresponsible government. And having a net worth <$10k. Suddenly being able to hold your money in USD, on an account that cannot be seized, and can be used globally, becomes incredibly attractive.
You don’t need financial literacy, there is no min-buy in like ETFs/bonds, and there is minimal KYC or other identity restrictions. I think this is an incredible boon for the billions of people living in such conditions.
As someone who tried to figure this out. The answer is essentially you must actively seek out a broker that lets you do this in the first place and let me tell you, in my country there are only a handful of them that make it easy and even those will still require you to fill out a signed form on paper and mail it to them.
Or a CD, or maybe just a bank account. I think of stablecoin issuers as banks because why not: they keep your cash, pay you some yield and promise to give it back to you when you ask them. Walks like a bank, quacks like a bank…
The GENUIS act and I think MICA both disallow that part, exactly for this reason... traditional banks were seeing the writings on the wall and lobbied for such yield distributions to remain their own privilege only. For now.
But you can pretty easily find similar/better yield using DeFi and stake/bond some of your crypto assets in various strategies.
The difference is that there are virtually no minimum and usually no KYC... but there are also not many guardrails/gatekeeping, which leave the place to many scams/traps. It's best to stick to the largest platforms/communities and not fall for insane APY claims.
Does holding stablecoins require any sort of KYC? Or do I just need to maintain the security of a private key?
If the latter, I think that explains why stablecoins are popular in countries with weak institutions.
In a country with strong laws, and strong rule-of-law, "Code is Law" is a solution in search of a problem. But in a country with weak laws, it can be a lifesaver.
