đĄI WAS SO MAD but then i figured MiCA (AKA the master mfers) is actually making crypto safer than traditional finance.
đ§”Below is a thread comparing requirements and regulations for banks (AKA the mfers) and #Stablecoins issuers.
đȘNature of reserves
đStablecoins: Reserves are tied to the issued tokens & to be held in liquid and safe assets (like fiat currencies).
đŠ#Banks include a mix of central bank deposits and (supposedly) high-quality liquid assets (government bonds, cash), designed to meet short-term liquidity needs and long-term stability.
đ§If a stablecoin issuer releases 10 million #tokens, they must hold 10 million euros or equivalent liquid assets in reserve, while a bank only needs to hodl 10% of it (1 million euros) at the central bank !
đ°Segregation of funds
đStablecoins: Strict segregation between reserve assets and operational funds to protect against misuse.
đ°Banks: While operational funds and reserves are managed separately, banks have more flexibility in using their assets, provided they meet regulatory ratios.
đ§A stablecoin issuer must maintain separate accounts for reserve funds and operational funds, ensuring clear segregation and protection.
In contrast, banks can use their reserves more dynamically as long as they maintain the required liquidity and capital adequacy ratios.
đAudit and transparency
đStablecoins: Frequent and detailed audits specific to reserve adequacy are mandatory. Issuers must provide transparency reports detailing the reserve assets.
đŠBanks: Regular supervisory reviews and stress tests are conducted ; these audits cover various aspects of operations beyond reserves.
đ§Example: A stablecoin issuer might release a quarterly audit report from an independent auditor confirming that the reserves are intact and properly managed.
Meanwhile, banks undergo comprehensive financial audits and stress tests to ensure overall stability and compliance with regulatory requirements.
đžRedemption and liquidity
đStablecoins: Holders have direct redemption rights to exchange stablecoins for fiat currency at any time, at par value
đŠBanks: Deposit insurance schemes and central bank facilities ensure depositor confidence and liquidity but there is no direct 1:1 redemption for all liabilities
đ§Example: A user holding 1 million stablecoins should be able to exchange them for 1 million euros without any loss in value, whereas banks benefit from deposit insurance that protects depositors up to a certain limit (100k in France).
đConclusionđ
While both stablecoin issuers under #MiCA and traditional banks are required to maintain reserves, banks generally have it easier compared to stablecoin issuers.
Banks have more flexibility in the types of assets they can hold as reserves and greater latitude in how they manage these assets, provided they meet regulatory ratios.
They benefit from well-established deposit insurance schemes and central bank facilities that ensure liquidity and depositor confidence, without the need for direct 1:1 redemption for all liabilities.
In contrast, stablecoin issuers face stricter requirements for reserve backing, segregation of funds, frequent audits, and direct redemption rights, making their regulatory burden more stringent and demanding.
