Stablecoins can pose a lower risk than bank deposits and money market funds.
Stablecoins were designed to keep a stable value relative to a fiat currency.
Stablecoins are less risky because their reserves are backed by short-dated Treasuries.
These reserves are also kept separate from the issuer’s assets.
Money market funds invest in short-term assets.
The point is that, as risky as crypto has been characterized, certain crypto-based investments are even better than those available through the legacy banking system. This is because banks accept short-term deposits and use them to offer long-term loans. This means:
- Those loans are not repaid for years
- This creates a continuous risk for banks and permanent risk for management.
- Stablecoins are used as a way to make transactions happen.
- They are not an investment option per se.
- And they are certainly not a “cash management vehicle