Newly chartered banks, such as Erebor Bank, Openreserve and Augustus, will likely have to keep raising money as they grow to maintain the capital cushion they need to satisfy higher regulatory requirements theinformation.com/newslette…

“Fifty eight, out of date! Let our onions speculate!”

One of my favourite Harry Potter loopholes doesn't even involve magic. It involves exploiting the Muggle economy. Hagrid tells us there are 17 Sickles to a Galleon. Sickles are silver, Galleons are gold. Simple enough. Except gold and silver don't have a fixed exchange rate in the Muggle world. Their market value fluctuates constantly. Before 1900, the gold-to-silver ratio averaged around 16:1, which is pretty close to the wizarding world's 17:1 rate. Throughout much of the twentieth century, however, it averaged around 45:1. See where this is going? Wait until the market heavily favours gold. Melt your Galleons down and sell the gold in the Muggle world. Use the money to buy as much silver as possible, then take that silver to Gringotts and have it converted into Sickles. Finally, exchange those Sickles for Galleons at the fixed 17:1 rate. Congratulations. You've potentially turned a small pile of wizarding gold into a much larger pile of wizarding gold, simply by exploiting the difference between Muggle market prices and Gringotts' fixed exchange rate. No Dark Arts. No Horcruxes. No elaborate schemes. Just precious metals, a fixed exchange rate and a wizard who understands arbitrage. The real question is why nobody in the wizarding world seems to have built an entire financial empire around this.

“A stablecoin cannot simply be an asset - it needs to be part of a service.” I’ve castigated stablecoin issuers for not recognizing the commoditization of their core product, and that they must build products and services that use their stablecoin as an input to be viable. At least twice a week, I get someone asking me for examples, so I’ll give a small one here to illustrate what I mean. I have a whole notebook of products sketched out in the unlikely event someone hands me $20m to run a skunkworks for a stable issuer, and just like even the smallest community bank, a stablecoin issuer needs a wide variety of ancillary services that add value to the underlying bank deposit they’re pitching. Much of the world population struggles with consistent savings, especially formal savings. Two product features shown to increase savings rates are mobile access and commitment devices. Crypto is well positioned to provide these unchain. First, let’s take a quick detour to a nearly extinct financial product: the tontine. Tontines were a way to provide a kind of insurance against living beyond your working years. Subscribers to a tontine would pool their money, and a tontine manager would invest it for them. Shares were generally non-transferrable, even upon death. So as people died over the years, survivors benefited not just from investment returns but from inheriting the shares of those who predeceased them. Thus, if you lived to 80, you would still get an income or lump sum distribution from the tontine. It was a way to hedge before longterm care insurance and government pensions became widespread. Of course, tontines created a perverse incentive to kill your co-investors, provided you knew who they were. This is probably how most people know of tontines today — they make for salacious plot devices in old murder mystery novels. Having a worldwide, pseudo-anonymous distribution solves for a lot of this, though. Back to savings products! Taking inspiration from the tontine, you can make a savings product where savers only receive interest in a month if they contributed. Because it’s investing 100% in your stablecoin, principal and accrued yield can always be withdrawn, but future yield is contingent upon contributing each month. Pair with a simple mobile interface that allows people to on/offramp your stablecoin to their local currency or bank accounts. This provides an onchain, incentivized savings account that has no managers to pay a fee to or trust (outside of those embedded in your stablecoin). Users know their savings are secure, can’t be seized without the entire pool being frozen. If they miss a month of contribution, then it’s easy to recover the next month with a contribution. Heterogeneity amongst savers’ habits should allow for yield higher than your stablecoin’s base rate. The key here is that 1) your stablecoin is the key input, 2) the product is not actually your stablecoin — it’s the incentivized savings account, 3) you are solving a real-world problem to offer secure, USD-denominated savings that should be at least a little higher than your stablecoin’s raw yield, and helping people build good, longterm savings habits. It should also provide a stickier deposit base, since users are dripping in each month until they need the money for emergencies, a large purchase, or whatever their savings goal was. Your stablecoin needs 10 to 20 of these fairly narrow, focused products that create demand for your token. This is why a stablecoin that is serious needs to have its own skunkworks rather than relying on the slowing pace of DeFi innovation and the anemic distribution power of DeFi teams. Intuitively this makes sense. When you open up your bank or brokerage’s website, they have all kinds of niche services that are only used occasionally or do not work as standalone products. If you need inspiration, go look at your mobile banking app and see what you can do besides deposit, withdraw, and get margin/payday loans.

Ok, I officially have a nights-and-weekends project to make an interactive atlas of every currency’s history. Very work in progress, still.