Type of financial entity that should exist: - Consumers and businesses can easily sign up - Federally regulated - Only function is to custody USD - No fractional reserve - Ability to opt-in to yield via US Treasuries - Revenue model: cut of Treasury yield or $9.99/m subscription
Normal custodians not open to retail, no easy access to consumer apps via Plaid, basic functionality like checking and bill pay etc.
I doubt the Fed would allow such a reasonable option. All the money would go there
Who is going to bag hold all the HTM assets on bank’s balance sheets though when depositors flee to the new 1:1 backed provider. And then where will credit come from 😱😅
This seems too straight forward for anyone in Silicon Valley to look into, but this is an amazing idea.
I can already imagine the look on the VC’s face when I say I’m gonna charge a $100M deposit account $9.99 a month 😂😂😂 (If I can get a $20M on $100M terms from a FC investor I’ll pivot to this TODAY 😩💰🫡)
unfortunately this could not compete with a more fragile system that creates credit and thus offers higher yield. we need a robust system that offers competitive yield via closed-loop credit formation without ever being net undercollateralized
The insurance Co's could just offer insurance for deposits that are not covered by FDIC. But I suspect that people wouldn't buy it since it lowers the rate that they are earning on deposits. You don't need to create new entities that are not profitable. I don't think there is incentive to do that.
Seems to me that SVB was federally regulated. How did that help?
This reminds me of Payments Banks in India. They were created a few years ago, mostly from a financial inclusion perspective, and they've had a mixed success rate so far. The business model was really tough when they couldn't lend.
Didn’t Russia do this with the ruble post-Ukraine sanctions?
Reminds me of https://ma.tt/2009/08/starting-a-bank/ I have experience building a similar frontend for this in the past and is something I'd love to work on.