Many sad stories would be a lot less sad if insurance was widely available. People insure self-custodied valuables all the time, either through their homeowner/renter insurance or a standalone specie/precious metals/collectibles policy. And yet, this kind of coverage in crypto appears to be minimal. Is that because no reliable insurers offer it or because few who self custodies wants/has access to it?

Another workaround around the prohibition on interest (which meant usury) should be very familiar to the DeFi crowd: rewards that were up to the bankers’ sole discretion. Called discrezione, it was the yield paid on time deposits. The logic went that because the yield was at the discretion of the bank, it was actually a gift. And Church doctrine didn’t make it a mortal sin for bankers to treat their depositors warmly. Because banking was a competitive market, depositors tended to migrate if discrezione was low. And if no discrezione was paid at all? Bank run, because it meant the bank maybe didn’t have the money to pay. While some hardcore theologians would cite Luke that the expectation of yield alone created usury even in absence of a contractual obligation, it didn’t seem to be considered scandalous in practice. Even the pope would have discrezione accounts with Italian banks.

Kind of amazing how the Medici operated a kind of holding company instead of all siloed individual partnerships, as was the style at the time. On the one hand, this exposed the whole organization to liability, but given the lending between branches, contagion was always going to be possible.

The foundations of modern Western finance were built by regulatory arbitrage - but around Church regulations, not governmental! The bill of exchange is the basic building block of what we can recognizably call banking and finance in the West. Why? Because it allowed for lending without being branded usurer. Usury, even when legal and licensed, kept you outside polite society and deprived you of certain rights. How bad this was depended upon where you lived. So how to lend out money today and be compensated for the use of that money tomorrow? Enter the bill of exchange. Ostensibly, it solved for settling transactions without hauling silver past bandits and pirates. It involved several parties and steps, but a typical transaction would be for Banker Bruno to pay 100 florins to Merchant Marvin in Florence, who orders his business partner in Brugges, Merchant Mike, to pay 103 florins’ worth of Flemish groats in two months to Banker Ben, who runs the local bank branch there. You can see that while the bulk of exchange solved a genuine need around moving money, it also embeds credit and a fee that can replace interest. So if you wanted a loan from the Spinelli Bank or Medici Bank, you didn’t walk in and ask for a straight loan to be repaid with interest. That’s usury! Bad! Sends you to hell. Must avoid. No, you construct credit with bills of exchange that charge a theologically friendly fee for the currency exchange. If you were really clever, you’d set this up twice to build a longer loan payable in the same city. Florence to Brugges and back to Florence gives you a longer term on your loan (the usance date where the bill comes due). With CLARITY still TBD and a hot topic with regards to stablecoin yield, it’s in some ways ironic that banks found workarounds to a prohibition on interest, while today the roles are reversed. This was really easy if you were a merchant genuinely trading between two cities. Y

I’ll try to steelman the opposition position: RH tokenized stocks are probably disliked for the same reason non-sponsored ADRs are disliked: the company’s name is on something it didn’t authorize and doesn’t do things like revert unvoted shares to management control. The new (not old EU swap-based) RH tokenized stocks do not pass beneficial ownership, and are a debt instrument with exposure to RH itself potentially. Ondo put their backing into an SPV that’s designed for bankruptcy remoteness but the Jersey-issued RH tokens do not appear to be claiming remoteness from RH’s creditors that I’ve seen. Please correct me if you have seen otherwise. So from AMC or another company’s view, you have people who view themselves as shareholders, but are not actually shareholders holders. The RH tokens feel closer to a Contract-For-Difference. Legally, I suspect RH is right that everything is meeting the letter of the law, but from the public company’s perspective, the tokens create a big blast radius for you via vanilla creditors of Robinhood thinking they are owners in your company. ⬆️ That’s the steelman I’d construct for AMC et al. I think it breaks down if I’ve misunderstood how this generation of RH tokenized stocks are structured

Someone asked what I meant by “groß Geld” and “kleine Geld”. It’s this concept of “big” money and “small” money that circulate simultaneously in two overlapping systems. Historically this was about denominations of hard currency. In Europe, pennies were the workhorse for small transactions, and while pounds, dollars, groats, and others were utilized by merchants and long distance trade networks. India and East Asia and Africa had their own versions. We don’t make this distinction today very much because ledger money in a bank or fintech or blockchain address have become liquid, reducing the need for physical currency. But vestiges of “big” and “small” money can still be seen even in the US - you’ve probably seen stores that won’t accept bills larger than $20. $100 dollar notes are squarely in the big money category - they are compact and portable compared to 100x $1 notes. This is why $100 notes make up most of the paper currency supply, and also have a tendency to be shipped overseas to other countries. Anyway, this imbalance is not a new phenomenon, and makes sense from a financial perspective. The cost to mint a copper farthing ≈ the cost to mind a silver dollar; the cost to print a $1 note ≈ the cost to print a $100 note. And then you need to transport that heavy currency out into the countryside. So areas far from a mint would tend to have currency shortages since the transport makes distribution costly, and if that currency, the mint would be biased towards making the higher denomination coins due to fixed costs being about the same. Bringing this back to stablecoins, this currency shortage is historically what allows private currencies to flourish. Tether does this today - they supply dollar-like assets in regions with a chronic shortage of dollars. That it happens on Tron and Ethereum rather than an AWS server is almost a quirk of history than an actual feature for most users. But it also means most private currencies have been small money to allow day-to-day transactions to not revert to barter. What makes Tether special is that they answer a shortage of *big money* as well as small money. The last time that occurred on a global scale was the proliferation of silver dollars from the Habsburg kings of Spain, which most major currencies forked to give us USD, yen, yuan, pesos, etc. So it may feel very distant from crypto, but the history of small and big money, with especially rich histories in east Asia, Europe, and North America, is deeply interwoven with the primary source of demand for private currencies (aka stablecoins). It’s way down at the very bottom of the stack of just having enough hard currency in circulation to avoid barter.

Someone asked what I meant by “groß Geld” and “kleine Geld”. It’s this concept of “big” money and “small” money that circulate simultaneously in two overlapping systems. Historically this was about denominations of hard currency. In Europe, pennies were the workhorse for small transactions, and while pounds, dollars, groats, and others were utilized by merchants and long distance trade networks. India and East Asia and Africa had their own versions. We don’t make this distinction today very much because ledger money in a bank or fintech or blockchain address have become liquid, reducing the need for physical currency. But vestiges of “big” and “small” money can still be seen even in the US - you’ve probably seen stores that won’t accept bills larger than $20. $100 dollar notes are squarely in the big money category - they are compact and portable compared to 100x $1 notes. This is why $100 notes make up most of the paper currency supply, and also have a tendency to be shipped overseas to other countries. Anyway, this imbalance is not a new phenomenon, and makes sense from a financial perspective. The cost to mint a copper farthing ≈ the cost to mind a silver dollar; the cost to print a $1 note ≈ the cost to print a $100 note. And then you need to transport that heavy currency out into the countryside. So areas far from a mint would tend to have currency shortages since the transport makes distribution costly, and if that currency, the mint would be biased towards making the higher denomination coins due to fixed costs being about the same. Bringing this back to stablecoins, this currency shortage is historically what allows private currencies to flourish. Tether does this today - they supply dollar-like assets in regions with a chronic shortage of dollars. That it happens on Tron and Ethereum rather than an AWS server is almost a quirk of history than an actual feature for most users. But it also means most private currencies have been small money to allow day-to-day transactions to not revert to barter. What makes Tether special is that they answer a shortage of *big money* as well as small money. The last time that occurred on a global scale was the proliferation of silver dollars from the Habsburg kings of Spain, which most major currencies forked to give us USD, yen, yuan, pesos, etc. So it may feel very distant from crypto, but the history of small and big money, with especially rich histories in east Asia, Europe, and North America, is deeply interwoven with the primary source of demand for private currencies (aka stablecoins). It’s way down at the very bottom of the stack of just having enough hard currency in circulation to avoid barter.

Two updates to this: 1) Global History of Money (Kuroda) I found this one disappointing vs expectations due to the extended discussions of peasant markets in Europe and Asia. Think rando village markets. I just don’t need to see multiple examples here. Writing style is also somehow not very engaging, but don’t know why… Good treatment of “groß Geld” and “kleine Geld” issues, which is really, really important for stablecoins! If you’ve not been introduced to this concept elsewhere, the payoff makes the book much more useful. But I’d still recommend either Good Money or Almighty Dollar from the list below for best introduction (former for nerds, latter for casuals) 2) Rise and Decline of the Medici Bank 1397-1494 (De Roover) Interesting but definitely niche. This is a bit heavy on personal correspondence and personalities but the reproduced numbers from the Medici ledgers is pretty interesting. Definitely one to pick at or use as a reference book after a quick skim. Cover to cover will make you zone out.

It’s really amazing to me that the Rome branch of the Medici bank operated with zero equity almost from the start. It was such a large source of funds from the Papacy and cardinals looking for yield that it financed other branches’ activities without feeling the need to retain an equity buffer. True degens.

It’s nice to see feature innovation slowly making a comeback to DeFi. Morpho in-kind redemption and this are both examples. Not necessarily sexy, but very worthy nuts-and-bolts kind of work to make DeFi more full stack

Overall, seems like a good concept. I do worry about the user being able to select what to redeem in-kind, though. It would be better to make it a pro rata share of the portfolio. You transform a liquidity problem into a kind of adverse selection problem. Seems complex to game out. As a lender, you’re getting some kind of embedded option under race conditions, so it’ll take people time to understand and price the value of that?

One of the great interoperability experiments in financial history occurred in mid-to-late 1800s Europe, and was ruthlessly exploited by none other than the temporal arm of the Catholic Church: The Papal States. In the US we have “In God We Trust” on our currency, but 150 years ago, God proved to be pretty untrustworthy with currency. To set the stage, the year was 1865. America and China, both recently emerged from lengthy civil wars, are still putting themselves back together. The European powers are still the stars of the economic stage. France, Belgium, Italy, and Switzerland sign a treaty to standardize their metallic currencies, with a fixed weight and fineness of silver and gold per franc, lira, etc. The common silver/gold content would allow the four currencies to circulate within each others’ borders to make trade easier. France was the center of gravity for the arrangement, which came to be known informally as the Latin Monetary Union. Other states eventually joined in the standardization as well - including the recently diminished post-unification Papal States. Then comes the currency caper by Cardinal Antonelli, the treasurer of the Holy See. The abuse ran along two separate dimensions: issuance limits and debasement. Each nation had an issuance limit, roughly tied to their population size, to prevent race conditions amongst the nations to mint the dominant circulating coin. Cardinal Antonelli exceeded the minting cap for the sub-million-population Papal States quickly and repeatedly. The Papal States also quietly debased their coinage and sold it into the market (especially France). This was successful because no one was bothering to assay the coins of members. It worked for a few years until the French and Swiss banks wised up. By 1870, Papal funny money was no longer accepted at par and anyone who held it at the time of demonetization ate the losses. The monetary union limped along (it had other major problems) until WWI, when it was discontinued. This is exactly why it is vital to understand the exact backing of stablecoins. If the Church was willing to fraudulently issue undercollateralized stablecoins, you can’t assume a crypto issuer wouldn’t do the same!

For those interested in a neutral survey of some of the Turkish lira-exposed assets right now, this is a good piece by the @pennyworks_ folks. It covers @brix_money @tori_finance and @PikuFinance The main thing I’d add is that these are mostly available in different venues