Bank Deposits Go Onchain: How a Full-Reserve Dollar Differs From a Stablecoin

The Signet record

Scott Shay says Signature Bank was the first crypto-friendly bank, alongside Silvergate, and that he created the first 24 by seven blockchain-enabled money transfer system. By the end of 2022, he says, Signet had transferred over a trillion dollars. He says the US government started in December to kill crypto and that the bank was killed in March 2023, "unjustly, wrongly, unnecessarily."

Host Zach Fowler, who says he was at Coinbase when he first learned of Signature Bank's role with USDC, called the closure a rug pull for the industry and described the bank as "a structural fundamental player."

How full reserve works

Scott Shay says NeXT keeps its holdings in a T plus zero environment with custodial receipts, so there is no distance between a dollar deposit and the Treasuries backing it. He contrasts this with fractional banks, where customers move "a promise to pay" and FDIC insurance covers up to $250,000. At Signet, he says, some clients had 250,000,000 on the system.

He says NeXT moves a dollar immutably, while a fractional bank is "debits and credits all the way down," and he believes it is much safer than any fractional bank.

Taking on stablecoins

Scott Shay says NeXT's tokenized deposits have the functionality of a stablecoin without a bid-ask spread. He says that under IFRS, treasurers outside the US treat stablecoins as an intangible asset, while deposits at his bank count as cash. He cites figures that 95% of Tether USDt and USDC transactions are within four hops of sanctioned parties, and 70% within three.