A bank issues money (deposits), and stablecoins try to produce something 'money-like'. CDO tranches promise different rates of return with different riskieness, they never really acted or were meant as money substitutes.
No one invests into stablecoins to get crappier versions of USD.
They go into UST because they were promised 20% risk free APY from Anchor.
CDOs (or really the generation of junior vs senior debt) showed these people how to cut up risks and provide returns for extended periods of time. Much like how CDOs cut up debts and moved risk around in funny ways.
But no wealth was actually generated. At least with CDOs the subprime mortgages had high APY, it was just that the risk of widespread default was miscalculated.
Furthermore, the senior debt tranches of CDOs had lower returns than the underlying. (3% 'risk free' for example, built out of 5% or 8% subprime mortgages)
This Anchor / UST / Luna looks unsustainable. There is no financial instrument that offers 20% risk free returns in today's world.
There was a off hand comment in the Big Short book, about a Money Market fund, Reserve Primary Fund, that announced they couldn't pay back all debits, during the worst of the 2008 crisis. It was, "Money Markets weren't cash -- they paid interest, and thus bore risk, ..."
Its interesting to note that Money Markets pay out <1% interest now. When I searched for Money Markets to get the %, I got an Ad for "Donut" touting a 7% APY DeFi. They advertise they put money into StableCoins and earn a return. Customer Quote on the page, "I make so much money on interest, I can pay rent". My god, the collapse will be huge.
