Stablecoin Bank Models - A stablecoin bank could resemble a narrow bank, where deposits are 1:1 backed with T-bills [1] - From a user experience perspective, customers would interact similarly to current payment methods, such as tapping a piece of plastic [1] - Transactions would function as wallet-to-wallet transfers [1] Challenges and Concerns - If a stablecoin bank (or a narrow bank) becomes large enough, the Federal Reserve and Treasury would likely be concerned [1] - This concern stems from the potential impact on banks operating under the fractional reserve model, which affects the Fed's monetary policy implementation and money creation [1] Fractional Reserve and Lending - A banking license is needed to issue loans [2] - If a stablecoin isn't backed 1:1 by true dollars, then it's not really a stablecoin anymore and defeats the whole purpose [2] - A stablecoin could be created and issued by a federally chartered bank (that has a Master Account) which operates a fractional reserve model, known as the "deposit token" model [2] Potential Benefits - Customers could automatically earn T-bill yield on their deposits [2] - Credit issuance itself could be done in stablecoins [2]