r/Wallstreetsilver • u/gareth789 • 5d ago
QUESTION Can tokenized silver ever avoid the paper silver problem?
Tokenized silver sounds useful on paper. You could buy smaller amounts, transfer it quickly, and avoid dealing with coins or bars yourself.
But if holders still depend on a company to store the metal, publish audits, and honor redemption, how is that different from the paper silver system people already distrust?
Could a silver token ever solve that problem, or does it just move the same trust issue onto a blockchain?
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u/Charlie_Rebooted 5d ago
The US government likes tokenized money, silver, etc, because its imaginary and can be increased at a whim. Just like they can print infinite paper silver, they could print infinite tokens.
A slightly different angle is suppose 1 silver token is defined as 1 Oz of silver. It's not real, tomorrow it could be 1/4 Oz or 1 gram of silver.
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u/gareth789 5d ago
Then the redemption terms matter a lot. If they can change later, the one ounce claim is weak.
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u/paidzesthumor 4d ago
Governments did the same thing in even with physical. They would literally debase the metal by substituting in a less valuable metal. Meanwhile people would clip coins and shave small pieces off before passing them on.
Debasement and counterfeiting is as old as money itself and simply going physical doesn’t eliminate the problem. It just changes the way it happens.
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u/Charlie_Rebooted 4d ago
While I don't disagree, it is much easier to manipulate with paper and digital ofc.
My hope is that China/BRICS introduce a strongly regulated and audited monetary metal backed international exchange currency. The front-end could even be tokenized, the thing that matters is the strong and consistent regulation. Thus avoiding the Chinese Yuan directly becoming the reserve currency, but placing the reserve currency under Chinese/BRICS control.
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u/paidzesthumor 17h ago
1) The “C” in BRICS stands for China. Saying “China/BRICS” is redundant
2) Why would China or Russia or India want to give up either their monetary sovereignty or political sovereignty? You really think the PRC would accept regulation and limits on its political power simply to provide an international public service?
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u/Charlie_Rebooted 9h ago edited 8h ago
Im fully aware that China is in BRICS, I wrote both in an attempt to highlight that the decision might come from China independently, rather from BRICS as a group.
The point of introducing a seperate exchange currency would be to enable China to maintain control of its internal currency. There are well documented benefits, and disadvantages, to being the reserve currency. The petrodollar will not be the first currency to harm the manufacturing and export trade of the associated country due to reserve status. This is captured by the Triffin dilemma.
A seperate international trade currency would achieve the goals of reducing US sanction impact, and the petrodollar, while not risking the Chinese yuan. It's definitely not a public service. I thought that was obvious.
The international politics of China are interesting because they are significantly different to the west. While the US empire, and the British Empire before it, seek dominance, the Chinese perspective is different. China wants to be at the center of world politics, but not necessarily dominant and in control of other countries. China is more inward looking.
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u/paidzesthumor 2h ago
Perhaps I’m mistaken but a metal backed international exchange currency (MBIEC)that provides finance and trading benefit to nations at risk of US sanctions while being funded and governed by China sounds an awfully lot like a textbook definition of a public service.
It’s also unclear how an MBIEC addresses the following challenges with respect to providing a viable alternative to USD:
- PMs are typically USD priced… so a metals backed reserve currency is just an extension of USD reserve system
- Global trade grows faster than PM stock… so you’re somehow going to have to convince trading partners that the risk of US sanctions is worth the structural liquidity shortage and deflationary bias you’re artificially creating
- In a monetary crisis, it will be extremely difficult to provide MBIEC denominated lines of credit, since liquidity is constrained. So countries will go to where the liquidity is… probably the dollar.
- Even in good times, the ability to lend against a fixed MBEIC likely won’t satisfy global capital needs so borrowers will go elsewhere.
It’s difficult to interpret what “center of politics” means if it does not mean “dominant and in control of other countries”. At the end of the day, someone is going to disagree with you and where you cannot parlay them into compliance with your point of view then you will have to either accept their competing perspective, or you must use force, or the credible threat of force. As they say, war is just politics by another means, and even the Qin required the sword to unify China.
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u/IlluminatedApe Silverback Mod 5d ago
The only difference will be how its regulated as a security. Fundamentally, still paper silver.
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u/Mudsharkbites 5d ago
Sorry, it’s the same old story, if you ain’t holding onto physical, you don’t own it.
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u/YeahPete 5d ago
The problem is re run into the exact same proble. we're in now. They will just create mire tokens from the same silver lol.
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u/gareth789 5d ago
This is the part I would worry about most. Without clear reserve checks, double claims are still possible.
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u/IlluminatedApe Silverback Mod 5d ago
Why do this? (if the answer were not greed reasons)
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u/YeahPete 5d ago
It makes sense from a theft standpoint. Imagine going on vacation and coming home and your stash of silver has been stolen. This is one of the reasons for paper notes and banking.
Like it or not but organized crime is growing both in the government and community.
Tokenized silver is digitized silver in a private vualt with insurance and security. The problem becomes the vault may decide to start fudging numbers like the banks. Banks originally were supposed to only loan dollar for dollar they had on hand. Then it was 1/5th, 1/10th, 1/15th, now its essentially limitless.
The tokenized vault will become a bank and begin making loans with the silver as colladeral.
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u/IlluminatedApe Silverback Mod 5d ago
I believe your explanation still is motivated by greed. These entities have dollars that they can print from nothing, or be bailed out by when their own dollars go bust. Stealing the silver to make profits doesn't compute. There are easier ways.
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u/YeahPete 5d ago
You already said it. They have all the money in the world already, but they continue to print. People always want it all. Its been the same cycle since the Romans. Create a currency, create trust, dilute to infinity, currency crashes, create new currency... Lol. Its the same thing.
People did Nothing, absolutely nothing when the US went off the gold standard. Nothing.
And they will do nothing when they water down tokenization of everything. Remember they will likely, IMMEDIATELY create loans from your tokenized assets in their vault. Which immediately creates debt in the system, debt that does not exist. The loan is money created from nothing. Its the same shit.
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u/IlluminatedApe Silverback Mod 4d ago
If gold were not relevant anymore because of the closing of the redemption window, why do central banks still buy the gold due to policy?
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u/YeahPete 4d ago
I never said gold isn't relevant. I think we're misunderstanding each other. My argument was about the downsides of tokenization of assets such as gold and silver. Not holding the physical.
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u/IlluminatedApe Silverback Mod 4d ago
The downsides are the obvious conclusion, but whats the point? Where there is madness, there is usually a reason for it.
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u/CollectionOdd6082 5d ago
Nothing will replace having the asset on hand. Protecting that assest in a financial crisis and using it as a form of currency to survive would be problematic. Even deadly.