This is what @Benjamin sumarizes in the abstract of his paper:
In a dual cryptocurrency, on the other hand, shareholder may choose to repay depositors, but are not bound by any legal obligations to dso. I show that, under the assimption that shareholders behave rationally, this implies pegged cryptocurrencies cannot be backed by tangible assets
On page two @Benjamin explains,
In the absence of third-party legal enforcement, solvency is not a very meaningful condition. Since shareholders are not bound be law to repurchase nubits, shareholders could allow the nubits peg to break even when they have the financial capacity to support it. In my view, we should only expect nubits repurchase to occur when repurchase align with shareholders' economic interests. .... I we allow shareholders to vote on the use of reserve funds as shareholder and assume that they vote acording to self-interest, the argument that a 100% reserve offers supoort for the peg falls apart.
To put it straight: he thinks that when the law is not watching, even they had 100% reserve, the shareholders would just pocket the reserve fund themselves even when they could save the peg. They won't have the will to save the peg when things get tough (even not tough)
This would be a terrible assessment of Nu shareholders. I for one am interested in Nu not only because of neat technologies (POS, voting, distributed computing, and all that) but also because I see potential for massive adoption of nubits by normal businesses. Knowing that the enterprise is an experiment that could fail I still went ahead to support Nu. However most businesses and individuals Nu cators for operate under normal legal framework.These businesses, and the government, would be very concerned, to put it mildly, if shareholders agree to be painted like that.
Practically, as I said in comments on the paper, if we insist that econimic interest is the only thing shareholders care, then things will likely play out such that 1) Nu adoption will be hindered. Nay sayers, doubters, and competitors will have a lot of fuel against Nu. 2) The government will come down on Nu to add that missing "third-party legal enforcement" when Nu gets big enough. 3) If Nu grows in size and has a lot of business depending on it, and it fails in a way incompatible with moral and legal norms, people WILL hold shareholders responsible and get even one way or another. Economic interest does not equal to self-interest.
In short I think Nu shareholders should stay away @Benjamin's thinking of how shareholders should behave, and by extention his extreme view on reserve, for shareholders' own good if not for good PR.