If this is a grand jury subpoena, things could get ugly fast in the crypto space. Despite all talk of decentralization, the major exchanges pose a systemic risk.
Otherwise we're just wasting gigawatts of electricity to print Monopoly money.
The sooner people realize this is exactly what is happening, the better.
Not to mention it would never work, the blockchain has way too much overhead (many many orders of magnitude) to support an entire world's worth of exchanges every day. There literally isn't enough electricity in the world. People would have to do all of their transfers on third party exchanges that undermine all of the crypto guarantees of the currency in the first place. They're no better than putting your fiat currency in a bank run by criminals that have no respect for laws. And I'm not talking euphemistically about regular bankers here, I'm talking about full up scam artists. I mean why not, it's not like the law is going to get you. There are no pesky regulations to get in the way. No annoying insurance adjusters breathing down your neck. You have total freedom to scam everybody all day long.
BTC uses the same amount of energy to produce an empty block as it uses to produce a full block.
Markets cannot be completely decoupled from states as long as they trade in real goods and services - as long as you're not trading solely in virtual goods, the other part of the transaction still requires you to interact with the real world under the jurisdiction of some state, and thus the whole transaction, including the cryptocurrency (and the source of that cryptocurrency) is subject to those rules.
If you sell some virtual services for cryptocurrency and later want to buy a car with the proceeds, then not only the car purchase, but also your sale of these virtual services must have been done "cooperating" with all the rules of fiat - states can and will forbid using the proceeds made in markets completely decoupled from their systems of financial regulation; they will use their hold over the physical markets to try and regulate the virtual markets also as much as possible. In the long run, if cryptocurrencies won't cooperate, then they'll be ostracized - there's nothing stopping the gov't from passing a law that simply prohibits any legitimate merchant to accept bitcoin, greatly limiting the range of things that you can actually buy.
Fiat is and always will be tightly monitored and controlled. If cryptos want to replace fiat, they will have to do the same.
The moment people can start to pay rent and groceries in crypto, it makes sense to accept crypto even if you can't turn it into fiat. As long as taxes are paid in fiat, you need some of it, but that wouldn't make crypto useless.
If they sold a single USDT to an American, possibly. At the very least, they may be liable for American USDT investors’ losses plus fines.
Disclaimer: I am not a lawyer. This is not legal nor securities-related advice. Do not buy or sell anything based on my Internet comments.
An exchange could offer USDT trading but still have negligible exposure to its value itself. And then if USDT goes to zero – radically breaking the intended parity-with-USD – direct losses should be confined to USDT holders, not exchanges.
Nope. They'd only be insolvent if they had a legal binding commitment to redeem USDT 1:1 in dollars, and only if they didn't have sufficient other USD reserves to do so.
On what basis? Other than ones that commingle USD and USDT and/or are organizationally associated with Tether (which, I think, is mostly Bitfinex and Bitfinex), I'm not seeing where there is much basis for holding the exchange liable for the collapse in value of a traded asset.
But, for example, if it happens to get legally treated as an unregistered security, then the exchange would be fully liable for the losses of their customers, since it was not allowed to sell unregistered securities to general public/unaccredited investors. And this argument by itself seems sufficient to press a serious prolonged case, even if the courts later decide that no, this interpretation isn't the right one.
In general, being an intermediary in shady products may easily mean that you're (also) liable. "Normal" stock exchanges and stock brokers are the exception, they have specially listed immunity exceptions that apply if and only if they fulfil a bunch of conditions; otherwise people may well sue you to cover their losses just because it seems that it's easier to enforce judgments on you than a Hong Kong company.
And they don't have to win the lawsuit, they just need to not get it dismissed outright and scare others into leaving the exchange.
Other than Bitfinex (with he comingling issue mentioned upthread), I understood the main use case for USDT on exchanges is to avoid even touching USD transactions in either direction; for exchanges doing this, they wouldn't be at risk here.
> And they don't have to win the lawsuit, they just need to not get it dismissed outright
Right, but I'm not seeing where you get a colorable cause of action that avoids that for a typical USDT-supporting exchange from a USDT value collapse.
Anything creating high volume benefits exchanges, even if that volume is everyone trying to sell their tethers for other crypto.
Bitfinex has a few billion in publicly known cold wallets.
It would only do so if the exchange has a strange unrelated agreement (like to trade 1 USDT for 1 USD), or were holding the money they're using to run their operation in that asset. Except for maybe Bitfinex (because of the special case), no exchanges are doing that with USDT.
Note: only exchanges supporting USDT (tehter) is going to get hit hard, other exchanges such as BitStamp will probably see a downtrend but not going to crash
Not necessarily but the market shakes from a major exchange going bust can definitely hit other exchanges as well (a classic bank run), and even if there won't be a bank run other exchanges, especially any with ANY ties to ANY US institution or customer (which basically every exchange has!), will be expecting their own "audits"...
This is just the beginning. As centralized exchanges start having all sorts of problems (CoinCheck, Bitfinex, maybe Bittrex and Poloniex soon), more people will start looking into decentralized exchanges and thus increase their liquidity. Even Binance, one of the biggest centralized exchanges right now, said that it wants to become a decentralized exchange.
All of this probably won't happen within the next year, but it will happen. It's just a matter of all the pieces falling into place for people to switch. Probably the #1 thing that could help their adoption is being able to integrate new cryptocurrencies faster than any centralized exchange can, especially if this integration is "permissionless", by simply allowing the cryptocurrency developers to support its protocol and then have the cryptcurrency automatically appear on the exchange.
A shortage of shitcoins isn't the biggest problem currently for the cryptospace.
No single exchange can keep up with every new cryptocurrency, so people start creating accounts with all the exchanges, and then start preferring the new ones if they also bring overall site improvements over the incumbents, and eventually dump the incumbents. This is healthy for the cryptocurrency market. If this wouldn't have happened, things could have been a lot worse with centralized exchanges.
I don't know what the "final form" of this ecosystem will be, but I hope it will be something like the internet. Decentralized exchanges essentially being "protocols" like TCP, which link all the cryptocurrencies (servers) and users (clients) with each other, and everyone can "exchange" (connect) one cryptocurrency to another.
But unlike the internet, I hope there will be a much bigger emphasis on P2P connections/transactions, and that we won't sacrifice that just to get a little more performance or more convenience. There will be such more centralized cryptocurrencies, too, just like today's internet continues to have huge walled gardens like Facebook, but hopefully it won't be the majority of them.
Going forward though there will be dexes and decentralized stable coins (such as Basecoin). Those would be extremely difficult to track down and have strong incentive structures to maintain their value.