That is could be used to avoid all those annoying banking laws (AML, KYC, etc).
@patio11 19h19 hours ago Eventually, a bank or, more likely, a regulator is going to say “Actually this doesn’t look like a legit deposit that we’re uncomfortable with supporting due to AML/regulatory reasons. It looks an awful lot like proceeds of crime intermingled with grey money.”
@patio11 19h19 hours ago More And the terrifying outcome, from the cryptocurrency economy perspective, is the regulator doing what the USFH did with respect to Mutum Sigillum (Mt Gox’s US front): “OK, we’re going to give you two choices.”
@patio11 19h19 hours ago More Door #1: Prove that it’s legal money. This should be trivial for you because KYC is the law and your compliance should be automatic. So have your lawyer suit up. BTW we expect this to take 3+ years.
Door #2: We propose a 50% haircut.
A clear abuse, it's the government's job to prove illegal deeds. Holding customers funds hostage under the threat of bankruptcy, while the company navigates the complex legal minefield the government itself created is just about the most corrupt system and farther from the rule of law you can get, short of direct confiscation.
They even went as far as claiming MtGox was a money transmitting business because it was a customer of Dwolla, and so customers of Dwolla could send money to themselves by withdrawing and depositing dwolla to MtGox: http://k.lenz.name/LB/2013/05/16/seizure-warrant-against-mut...
Tether and Bitfinex are the same thing, though both will vigorously deny that, but it's patently clear that they're intimately related. Tether has variously been able to get banking services, and thus act as a USD deposit to enter crypto exchanges like Bitfinex (USD -> USDT tether -> trade for Bitcoin, etc.). Because it's so clear that Tether is simply used as a way to circumvent AML/KYC, Tether continues to have difficulty securing banking services.
This current uncoupling of USD:USDT(tether) is due to such a banking issue. There are two major risks with Tether:
* Liquidity: without access to banking services, Tether uncouples and there can be a 'bank run' as the majority of funds are unavailable to maintain the stable price.
* Reserves: right now there are no guarantees that each Tether is backed by actual USD. You simply have to trust Tether on this. Ultimately Tether may be a sort of fractional reserve, and thus enough selling pressure will make Tether worthless.
At it's core, it's just a clumsy obfuscation.
Would you mind briefly expanding on "Because it's so clear that Tether is simply used as a way to circumvent AML/KYC"? Not being contrarian, I just don't understand how this part works.