I believe the U.S. minimum requirement is currently at 10%, but you do remember how bad it all came crashing down 13 years ago, right?

So yes, it does matter if we let financial institutions disregard risk in the pursuit of profit, when they are gambling with other people’s money.

In the case of Tether though, it’s not a traditional bank that issues interest yielding loans based on the lender’s credit profile.

Rather, the suspicion has been that they are simply issuing USDT coins to buy up crypto, which causes the latter to increase in value, but the money to buy these assets were never there in the first place, and that is why today, they can only show a fraction of the cash they claim to have received.

Banks aren't at all like a supposedly pegged cryptocurrency. Secondly banks don't have a 0% reserve requirement against all types of RWA. They have specifically low reserve requirements against certain types of assets but if you look at the balance sheet of a bank you'll see that their capital reserves are not zero. The Fed removed the reserve requirement on eligible deposits and moved to the "ample reserves" system where they pay interest on reserves that depositary institutions lodge with them but which a specific reserve requirement against liabilities is not needed.

Banks are still required to have reserves against risk-weighted assets (remember that deposits are a liability) and to cover liquidity and macroprudential risk. Here's the fed policy note https://www.federalreserve.gov/monetarypolicy/reservereq.htm and here's an explanation of the "ample reserves" system https://www.federalreserve.gov/econres/notes/feds-notes/impl...

Sibling comments express justified disbelief at this question, but just in case: in our modern monetary system, reserve requirements aren't the "last resort" against bank runs. The central bank will jump in and provide the required liquidity to prevent a bank run as a last resort, and (since it is the entity which ultimately runs the monetary system) the central bank is by definition always able to do so. For a bank to fail in the modern system, it has to fail its capital requirements, which is a very different story (the keyword you'd be looking for here is the Basel regulations).

Tether cannot fall back to a central bank, so the cases are completely incomparable.

Yes because it's an unregulated offshore private company? In the physical world it's like giving money to someone in exchange for a piece of paper with "1 my token", freshly out of the printer. It's worse than banks.

Tether is acting like a bank, that's the problem. A completely un-auditable bank with a history of shady behavior.

If a bank has 0% reserves, the books say 0% reserves. Tether has no books.

Are you really comparing tether to a bank?

The two are incomparable.