That is, Tether loses its peg, $X dollars go missing, and firms start to fail like dominos, even outside the crypto sphere.
Tether is far from that level but theres nothing stopping its growth.
The solution isnt to ban tether, but rather launch central bank stablecoins. Put the official USD as a ERC20 token.
If this happens, we need to let it fail. I'd be furious to see the fed bail out USDT to make sure the crypto market stays "stable".
> That is, Tether loses its peg, $X dollars go missing, and firms start to fail like dominos, even outside the crypto sphere.
If firms fall because they bet too hard on USDT, they deserve to fall. Tether has not offered sufficient evidence that they are fully backed, so that risk needs to be accounted for by the firms that use USDT.
> Tether is far from that level but theres nothing stopping its growth.
Hopefully what's stopping that growth are better stablecoins with alternative risk profiles that are more favorable to investors.
> The solution isnt to ban tether, but rather launch central bank stablecoins. Put the official USD as a ERC20 token.
That's still just trading one set of risks for another, which is fine. Having multiple stablecoin options is good.
We already know its going to happen: some "blessed" TBTF tradfi bank is going to have some massive tail risk exposure on chain and will go insolvent unless FRBNY steps in so that they can get more tethers minted for them on chain.
What they wont be able to do is halt trading for all the derivatives on all the dex's on chain to help minimize the cost of that bailout.
Issuing a token, and claiming it will always be worth $1, simply by hoping that someone, somewhere will buy them for $1 is fraud.