U.S. court rejects Tether’s bid to conceal reserve records from the public

Because the simplest explanation is a media conspiracy perpetuated by…finbold.com.

I once tried to exhaustively document and cross-reference a pretty ordinary coding session of several hours, and took a surprising amount of effort, something like an hour of writing and pasting links from browsing history per two or three hours coding, and you need to do it every two or three hours or else you forget half of what you were thinking. Similar experience with writing down the results of what seemed to be a perfectly harmless week-long dive into mathematical literature.

Annotated bibliographies (let alone anything more detailed) take time and work, which for standard newspaper journalism does not pay off.

Since the company is so evasive and has been for years nobody outside really knows.

Basically tether mints a bunch of USDT, 'loans' it to bitfinex which then creates an asset on tether's balance sheet of the loan. Bitfinex then goes and buys BTC with the USDT raising the price of BTC.

The problem here is that there is no actual USD anywhere in this system. Net, the system is just one where tether is getting minted out of thin air and then sold to the public for BTC or whatever coins.

The risk is that there could be a bank run. People panic and drive down the price trying to get rid of their tether. Now crypto as a whole has lost a lot of the liquidity used to buy/sell crypto. This causes a further panic across other crypto assets.

It is quite possible that a number of exhanges which had traded IOUs for Tether, Traded that Tether back to have the IOUs canceled.

Edit: Now that I think about it, it really would make sense. They are fighting to keep these records secret, but they may also be cleaning up their books a little in case they lose and have to make their holdings public.

In addition, I’m surprised so many people defend them by effectively saying ‘this time they’re not lying’ — with no evidence. All I can see it as is wishful thinking than sound judgement.

A bank.

But if Tether is a bank, then UST isn't a 'stablecoin' it's a deposit. And Tether is engaging in what banks have done for centuries, that is increasing the money supply through credit. They are doing it in an illegal and unregulated way which most likely will result in tears and recriminations. But ultimately there is nothing new under the sun.

Edit:

I was wrong in what I wrote above.

Tether is acting as a bank, and yes UST's are simply deposits, but all those people correcting me are right. Their assets (at least nominally) should match or exceed their libailities.

Depending on what it is, that's also a way they can lose money.

If you think of Tether as an investment organisation that takes $ and hands out claims which they say are worth 1$, while making a bunch of investments, what's that in regular investment land? A money market fund. What can go wrong? https://www.investopedia.com/articles/economics/09/money-mar...

On the other hand if they're exclusively in something as safe as US Treasury notes, satisfied by profiting a very small % but on a large pile of money, then they're on more solid footing. The fact that they say "commercial" paper makes me doubt this somewhat.

TLDR: if their 100% backing is in anything with even moderate risk, they could be doomed.

They hold 10% in _cash_, and 90% in debt. That debt is liquid and can be traded for more cash easily in the case of a bank run (possibly even guaranteed by the fed?)

Tether _may_ be holding cash and assets covering 100% of its reserves, but 1) it's not sure, 2) it's not clear how liquid those assets are (e.g. dubious CP)

If Tether hold cash+assets covering 90% of issuance then it's a scam. If they hold 99% then it's a scam. It's not equivalent to fractional reserve banking

That answer is correct only in a very limited sense. All legacy banks have more assets than (non-equity) liabilities. In addition to that, banks have liabilities with lower seniority than deposits, which take losses before deposits. So yes, if a healthy bank faces a liquidity crisis, all deposits can't be paid out immediately. But they can be paid in full after the assets are liquidated. That's why banks are not huge scams. They are machines that create long term lending from short term borrowing, which actually is a useful thing. And yes, that contains many known risks, which is precisely why banks are regulated and audited. (I have yet to hear an understandable explanation how a mortgage or business loan works in crypto world - without fractional reserve banking, that is.)

What potentially makes stablecoins scams is if they do not have assets to cover their liabilities. And funny thing is, that would be extremely easy to show to be not the case by being open about the details of the reserves. So easy, in fact, that it is practically impossible to come up with any other reason for not being open about the reserves than them actually being scams.

That's exactly why traditional banks are subject to heavy oversight and regulations, and deposits are protected by govt guarantees. Tether on the other hand is operating completely in the dark and has been involved in a lot of shady activity that does nothing but undermine trust in their ability to do treasury operations in a responsible manner.

2) Historically, bank failures and bank runs were a major recurring problem. Our current financial regulations are written in the blood of those past failures.

3) Among the many safegaurds in place is the FDIC, which insures depositors against bank failures. The FDIC is backed by the US government.

There are two different failure modes for Teather

1) A liquididy problem (bank run). Teather pauses redemptions while until it is able to liquidate its other assests. Might cause a panic, but long term, your Teathers can still be redeamed for dollars. If their is trust in the market about this, 3rd parties can provide liquidity as a form of arbiteage (causing the value to dip below $1, but not crash)

2) A solvency problem. Tether runs out of money and the remaining holders get 0. Or, Tether knows they haveva problem and pay everyone pennies on the dollar.

People are concerned about failure (2)

I imagine you're bringing this up to say that crypto is no worse than traditional banks. I disagree strongly with that.

One difference is that there are apparently strict rules that banks and central banks are supposed to follow (though the rules seem to change or bend expediently), and they are backed up by the government ('bailed out') if they screw up.

Also the Tether people themselves do not appear to be revered for their integrity.

b) Individual bank accounts (in the US) are backstopped by the federal government, via FDIC. It might still be a scam, but it's a scam whose validity is backed by the most expensive military on Earth.

Playing devil’s advocate, their users clearly don’t care if they’re backed. As such, they’re running a hedge fund with zero cost of capital. Those typically have good reasons for treating their strategies as proprietary.

- External fund managers

- Engagements with companies

- Overview corporate bonds

- Overview nation-state bonds

- Stocks

- Overview top 100 largest investments

All contain detailed lists about the country, instrument invested in, sector and how large the stake is rounded to the nearest million euro. All these lists are updated regularly as changes occur. Nobody is asking Tether to disclose every term of every single deal they make, but making disclosures about the composition of your underlying assets is not a very big deal at all. You can find similar documents for almost every pension fund out there.

If people aren't willing to tell details on what you're invested in, that is considered one of the red flags that you're investing in a Ponzi scheme.

[1] I'd link directly, but the final link is a downloaded PDF, so it's not as easy to copy the link.

Theoretically, USDC is backed (or more backed) by dollars.

I'm not sure why anyone has ever held a Tether for even 1 second. Even if you believe in it 100% - why not hold something other people believe in more?

Of what, a few months of a 50% dip? Look at the chart, we've seen all of this before.

There are other sources of yield, such as Gemini Earn (6.5%), which lend to larger trading firms. Those feel riskier since they're more exposed to systemic collapse in crypto and lock up your dollars with a long withdraw delay.

Then there are the ponzi yields (10-40%), like the recently collapsed UST and the soon-to-collapse USDD and USDN. I think it's obvious why those are a bad idea.

Even if it is only 1% in total, for all cryptocurrencies - 1/100 of the yearly energy used by the whole planet is a gigantic amount of energy, isn't it?

[1] https://www.businessinsider.com/bitcoin-mining-electricity-u... [2] https://www.nytimes.com/interactive/2021/09/03/climate/bitco...

I'm not sure how you're avoiding that, especially once the stable coins are regulated? You still have payment processors to pay, just with different names

Is it because the crypto-exchanges tend to go in maintenance mode when a coin is going down?

So even if you consider it inevitable, backing that conviction with your own cash is a great way to get rekt.