I've provided details here: https://twitter.com/brandonjcarl/status/1536310742261047296?...
By itself that's not enough for Tether to "fail". It does mean that the asset is in a position of very high risk and subject to a run.
It also seems like without catastrophic retail investment losses, politically there isn‘t much to gain with implementing such a regulation, and potentially much to lose. Reacting too late to prevent harm seems to be the logical outcome.
A lot of protections have been put into place since then. There's a reason we prosecute Ponzi schemes, offer FDIC and SIPC insurance, stress test banks, etc.
I agree with you that Tether is very risky, but I think your revaluation of the "digital coins" class. In its attestations, Tether claims to value digital coins as "cost less impairment," so effectively at the minimum value the coin has reached since its purchase.
With that methodology, it is erroneous to apply "down 60% from market highs" to estimate the current value.
That said, we can speculate endlessly about Tether's ultimate solvency because we don't have a detailed enough balance sheet. I think it's clear, however, that despite acting like a bank Tether's capital could not possibly meet Basel 2-like risk weighting standards. Even with completely above-board operation, Tether would be reasonably likely to collapse if we experienced a repeat of the 2008 financial crisis.
To do this correct you'd need purchases and sales versus assets.
All that said, it's why I put a rough estimate of 30% (instead of 60%) and hadn't included any losses in broader commercial paper (which has dropped). So the overall estimate is defensible.
Also agree on Basel 2-like risk. The primary issue with Tether is the marketing around stability and the transparency. If it was treated like any other "money market" with better NAV reporting, position reporting and rules around withdrawals then we'd mitigate some of the risks.
As you can see, the rates don't map to any significant overcollateralization.