IIRC, the NYAG/JPM report from a few years back almost explicitly said "this is totally criminal and entirely fraudulent, but it's too late to stop, because if we do, the entire global financial system will explode"
Though I swear I recall reading some ominous wording, pointed out by another commenter, that subtly suggested the decision to quietly settle vs. aggressively prosecute was based on billions of dollars of potential economic fallout. Other articles [2,3,4] talk about contagion risk, but none are exactly what I recall. Funny how memory works!
[0] https://cryptobriefing.com/jp-morgan-issues-tether-warning-second-guesses-146000-btc-price-target/
[1] https://www.tbstat.com/wp/uploads/2021/02/JPM_Bitcoin_Report.pdf
[2] https://www.bloomberg.com/opinion/articles/2022-05-12/crypto-crash-contagion-could-go-beyond-bitcoin-ethereum-tether
[3] https://decrypt.co/83276/imf-warns-stablecoins-could-pose-contagion-risk-global-financial-system
[4] https://www.cnbc.com/2022/05/19/tether-claims-usdt-stablecoin-is-backed-by-non-us-bonds.htmlSure it can be a distributed concencus/ledger system/smart contract system almost no one important needs or will use, or will reuse the idea internally themselves if it's useful.
Anything important won't be built on something they can't control or manage. Crypto by definition is that. So you have to really consider what this built on it and who's profiting from it.
"No contagion risk" doesn't mean nobody would be harmed by a crypto collapse; obviously there are a handful of morons here and there who would get wiped out. It means there is no systematic, widespread dependency of the real economy on the crypto one. I think the bank failures bear that out.
if balance sheets and collateral for loans for big businesses were all in tether it stopped being redeemable or traded at $0, the businesses would have nothing on their balance sheet and all their lenders would realize the collateral was also missing, and the lenders also would realize they wouldn't get paid and had lent on bad assurances. The lenders would also lose money on all those loans, and their capital partners would lose money (private equity firms and their limited partners) and everyone that relied on payouts from the PE firms would have to change their forecasting, and the PE firm would not be investing in the economy anymore, making a hole in that market. Depending on how many PE firms were doing this it could grind a significant part of the economy to a halt.
good news is that typically the government fills in the gap. but people don't like that.