That might explain why it has not crashed completely yet.
As a rule of thumb, never trust service providers that should, by all common sense, fail, but miraculously don't.
Common sense is rarely either.
Now, it's just a question of degree: they're so profitable they can recover from being fractional rapidly. OTOH, why mess with a working formula?
To be clear, I have zero financial interest in any crypto, I just think it’s premature to assume the worst just because of the industry.
And they later detailed the $1bn Tether printed for Celcius in return for collateral (once Celcius collapsed and they claimed it was fully repaid).
Understand: for modern banks this kind of fractional behaviour is considered normal. It's only from the weird Bitcoin perspective that full reserve would be a requirement.
TBH I'm not sure if they're allowed to operate in NY though.
This is pretty hilarious coming from someone defending a company that refuses to produce a legitimate audit. (no, an "attestation" is not an audit)
If all they're doing is sitting on a giant big pile of cash and treasury bonds, it should be absolutely trivial to provide proof: here's where those assets are deposited.
And I’m not “defending” anything other than the basic idea that when one has not proven something, one cannot claim it as true. Nobody has been able to prove Tether is a scam, so it isn’t.
This right here is amazingly revealing of the mindset that leads fools to become separated from their money. What's the opposite of caveat emptor?
Tether is simply shadow banking and brings liquidity into Bitfinex. It’s very simple:
1. Export finished goods from China for dollars.
2. Import inputs for step 1 from places like Turkey, Ukraine, and others and pay inflated invoices with dollars from step 1.
3. Receive Tether out-of-band for step 2.
4. Swap Tether for dollars on Bitfinex.
5. Buy property in Western countries in the names of your children who have US, Canadian, and UK passports.
Reverse the steps for redemption.
To be fair there's a HN unicorn doing just that: Coinbase. They created a joint venture with Circle and are backing $25 billion USDC by US short term treasuries, minting a cool 1.25 billion yearly in interests.
And contrarily to tether, Coinbase does have the actual USDs / short term US treasuries backing the USDC emitted (big names banks have published the list and individual numbers of all the US treasuries they're holding for Coinbase and during the SVB fiasco Coinbase was shown to have 3.3 bn at SVB or something like that).
Certainly a very profitable business to be in...
[1] https://amycastor.com/2023/12/28/crypto-collapse-mt-gox-payo...
[2] https://davidgerard.co.uk/blockchain/2023/12/06/bitcoin-goes...
Most people don't look any further than that. Obviously, a large number do look further than that, and many, many people would never take the bait. But don't underestimate the number of people, even well resourced people, who would fall for this sort of scheme.
You'll also note that they're following the "International Standard on Assurance Engagements 300 (Revised) ~ Assurance Engagements Other than Audits or Reviews of Historical Financial Information", which heavily suggests that this is not an audit and they did not review historical financial information.
Also, the 'auditors' they are approaching are more and more into the 'not quite competent' end of the line if you look into them.
Even if they claim full backing and don't, they have lied.
Whether that is substantially and materially a sole qualifier in determining them a fraud and scam, is for the legal system, not an assortment of most vocal persons, to decide.
So no, it’s not the “very definition” of a scam.
Tether is a profitable business cooperating with the US govt.
Please don't dispense slanderous accusations unless you know what you are talking about.
Tether is an insanely profitable company, they would be able to fill any hole in a few years purely from profit. That is besides the point though.
There is no (literally 0) evidence that Tether is not solvent. Tether itself has been audited [0] and has hundreds of millions MORE reserves than USDT issued. Tether is the opposite of the fractional reserve banks in America. Tether is MORE solvent than major US banks (before federal bailouts.)
> "Tether is a well known scam." Huh? Hundreds of thousands of real people use Tether to transact monthly. Seems pretty legit to me?
I will concede that Tether has made some strange choices by choosing a smaller Italian firm to conduct their audits, but this is very different than a "well known scam."
[0] https://tether.to/en/transparency/#reports
P.S. if you want to discuss 1 on 1 my socials are in my bio
Dec 26, 2023 Tether mints $1B USDT for ‘inventory replenish’ [0]
Sep 19, 2023 Tether authorizes $1B USDT to ‘replenish’ Tron network [1]
Feb 3, 2021 Tether pays $18.5 million in penalties; NY Attorney General alleges they don't have the cash reserves they claim [2]
[0] https://cointelegraph.com/news/tether-1-billion-usdt-invento...
[1] https://cointelegraph.com/news/tether-authorizes-1-b-usdt-to...
[2] https://web3isgoinggreat.com/?id=tether-pays-18-5-million-in...
Theoretically the banks have lower risk due to regulatory actions. We've had enough financial crisises now that a reasonable person could discount that. Given the levels of debt and spring-loaded derivatives, any institution is at risk these days. We can imagine a history book entry saying "XYZ couldn't return their depositors money" for pretty any actor in these markets.
The banks get bailouts of course, but that tends to be action outside the official rules; so maybe Tether will get it to? The differences here are mostly about how long the game has been played, not what the game is. Tether doesn't seem to be less reputable than the banks. It outlasted Credit Suisse for example. I'm not calling anything, but maybe Tether is going to behave a lot like another bank.