Except it's not zero sum. It's turning out to be one of the most leveraged assets out there. If I borrow money (or print tether) to buy BTC at $50k and then the price drops to $35k that money is gone.
tether as absolved of all charges, and is under continuous monitoring and audit by NY AG - who would love to jail to advance their careers. Imagine how impressive "jailed 100 BILLION dollar fraudsters" sounds on the resume.
Nope, not a fraud.
Print, lol. They are just a prime money market fund, setup exactly the same way the funds your parents kept in their 401k.
Surprise, commercial banks that lend to you, like mortgage or car lease are actually creating money out of thin air. Unlike tether which is fully backed.
>Surprise, commercial banks that lend to you, like mortgage or car lease are actually creating money out of thin air. Unlike tether which is fully backed.
In the US commercial banks are required to maintain a certain % of cash reserves relative to all deposits. They are also FDIC insured. Tether is neither insured nor required to maintain any reserves. Their recent filings show that less than 3% of tethers are actually backed by cash, and the bulk of tether is backed by anonymous 'commercial paper,' aka IOUs. Tether also declined to disclose the credit rating of this commercial paper, or who the counter-parties are.
Once the BTC world stops trying to hide, obfuscate or otherwise cover for bad actors it will be possible to create meaningful financial innovations that scale.
Please observe that 3% is actually much higher than 0%.
The rest of bank's book is usually assorted IOUs as well: commercial paper (aka bonds issued by companies) and mortgages. All of these assets that the Fed buys whenever any bank is in trouble, you can look this up in any news source.
Tether is simply just another offshore bank.
None of offshore USD deposits are insured by the FDIC. Yet, offshore banks hold trillions of dollars. They also have higher than zero reserves, just like Tether does.
There is nothing going on, just clickbaity nonsense media churns out for ads.
1. reserve requirements have been 0% in many first world countries for decades.
2. I agree tether runs their operation in a bit of an opaque way.
However, that should be the criticism indeed, not the composition of their portfolio, which is much the same as any other bank, really.
To steelman Tether's position, it seems that their opaqueness is an intentional strategy to make them more resilient. They could easily get a bank charter somewhere, however you lose control, and must share it with the regulator. Regulators will review and approve directors/offices of the bank, you may in fact lose control over your own business. It also comes with all sorts of jurisdictional and political risk. Having been in that industry, I can sympathize with Tether, it's extremely hostile to large fintechs.
They could be targeted simply for political reasons, or because someone connected decides to destroy by leveraging their regulator buddies power.
How do you prevent that, without being opaque and telling those that may target you, exactly where all your assets are so they can just freeze them directly?
I really wonder if they ever disclosed to NY AG whose commercial paper they hold.
