[HN Gopher] CFTC Orders Tether and Bitfinex to Pay Fines Totalin...
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CFTC Orders Tether and Bitfinex to Pay Fines Totaling $42.5M
Author : VHRanger
Score : 175 points
Date : 2021-10-15 15:34 UTC (7 hours ago)
(HTM) web link (www.cftc.gov)
(TXT) w3m dump (www.cftc.gov)
| unreal37 wrote:
| No regulator or government official wants to see Tether
| destroyed, so they have to act all shocked and surprised before
| moving on to the next Facebook Privacy scandal.
| optimalsolver wrote:
| Tether's collapse will be to Mt. Gox what Little Boy was to a
| firecracker.
| randomhodler84 wrote:
| I'm not so sure it will collapse (now), this settlement adds
| legal clarity. The CFTC has set their parameters in the
| settlement and will enforce compliance, BitFinex/Tether paid a
| fine. Tether will be stronger through greater reserve and
| investment grade requirements, and more transparent.
| arcticbull wrote:
| Nah it certainly doesn't. This only covers up to February
| 2018. At the time they only had $2B in issued USDT, and of
| course, they remain under investigation by the DOJ and SEC.
| randomhodler84 wrote:
| Fair enough, I guess there are other battles still at play.
| Let's see where this goes :-)
| arcticbull wrote:
| Every day is a fresh adventure haha.
| reginold wrote:
| Open question: Has this been priced in by the market?
| axiosgunnar wrote:
| Everything has always been priced in by the market
| Macha wrote:
| Of course "the market" is people, and algorithms watching
| what the people and other algorithms do, so is not immune
| from excessive optimism or pessimism, as the stock market
| should demonstrate
| null_shift wrote:
| One would assume so. Interesting to see the price rise in
| advance of the announcement. Maybe this punishment was seen
| as less severe than it could have been?
| c-fe wrote:
| I think the price rise in advance of the annoucement may
| have more to do with the approval of bitcoin ETFs, there
| are some news about that..
| davidgerard wrote:
| The price rise was a Tether-fueled pump. Someone poured $1b
| of stablecoins into a single purchase to pump the price.
| spywaregorilla wrote:
| You mean someone gave 1 billion of tether to buy bitcoin?
| WalterSear wrote:
| It's not remotely priced in.
|
| The BTC price is currently held up by USDT inflows, rather
| than USD. Tether issuance notifications are the most reliable
| leading indicator in crypto: they are all you need to trade
| BTC.
|
| Most people in crypto aren't even aware of the problem. Most
| of the ones that are, refuse to accept the situation and get
| very emotional when it's brought up.
| [deleted]
| toomuchtodo wrote:
| If Tether went to zero today, what would the true price of
| BTC be?
| arcticbull wrote:
| It's very difficult to say because the waterfall of
| cascading liquidations would shut down exchanges. It
| would take quite a while for things to settle down enough
| for a real fiat market to exist. The whole market is
| propped up by stacked leverage.
| WalterSear wrote:
| Given that it's being issued specifically to manipulate
| the market (it's not just a 'whale'), and the fact it's
| involved in 70% of crypto trades, I can't see a way to
| put a floor on it.
| reginold wrote:
| Neat where do you track Tether issuance notifications?
| WalterSear wrote:
| Twitter bots are easiest, though they come and go. But
| you can see the issuing wallet here:
|
| http://omniexplorer.info/lookupadd.aspx?address=3MbYQMMmS
| kC3...
|
| Or visit Tether's site:
|
| https://wallet.tether.to/transparency
| abrodersen wrote:
| The canonical method would be to call the `totalSupply()`
| method on Tether's ERC20 contract.
| webinvest wrote:
| You can answer this question yourself by comparing the
| borrowing rates of USDC, DAI, USDT, BUSD, and GUSD. You can
| learn more by plotting the interest rate basis point spread
| on a time-series line chart. If the borrow rate for USDT was
| 18%, the borrow rate for USDC was 6%, and the borrow rate for
| DAI was 4%, what would that tell you?
| NicoJuicy wrote:
| I'm really disappointed that the EU hasn't launched an
| investigation yet ( at least, not that I heard)
|
| Should have been done 5 years ago.
| jdsully wrote:
| > Tether held sufficient fiat reserves in its accounts to back
| USDT tether tokens in circulation for only 27.6% of the days in a
| 26-month sample time period from 2016 through 2018
|
| With how shady they acted I would have assumed that number was
| 0%. A bit shocked it wasn't a total scam to be honest, even if
| they did misrepresent that it was in fiat not risky investment
| assets.
| legulere wrote:
| The longer you keep a scam running the more you can make out of
| it.
| vmception wrote:
| CFTC/FDIC/OCC/NYAG/Congress/all bank users: Collateral
| requirements for everything we regulate are like 4%. You need
| $4000 to trade with $100,000.
|
| Also everyone: omg tether was not 100% collateralized by fiat
| dollars at all times, sometimes, but also not at all times!
|
| I just feel like the arguments are weak. Tether was
| controversial because it was centralized at all and requires
| ongoing trust and its collateral is not verifiable except by
| the state's subpoenas. Then the argument moved to something
| much more .... tolerant of their existence but requires
| completely ignoring how all the rest of finance works to make
| it an issue with Tether. Strange. At this point I can
| acknowledge that the market can bear it. Tether, like
| everything non-crypto, are vulnerable to bank runs, and that
| works. If people actually wanted fiat, then Tether could be in
| trouble. But Tether users do not want fiat and redemptions
| barely occur. People don't want to accept the reality that
| Tether actually works as stated. Like if you just assume it
| works as described, using the investigations of multiple US
| agencies, then it makes sense! Tethers are created when people
| deposit fiat on Bitfinex, deposit directly with the Tether
| issuer, sometimes by Tether issuer when Tether trades at a
| premium (in exchange for other cryptos that are not dollars),
| and _sometimes_ arbitrarily. But its better to assume the first
| 3 everytime a big tether print occurs, than to _always_ assume
| the last one, because the formers are what all the US
| regulators and enforcement agencies have also found to have
| occurred most of the time. Not that hard. It is a trusted
| system, like everything else we are used to. They change their
| contract to reflect any deviation from 100% usd
| collateralization and that 's not that controversial.
| Fractional systems also work. Ideology doesn't make something
| else suddenly not work.
| roywiggins wrote:
| > Also everyone: omg tether was not 100% collateralized by
| fiat dollars at all times, sometimes, but also not at all
| times!
|
| The key point is that it wasn't fully backed _and Tether
| represented that it was_ : "Tether misrepresented to
| customers and the market that Tether maintained sufficient
| U.S. dollar reserves to back every USDT in circulation with
| the "equivalent amount of corresponding fiat currency" held
| by Tether and "safely deposited" in Tether's bank accounts.
| In fact Tether reserves were not "fully-backed" the majority
| of the time."
|
| Tether can either do a sort of fractional banking or not, but
| what they're getting fined for is lying about it.
| vmception wrote:
| Yes. To me, its more like they leaned into what the
| assumptions about them because they couldn't shake the
| assumptions. As in, at first they were doing what they said
| and people complained anyway, so then they did what people
| were complaining about because it was a conveniently
| awesome amount of money and people kept complaining, so
| then they changed their legal contract to reflect that they
| _can be_ what people complain about, the state investigated
| and found the period of time where they did what people
| complained about and had not updated their legal contract
| yet.
| SantalBlush wrote:
| The assumptions were that they were committing financial
| fraud. That's not something you just "lean into."
| roywiggins wrote:
| "Everyone thought I was lying so I decided to prove my
| detractors correct" is just lying to your customers with
| extra steps.
|
| "Because you thought I (cheated on you|took drugs|did
| crimes) and I hadn't, I decided I might as well do it for
| real, so there's no harm done" is not a defense, it's a
| hollow self-justification.
| vmception wrote:
| I'm not an apologist for them, I just don't care that
| they lied. Corporations lie and that's not controversial
| to me. They settled, with another US authority, the
| matter over their reserves is resolved - for that time
| period and legal agreement, the same standard applied to
| every other institution in the financial services sector.
| If you want a chronology of events, I offered it.
| nrmitchi wrote:
| > To me, its more like they leaned into what the
| assumptions about them because they couldn't shake the
| assumptions
|
| Ah yes, the reasonable defense of "Your honor, I only
| robbed the bank because someone thought I was going to.
| Therefore, it's not my fault."
| vmception wrote:
| its not a defense, I'm not an apologist. corporations
| lie. I don't actually find that controversial maybe
| because we are not 4 years old anymore. this is what
| happened, they settled, does your passion over how you
| frame this topic actually matter?
| freejazz wrote:
| you literally explained a completely nonsensical reason
| as to why they did what they did. call it whatever you
| want...
| vmception wrote:
| its not different than someone that everyone
| overwhelmingly trusts was found to have moved the
| reserves.
|
| here everyone just expected them to be doing that, and
| eventually they did it, not different than someone nobody
| expected to be doing that eventually being found to have
| done it as well. these cases prove that at one point they
| had not, even when everyone assumed they were. its like
| taking a time machine back to 2016 and telling people
| "hey actually they're fully backed", its interesting to
| find out, from the state's investigations, that they
| actually were.
|
| thats the only chronology I explained.
|
| lets play a new game: what's _inaccurate_ about what I
| said? seems like thats a much more productive discussion.
|
| the reason I think the distinction matters is because its
| resolved now. And that resolution involves Tether still
| existing. So our passion about a systemic threat to
| crypto and maybe the broader financial system will not
| involve the state doing something about that. which is
| fairly important to understand, both for your decision to
| use it even if briefly, or for espousing your passion
| about why others shouldn't use it.
| lvs wrote:
| Leaned into assumptions? Come on. It's just called lying.
| End of story.
| aww_dang wrote:
| I sympathize with the observation of hypocrisy, but disagree
| that this excuses Tether. The USD note once featured the
| words, "This certifies that there has been deposited...
| payable to the bearer on demand". At least in this case the
| offending text was removed.
|
| https://en.wikipedia.org/wiki/History_of_the_United_States_d.
| ..
|
| >In February 1965, President Charles de Gaulle announced his
| intention to exchange its U.S. dollar reserves for gold at
| the official exchange rate. He sent the French Navy across
| the Atlantic to pick up the French reserve of gold and was
| followed by several countries. As it resulted in considerably
| reducing U.S. gold stock and U.S. economic influence, it led
| U.S. President Richard Nixon to end unilaterally the
| convertibility of the dollar to gold on August 15, 1971 (the
| "Nixon Shock"). This was meant to be a temporary measure but
| the dollar became permanently a floating fiat money and in
| October 1976, the U.S. government officially changed the
| definition of the dollar; references to gold were removed
| from statutes.
|
| https://en.wikipedia.org/wiki/Exorbitant_privilege
|
| There is some irony in the US gov objecting to Tether's
| methods. While the USD is backed by what exactly? What are
| these reserves of the Federal Reserve? Meanwhile, the 1
| trillion dollar platinum coin is being proposed. Yes, it is
| fair to say Tether is guilty of having insufficient reserves.
| But how meaningful is it to say that they have insufficient
| reserves of an unbacked currency?
| AlexandrB wrote:
| > But how meaningful is it to say that they have
| insufficient reserves of an unbacked currency?
|
| Because being backed by USD reserves is their whole (self
| reported) value proposition and the supposed reason why 1
| USDT == 1 USD on the open market. If this is all false,
| USDT should float relative to USD like any other crypto
| equity.
| imtringued wrote:
| >There is some irony in the US gov objecting to Tether's
| methods. While the USD is backed by what exactly?
|
| It's backed by the obligation to repay roughly $50 trillion
| (private plus public debt). I honestly don't get how people
| misunderstand the new system. The money system is quite
| simple. Money is just the liquid portion of credit and
| credit has value because a debtor has obligated himself to
| accept credit as payment.
|
| A business isn't accepting USD because it has faith in the
| USD, it's because it is in debt and needs to earn the money
| back by providing goods and services or alternatively it
| needs the money to buy products and services from other
| companies that are in debt.
|
| The way tether is run is quite strange. It's not a bank so
| people expect it to have a reasonable amount of cash
| reserves or alternatively they expect tether to declare
| that they do not intend to hold cash reserves and that
| holding tethers has a completely different risk profile
| than holding USD which also means it would have its own
| exchange rate vs USD instead of 1:1.
|
| >Meanwhile, the 1 trillion dollar platinum coin is being
| proposed
|
| That's just a hack to get around a self imposed debt
| ceiling. Everyone knows it's stupid. Blame the bigger
| idiots in congress that want it to be necessary.
| arcticbull wrote:
| Once again, this demonstrates a complete misunderstanding of
| fractional reserve banking. Fractional reserve banking is how
| new money enters the financial system. When you borrow money
| for, say, a mortgage, new money is created - alongside a
| liability on the banks books. [edit: This liability is what
| gives fiat value - money is always 100% backed by the demand
| for that money].
|
| As you pay off your loan, the new money that was created is
| destroyed.
|
| This is how the money supply is actively managed, it's not
| some tinfoil hat conspiracy haha.
|
| There is also a 1/2 trillion dollar fund (FDIC) and a
| _further_ 1 /2 trillion dollar line of credit at the Fed to
| ensure depositor funds are secure.
|
| The federal reserve, created via act of congress, exists to
| manage the money supply - to maintain a low, fixed rate of
| inflation and maximum employment. These two features are
| correlated, by the way, as you can see in the Philips curve.
|
| Now, Tether on the other hand is just printing fake money to
| pump up the market to benefit themselves and a small cabal of
| crypto holders who recognized early on the liquidity did not
| exist to support their desired level of wealth.
|
| They lie about it regularly - in fact their announcement of
| _this settlement_ included a bald faced lie.
|
| > Tether: "As to the Tether reserves, there is no finding
| that tether tokens were not fully backed at all times--simply
| that the reserves were not all in cash and all in a bank
| account titled in Tether's name, at all times."
|
| > CFTC: "In fact Tether reserves were not "fully-backed" the
| majority of the time."
|
| This is the central bank of crypto, 85% of all trading volume
| is against USDT, and they have shown themselves to be the
| least trustworthy entity in the world. Just a new Liberty
| Reserve.
| vmception wrote:
| We are talking about totally different things, and I have
| absolutely no issue with fractional reserve banking and
| have no conspiracy laden issue or understanding of it.
|
| What you mentioned happens. And requires a charter from
| governments to occur.
|
| What I mentioned happens too. And simply relies on the
| tolerance of the market.
|
| One is about banks.
|
| Another is about the amount of unsecured leverage that all
| individuals and entities can operate with, and whether
| their counterparties need disclosure or not.
|
| "Fractional reserve" in this context, is more about the
| ratio of collateral, used colloquially for quicker
| understanding. "Loan to value" could be helpful for other
| people to understand. "margin requirements" for other
| people.
|
| I am only referencing the reality that individuals,
| businesses, and almost any kind of entity, can have a lower
| value of assets redeemeable for any liability they issue or
| accrue. It can be a "fraction" or their "reserves".
| arcticbull wrote:
| The "charter of the government" is the difference between
| kidnapping and an arrest.
|
| We've long since given up on the idea that anyone should
| be able to do whatever they want no matter who it harms.
| vmception wrote:
| Many financial infractions operate in a different reality
| that has no analogy to non-financial criminal law.
|
| You are focusing far too much on the marketing that uses
| the terms currency. Any individual or corporation is
| capable of creating a product said to be redeemable for
| something in their treasury. This has nothing to do with
| the parallels to the federal reserve when corporation
| calls its product a stablecoin or dollar-like. All
| settlements with Tether's companies have been
| _exclusively_ related to the reality that the corporation
| 's product was not in fact redeemable for the thing they
| said it was. That is the only issue, every authority that
| matters has said that was the only issue. Both crypto
| twitter as well as blockchain skeptic's opinion doesn't
| matter here. Their armchair legal analysis don't matter.
| Their comparisons to the state-monopoly on currency
| issuance doesn't matter. The corporation having marketing
| and legal agreements that accurately describe what their
| product can be redeemed for, if anything at all, simply
| has to be congruent with reality. That's the totality of
| the sanction from the CFTC, and the same with the NYAG at
| one state level. But I will give you one bone, and that's
| the reality that the DOJ can of course come with a
| parallel criminal prosecution for the same activity. So
| if that will validate your thoughts on anything, just
| wait for that if it ever comes. I'm not worried about
| "being right", only saying what this settlement is
| saying.
| randomhodler84 wrote:
| Yeah! And the reserve requirements were suspended during the
| pandemic for banks anyway. Tether is, at least on chain,
| completely open and auditable. You can trace every token, in
| ways the global banking system is opaque. A fine, some regs
| and compliance, and capital still flows.
| [deleted]
| ethbr0 wrote:
| Well, it'd be pretty easy to partially back tether.
|
| Create new tether, declare 1:1 fiat, sell new tether for 1 fiat
| each.
|
| It only really becomes a problem if they're trying to be
| completely backed, as new tether isn't an option then.
| asah wrote:
| The takeaway: tether executives are explicitly engaging in
| dangerous and shady behavior, and you can't trust any statements
| made by them.
| [deleted]
| ur-whale wrote:
| > Totaling $42.5M
|
| Which is essentially peanuts for the folks being Tether who will
| chalk it up to "cost of doing business".
|
| How do people come up with theses "punitive" numbers?
| codebolt wrote:
| This was my favorite part, just wow:
|
| > Further, at least until 2018, Respondent's internal accounting
| system for tracking fiat balances, including bank balances for
| USDt reserves, primarily consisted of a spreadsheet (the "Reserve
| Spreadsheet"). The Tether executive team was ultimately
| responsible for the Reserve Spreadsheet. The Reserve Spreadsheet
| required manual updates and was not always kept up to date in
| real time. Respondents were aware of the limitations of the
| Reserve Spreadsheet. For example, in an internal chat on June 15,
| 2016, Tether's then-Chief Strategy Officer informed Respondents'
| CFO and other employees stated that the: "transparency page needs
| to be dealt with ASAP . . . I am surprised the issuance address
| is not updated dynamically, btw . . . and how often does the bank
| balance get updated?"
| humaniania wrote:
| And crypto manipulators are trying to spin the recent price
| increase as positive news with absolutely no regard to how a
| similar price ramp up happened on MTGOX before it went down
| completely from insolvency. Has Bitfinex pricing decoupled from
| the prices on legit exchanges yet?
| webinvest wrote:
| MTGOX was essentially one large bug bounty for any hacker that
| had the means and ways of collecting the jackpot. Once the bug
| bounty was several million dollars...
| graeme wrote:
| No, no decoupling.
|
| I wondered if the runup was like MTGOX. It's plausible, but if
| so then someone is providing the dollars for everyone selling
| into USD on Coinbase etc. Whereas MTGOX's prices were all self
| referential right? By the time it started freezing up
|
| One other possibility is that Tether is playing the CME futures
| and making money from the pump up. I suspect they're insolvent
| but it's possible they aren't and are merely crooks. The crypto
| markets interface with real money now
| arcticbull wrote:
| This settlement only covers up until February 2018. At that time
| they only had $2B-ish in issued Tethers (as compared to $65B ish
| now). $850M of their assets were seized in an AML sting shortly
| after that, in mid 2018 [1], they've been fined $42.5M [this
| article and 2] by the CFTC and another $18.5M by the NYAG [3].
|
| Basically they've had to forfeit almost half of their assets up
| to [edit] Mid-2018.
|
| They remain under investigation for bank fraud by the DOJ [4] and
| for something unspecified by the SEC. [5]
|
| I suspect this party is just beginning.
|
| [edit] By the way, I love how each party here is framing this.
|
| > Tether: "As to the Tether reserves, there is no finding that
| tether tokens were not fully backed at all times--simply that the
| reserves were not all in cash and all in a bank account titled in
| Tether's name, at all times."
|
| > CFTC: "In fact Tether reserves were not "fully-backed" the
| majority of the time."
|
| [1] https://fortune.com/2019/05/03/cryptocurrency-new-york-
| attor...
|
| [2] https://www.coindesk.com/policy/2021/10/15/cftc-fines-
| tether...
|
| [3]
| https://ag.ny.gov/sites/default/files/2021.02.17_-_settlemen...
|
| [4] https://www.cnbc.com/2021/07/26/doj-reportedly-probes-
| crypto...
|
| [5] https://www.coindesk.com/policy/2021/09/24/sec-hints-at-
| teth...
| Scoundreller wrote:
| Have there been any updates on where the $850m that's been
| seized is sitting?
| elliekelly wrote:
| Do we know the money was actually seized? Last I'd heard the
| Tether (or maybe Bitfinex?) CEO had told the NYAG office the
| missing $850 million kept in a Panama(?) bank had been seized
| in an AML sting but I'm not sure whether that story was ever
| corroborated?
| Scoundreller wrote:
| $371m was seized by Poland: https://www.financemagnates.com
| /cryptocurrency/news/bitfinex...
|
| Haven't heard much specific about the rest.
| swang wrote:
| the $850M number you're talking about is the amount that
| Bitfenix gave Tether through Crypto Capital to cover for losses
| and/or missing money. the $18.5M was the fine they paid the
| NYAG for covering up that transaction.
| arcticbull wrote:
| That's the amount that Bitfinex took from Tether to remain
| solvent after the $850M was seized from Crypto Capital Corp
| in the money laundering sting. Bitfinex wrote them an IOU for
| it. But of course that money didn't exist anymore, it was
| taken by various world governments, and BFX and Tether have
| the same owners.
|
| Bitfinex and Tether are the same company, roughly speaking,
| and I do believe they co-mingled their funds at times.
|
| This is covered in section III of the NYAG settlement [3].
|
| Depends how you slice it I guess.
| prepend wrote:
| > reserves were not all in cash and all in a bank account
| titled in Tether's name, at all times
|
| Truly a bizarre statement for Tether to make. are they counting
| bank accounts in other people's names? How would that affect
| the question at hand.
|
| This sounds like junkie logic.
| davidgerard wrote:
| > are they counting bank accounts in other people's names?
|
| yes, it was a personal account in the name of iFinex general
| counsel Stuart Hoegner.
|
| And various holdings at non-banks, e.g. the $850m that
| disappeared at Crypto Capital Corp.
| newfonewhodis wrote:
| "All[1] of our[2] coins are backed[3] one-to-one[4] by
| USD[5]".
|
| [1] Not really though
|
| [2] Yours really
|
| [3] Not in a way you'd think
|
| [4] Approx but we can't tell you exactly how much
|
| [5] ish
| arcticbull wrote:
| [6] also it doesn't matter because we get to decide who, if
| anyone, is allowed to redeem - and on what schedule - and
| should we feel like it, what we give you. Also US persons
| are never allowed to redeem. This is all in their terms of
| service. Their backing really doesn't matter because
| they're not obligated by anyone to ever give it out.
| legutierr wrote:
| If I recall, one Tether executive was holding a good portion
| of the "reserves" in his personal bank account.
|
| How it is that Tether trades on par with trustworthy
| alternatives like USDC, Paxos and Gemini, I have no idea.
| arcticbull wrote:
| Yeah, it's in the NYAG settlement I linked as [3]. At one
| point, all their money was in Stuart Hoegner's personal
| Bank of Montreal account (#17 in [3]).
|
| Hoegner (their GC) was the director of compliance at
| Excapsa, the parent company of the wildly non-compliant
| Ultimate Bet. That online poker site had a back door where
| some of their friends could see other poker players cards
| [1]
|
| [1] https://bennettftomlin.com/2021/03/27/before-bitfinex-
| and-te...
| saalweachter wrote:
| In their defense, they probably thought this whole Tether
| thing would have imploded by now, and they needed to be
| ready to make their getaway.
| qeternity wrote:
| The important thing about all these Tether settlements is that
| they are for very specific periods of time, which were well
| before the most recent parabolic issuance in USDT.
|
| It's anyone's guess what they are currently sitting on.
| tkfu wrote:
| Have you ever heard of "The Narcissist's Prayer"? It goes like
| this:
|
| That didn't happen.
|
| And if it did, it wasn't that bad.
|
| And if it was, that's not a big deal.
|
| And if it is, that's not my fault.
|
| And if it was, I didn't mean it.
|
| And if I did...
|
| You deserved it.
|
| Tether defenders are really working their way through the steps
| here.
|
| 18 months ago, it was "That didn't happen." (Tether is 100%
| backed by USD cash.)
|
| 6 months ago, it "wasn't that bad." (It might not be 100% USD
| cash, but it's cash-equivalent assets like short-term commercial
| paper.)
|
| Now that there's strong evidence the commercial paper is just
| fake money shuffling between Tether/Binfinex/other shady crypto
| investments we get "that's not a big deal." (Look at the way
| banks work! They only need 4% collateral! Tether's probably got
| at least that much...)
|
| Next step is finding out that their actual liquidity isn't
| capable of holding up under a real-life stress test, and the
| defenders will be talking about "not my fault." (This was a once-
| in-a-lifetime crash, they couldn't have foreseen it, crypto's
| still way better than the fiat banking system!)
|
| When thousands of people lose their retirements in a gigantic
| defi crash, it'll be "you deserved it." (Everyone knows crypto is
| risky, you shouldn't have believed Tether was the same as USD.)
| thebean11 wrote:
| I haven't seen anyone defending Tether in a really long time
| loeg wrote:
| > I haven't seen anyone defending Tether in a really long
| time
|
| Check out comments _in this discussion_ by bpodgursky and
| vmception, for example. Similar comments come out in every
| Tether article on HN.
| ur-whale wrote:
| > Check out comments in this discussion by bpodgursky
|
| Here's one from bpodgursky:
|
| >My stance has always been "Tether is a scam,
|
| Not sure how that's "defending" Tether.
| loeg wrote:
| The full context, which you have chosen to elide, is
| clearly defensive of Tether[1]:
|
| > Tether is a scam, but no worse than the US dollar and
| normal banking fractional reserves... and even if it
| collapses, who cares,
|
| [1]: https://news.ycombinator.com/item?id=28880411
| ur-whale wrote:
| It's not, he's simply pointing out that there's even
| bigger scam out there. That's not the same thing as
| defending Tether.
| loeg wrote:
| Making comparisons to a perceived bigger problem is a
| defensive statement. The implication in this kind of
| comparison is that because Y is worse than X, that
| somehow ameliorates the harm of X. This is reinforced by
| the "who cares" remark.
| graeme wrote:
| It is defending Tether, because he is _wrong_. Some
| things are worse than other things. Fraud is worse than
| the Fed. No one sensible would claim the Fed is as bad
| as, say, Bernie Madoff.
|
| Formally, his tactic is known as "whataboutism"
| ur-whale wrote:
| > No one sensible would claim the Fed is as bad as, say,
| Bernie Madoff.
|
| Give it a couple of decades.
| [deleted]
| SilasX wrote:
| "Defend" is a four letter word; I wouldn't paint with such a
| broad brush.
|
| I hold the position that you need to be careful to
| distinguish between a) "every Tether statement is true/in
| good faith" vs "b) Tether will fail to produce sufficient
| backing value, sending crypto into a secular crash", and that
| a) is false but b) is false as well. That is enough to get me
| labeled a "defender" in some contexts.
|
| Disclosure: I hold liquidity pools that have Tether and have
| borrowed Tether against BTC via DeFi.
| graeme wrote:
| You can find plenty on twitter. E.g.
|
| https://twitter.com/BrutalTrade/status/1449035910658600969
|
| Some are paid bots but some are real
| chinathrow wrote:
| Meanwhile BTC is racing towards a new all time high, I simply
| can't wrap my head around this. What on earth is going on? Does
| anyone have a clue? I'm genuinely interested.
| trident5000 wrote:
| Nobody gives a f-ck about tether except those who keep
| yelling at the sky. The govt said it will be regulated like a
| bank and they received a fine.
| anonporridge wrote:
| Tether doesn't change the fact that my percentage ownership
| of all btc will never be diluted like my dollars constantly
| are.
| overtonwhy wrote:
| The unlicensed offshore exchanges that use Tether to avoid
| USA banking regulation and AML/KYC don't let you cash out
| real money. You have to buy crypto and hope that they let you
| transfer it out before their real asset reserves run out. Now
| that people have the data that Tether has <5% in cash
| reserves it's a race to get converted into BTC etc and get it
| out before the insolvency stops everything.
| olalonde wrote:
| The fact that USDT is currently trading at $0.9995 seems to
| contradict that theory.
| bpodgursky wrote:
| My stance has always been "Tether is a scam, but no worse than
| the US dollar and normal banking fractional reserves... and
| even if it collapses, who cares, there are other stablecoins
| not built on a house of cards."
|
| I don't see that stance changing.
| EugeneG wrote:
| Tether isn't some new innovation that is it's own animal. We
| know what to compare it to. The right comparison isn't "the
| US Dollar."
|
| The right comparison is money market funds - they are very
| highly regulated. If a money market fund said "we are backed
| by very highly rated short term debt," but they weren't, that
| is 100pct a scam that has huge fines.
|
| Just because Tether is in the crypto world doesn't mean it's
| now a magical novel currency. Still just a money market fund
| in a slightly different form.
| pcwalton wrote:
| I really would like to see an attempt to defend Tether (and
| by extension most of the cryptocurrency ecosystem in
| practice) that _doesn 't_ require me to buy into ultra-
| libertarian ideology. Most people, including me, do not in
| fact believe that the US dollar is a scam.
| hackingforfun wrote:
| I don't think that the US dollar is a scam but I think The
| Fed is struggling to keep it afloat. Also, the ever
| increasing debt of the US concerns me, as well as all the
| money printing. I just wonder, where does it end? How does
| it end? Just borrow more and print more? Drop rates to 0%,
| and then go negative if there's no further to go? Does all
| that seem sustainable? I do hope inflation will drop when /
| if The Fed raises rates again. Maybe that will bring some
| sort of balance. We'll have to see what happens. I don't
| think the US debt could ever possibly be paid off now
| though, and we'll have to keep raising the debt ceiling or
| remove it. There's also some absurd ideas like minting a
| trillion dollar platinum coin [1]. I just don't think this
| ends well.
|
| [1] https://en.wikipedia.org/wiki/Trillion-dollar_coin
| NicoJuicy wrote:
| I think it's mostly because it fits their views.
| bpodgursky wrote:
| The point re: tether directly is that it doesn't matter if
| tether is backed 1-1 or .05-1 or .01-1 as long as people
| trust it as a stablecoin.
|
| The point re: the ecosystem is that there are a lot of
| stablecoins and you can pick the one that isn't a scam. You
| can use crypto and not touch tether at all. There's no need
| to tie the ecosystem to it.
| chromaton wrote:
| 2 differences: 1. You have to have USD to pay taxes, which
| most Americans have to do. 2. The feds will bail out
| depositors in banks that have screwed up badly.
| arcticbull wrote:
| Also fractional reserve lending is both how new money is
| created and how it's backed. When you borrow money from the
| bank, they create a positive balance in your account and a
| negative balance in theirs. As you repay the loan, the new
| money disappears. The money in circulation is backed by the
| demand created for that dollar at issuance (in that the
| loan must be repaid).
| ItsMonkk wrote:
| And yet, during the recession of 2008 the M2 went up by a
| 1000 billion dollars, despite the fact that there were
| millions of houses foreclosed on, their assets tanked,
| and millions of loans defaulted. Curious how that works.
|
| Tether is much worse than the Fed(or would be if
| equivalent scale), but the Fed is no sweetheart.
| arcticbull wrote:
| The money supply is protected by the Fed, yes - that's
| kind of the point. The supply is adjusted to maintain the
| 2% inflation target. Generally in big financial crises,
| velocity of money drops so the supply is increased to
| offset it - and avoid a deflationary spiral.
|
| It's pretty logical right? If the economy is imploding
| around you, your natural response is to save your money -
| out of fear - and not spend it. However, that has knock-
| on effects. If everyone starts saving, prices go down to
| tempt people to buy, which means less revenue for the
| business, which means salary cuts and layoffs, which
| means folks have less money to spend - and so on.
|
| To avoid this situation, the Fed increases the money
| supply. This happened in COVID too. The fed IMO deserves
| a ton of credit for saving the American economy from a
| massive depression - twice so far since 2008.
|
| By the way those bailouts earned a $15B profit for the
| government [1].
|
| [1] https://en.wikipedia.org/wiki/Emergency_Economic_Stab
| ilizati...
| hackingforfun wrote:
| > The fed IMO deserves a ton of credit for saving the
| American economy from a massive depression - twice so far
| since 2008.
|
| I'm not sure I agree with this. I think The Fed stepping
| in after the stock market crashed in March 2020 gave
| stock investors an unreasonable expectation that stocks
| are safe. Stocks are a risk-on asset and should be
| treated as such. Right now many people treat them like a
| savings account. IMO we should've let the stock market
| crash lower so people understand that stocks are not risk
| free.
|
| Also, we may not know all the consequences from all that
| money that The Fed printed yet. So far we are seeing
| increased inflation, which hopefully will go down when /
| if they raise interest rates again, but we'll have to see
| what happens. I think, if anything, The Fed having to
| step in showed that the traditional markets are a house
| of cards as well. Just like in crypto, people just want
| the of price of stocks to go up, but that isn't
| reasonable. Volatility is normal and sometimes there
| should be crashes in markets so that people understand
| the risks.
| adflux wrote:
| I agree 100%, and not letting stocks crash is a severe
| policy error.
| ItsMonkk wrote:
| I know you know about Moral Hazard. I know you know about
| small bubbles allowed to get bigger getting out of
| control. I'm sure you know the phrase "Privatized gains
| and Socialized losses." These all apply here.
|
| The mark of a successful Fed is in reducing not just the
| frequency of banking issues but also the amplitudes.
| Every time the Fed is forced to step in, the interest
| rate cuts get bigger, the debt they create gets bigger,
| the Congressional action larger.
|
| The mark of a successful Fed is in stepping in ahead of
| time before the bubble gets out of control. If a Fed
| needs to take drastic action, they've already failed. CO-
| VID, being the first non-financially caused recession in
| 50 years, is a special case, and for that I give them
| leniency.
| arcticbull wrote:
| I agree with all that broadly, but I would push back and
| say the Fed's responsibility wasn't to stop the subprime
| crisis. That was Congress' responsibility. It's not the
| fire fighters job to stop people building houses made of
| paper. That's the fire marshal, the city planning
| department, the inspectors, and so on.
| chromaton wrote:
| Banks also take hard assets as collateral. They can send
| guys with guns to collect if need be.
| [deleted]
| liuliu wrote:
| Regarding 2, if crytocurrencies fire up all cylinders and
| get not only many traditional market makers, hedge funds,
| but also FOF involvement and with-hold tens of millions
| people's savings. They can potentially get buyout like
| traditional banks do.
| chromaton wrote:
| Maybe someday.
| arcticbull wrote:
| I gave a breakdown of why that statement belies a lack of
| understanding of fractional reserve lending here:
| (https://news.ycombinator.com/item?id=28880063)
| AlexandrB wrote:
| > Tether is a scam, but no worse than the US dollar and
| normal banking fractional reserves...
|
| So tether insures up to $100,000 for every depositor?
| christopherwxyz wrote:
| The U.S. government insures its own currency using its own
| currency or security.
|
| Tether can't do that without hurting the stability
| guarantee.
| bpodgursky wrote:
| Tether can absolutely insure its own currency by printing
| more Tether as needed -- it's identical to what the US
| government will do to protect bank deposits, by printing
| more dollars!
| mikeyouse wrote:
| That's actually out of date.. a decade ago, the US FDIC
| upped the limit to $250k per depositor.
| johanneskanybal wrote:
| Not sure if it's bots or hackernews sentiment changing but
| pretty much this. I guess that's what happens when the
| disruptors become the corporate. But yes it's like the
| classic democracy quote about it being the worst but better
| than all the other alternatives. If this is the slap for
| running an unregulated exchange for 10-15 years which today
| traded $350 mil everyone here not building that including me
| is the idiot.
| JumpCrisscross wrote:
| > _When thousands of people lose their retirements in a
| gigantic defi crash_
|
| Do we have any evidence this would happen? That ordinary people
| who didn't know they were investing in Tether would lose money
| in its collapse? (Honest question.)
| speeder wrote:
| I own a bunch of crypto and often people ask me questions.
|
| I endlessly have to warn then to never hold tether. The
| problem is people don't understand what tether is, they
| assume it is just USD and use it because it is the most
| popular in many platforms or the outright default settings.
|
| Tether crash will be very, very ugly when a lot of people
| leaving money on their "default" account realise the money
| all went poof.
| JumpCrisscross wrote:
| Thank you for your perspective. Are there any U.S. services
| which default balances into Tether this way? Trying to get
| a sense for whether the shockwaves will be principally
| offshore or not.
| TheAlchemist wrote:
| It's all about incentives.
|
| Everybody knows Tether is a scam - and it will probably take
| down crypto once it implodes. But the people 'with knowledge of
| the matter' have 0 incentive to expose it, and they have every
| incentive to keep it as it is. People are making hundreds of
| millions of dollars on it. Until the music stops, they will
| keep dancing.
|
| Anyway, it's fascinating ! As Patrick McKenzie put it ""we are
| living in the middle chapters of a Michael Lewis book."
| [deleted]
| ohbleek wrote:
| There's just over $68 billion Tether.
|
| The 24hr trade volume for BTC alone is just over $50 billion.
|
| If all tether were to completely turn to dust, it would not
| lead anywhere close to a "gigantic defi crash". This is in no
| way a defense of Tether. I'm just zooming out from the
| hyperfocus on Tether as the pseudo foundation of crypto. That
| is just simply not the case.
| agnokapathetic wrote:
| If all retail investors were not allowed to buy or sell
| stocks anymore what would that do to the stock market? Its
| only 10% of transaction volume, but critical to so many
| liquidity dependent financial instruments, it would be
| catastrophic for the market.
| lamontcg wrote:
| > Now that there's strong evidence the commercial paper is just
| fake money
|
| Tether is issuing loans of USDT against collateral in the form
| of crypto and calling that "commercial paper".
|
| The whole idea that anyone would be sending $70B of actual USD
| to Tether is now "fucking ludicrous". But the idea that anyone
| is selling $70B of crypto to Tether during a massive bull
| market in crypto (and it should be now quite apparent that this
| is still a bull market) is also "fucking ludicrous". There's no
| counterparty that massively stupid for either side of those
| trades.
|
| What makes sense is that people sitting on large cold wallets
| of BTC are using that as collateral to get USDT loans. They
| then trade it between themselves and any retail "investors" on
| a USDT exchange. The loans are USD denominated which provides
| an incentive to maintain the USDT-USD peg. Since they're loans
| against collateral and aren't redeemable that removes a lot of
| the risk of a run on the bank.
|
| It is still crypto-backed wildcat banking script, which won't
| end well.
|
| I don't understand why so many people who are Tether-skeptics
| believe them that their commercial paper is something the
| banking system would regard as commercial paper.
|
| And try graphing Tether issuance denominated in BTC rather than
| $USD and it is much more stable at around 1M BTC.
| wesapien wrote:
| We need to have crypto death penalty for scams. Ya know, a
| firing squad.
| graeme wrote:
| Would those loans be called commercial paper by any
| accountant's definition? We have two data points:
|
| * Moore Cayman, the auditing firm doing Tether's
| attestations, says they have commercial paper. They risk
| penalties for _blatant_ lies
|
| * Bloomberg reporter Zeke Faux say Tether's accounts and said
| they have "a lot" of Chinese commercial paper
|
| The massive loophole in the attestation regarding CP is
| Tether management policy is to value it at redemption value,
| even if the CP trades below par. So, they could buy the
| _worst_ quality CP, for say $5 billion, with a redemption
| value of $30 billion, and the accountants would say "yup, $30
| billion of CP per management policy"
|
| That seems easier than a pure lie. NYAG has also seen the
| statements for recent months. I suspect a total lie would
| carry more risk than the blatant misleadingly accurate
| statements I outlined above.
|
| Some of the paper could also be to crypto exchanges,
| collateralized the way you say. Then it would technically be
| CP. Tether has denied taking CP from affiliated entities but
| they use a narrow definition. Only majority ownership counts
| as affiliated I believe, since they consider their loans to
| Celsius non-affiliated despite part owning celsius.
|
| Also those Celsius loans are USDT denominated with crypto
| collateral.
| lamontcg wrote:
| > Would those loans be called commercial paper by any
| accountant's definition?
|
| We're talking about crypto here, blantant lying is pretty
| rampant, and Tether has clearly blatantly lied in the past.
|
| > They risk penalties for blatant lies
|
| If the amount they're being paid for those attestations
| exceeds the risk then it makes sense to blatantly lie.
|
| They are also not audits, but attestations, so Tether can
| be blatantly lying to them.
|
| > Also those Celsius loans are USDT denominated with crypto
| collateral.
|
| And that is it right there.
| JumpCrisscross wrote:
| > _seems easier than a pure lie_
|
| Aren't Tether and Bitfinex firms with a documented track
| record of repeatedly telling "pure" lies?
| graeme wrote:
| Yes, but not through accountants. Recall one incident
| where they transferred in a few hundred million to a
| formerly empty account. Moore Cayman accounting
| accurately reported they say money in the account. Then
| the money was transferred out after accountants looked at
| it.
|
| Much more complex than just lying. They used the
| accountant's true report to cover the truth.
| onlyrealcuzzo wrote:
| > It is difficult to get a man to understand something when his
| salary depends on his not understanding it.
| A4ET8a8uTh0 wrote:
| I am commenting here, because I want to save this "And if.."
| list, because it is beautiful in its simplicity and yet we see
| it played out over and over again.
| 8ytecoder wrote:
| You can favorite a comment
| miked85 wrote:
| Just upvote or favorite it and you can find it in your
| profile.
| yorwba wrote:
| HN also has a "favorite" button you can use to save things
| for later.
| vtail wrote:
| Where is that favorite button? I have never seen that
| functionality.
| vtail wrote:
| Found it: just click on the comments's time, and you will
| see the "favorite" option underneath the link.
| yunohn wrote:
| You have to click through to the comment's page to use it
| - it's not on the main page.
| adventured wrote:
| Click on the "n minutes ago" time stamp next to the user
| name.
|
| For example, it's on this page:
|
| https://news.ycombinator.com/item?id=28880280
|
| That's the perma link for that comment. The favoriting
| action should maybe exist in the thread as well.
| jimkleiber wrote:
| I also just learned that by visiting one's own profile, one
| can see which submissions and comments they've upvoted--
| which is private, unlike favorites[1].
|
| [1]: https://news.ycombinator.com/item?id=28880623
| Scoundreller wrote:
| Just fyi that favorites are public.
| atatatat wrote:
| By default..? Oh dear.
| jimkleiber wrote:
| ...I did not know this. So thank you for letting us know.
| johanneskanybal wrote:
| Pretty big and popular strawman you got there. Tether has been
| a boogie man since forever, the traditional system is infinite
| times more corrupt. Top voted hackernews comment like this?
| Probably a pretty amazing time to buy some more and short some
| yc. edit: remember eth being mentioned here for the first time
| 6 years ago, how the cycles roll.
| hkai wrote:
| I don't disagree with you, but USDC and USDT are identical in
| their transparency, yet everyone hates USDT.
| [deleted]
| TacticalCoder wrote:
| Not by a mile. USDC are emitted by a consortium which the HN
| unicorn Coinbase is a major part of. They have something like
| 73% of USDC in actual USD and the rest are corporate bonds /
| money markets and things like that. It's not 100% USD, but
| they're 100% backed.
|
| Coinbase is a reputable US company ran by US citizens.
|
| USDT is operated by shady people with an history of fraud
| from shady micro countries on the dark list of fiscal havens.
|
| They are nothing similar.
|
| I do believe there are actual people wiring a lot of real USD
| / EUR to Coinbase's bank accounts to buy crypto. I'm really
| not so sure there are people actually wiring lots of money to
| Tether's bahamas bank accounts. I'm not sure many ever did.
|
| I really don't get this: Coinbase is a HN unicorn. Do you
| think it's a gigantic fraud / scam and there aren't a
| shitload of real people putting a shitload of freaking real
| money to Coinbase's very real bank accounts?
| ThinkBeat wrote:
| I am completely ignorant here.
|
| I read an article not that long ago where a journalist was trying
| to figure out where Tether kept its money (if there was any).
|
| The main characters seem to be distributed in different parts of
| the world and were not inclined to be interviewed.
|
| This corporate entity seems to be highly convoluted, which means
| its hard to know what jurisdiction they fall under.
|
| My question: How is Tether compelled to pay this? What happens if
| they do not?
|
| Can they just terminate whatever US subsidieres there may be and
| keep operating the same?
|
| Do they need a corporate component in the US, if so why?
| Andrew_nenakhov wrote:
| People on reddit and twitter are like, "great, now that Tether
| FUD is over, leave it behind and go for $100k!" - of course it is
| over. U in FUD stands for Uncertainty, and now it is Certain that
| Tether is a fraud.
|
| The only thing I can't understand is why the price still pumps.
| TacticalCoder wrote:
| > The only thing I can't understand is why the price still
| pumps.
|
| I know for a fact that there are private banks, the traditional
| ones (think Swiss banks), working on funds that'd let their
| HNWIs invest in crypto. We're talking about entry tickets to
| the tune of 1 million EUR minimum. It's not
| private/confidential infos: it's information some private banks
| are relaying to their very wealthy clients.
|
| There are a lot of people who want to get in but have zero clue
| as to how to do that: now their traditional banks are going to
| let them do that.
|
| There are simply people out there who want to buy.
| jstx1 wrote:
| Seriously - Bitcoin is more than 8% up today and about 50% up
| compared to 3 weeks ago. It's almost back to the all-time high
| from April. How does anyone explain any of this?
| timerol wrote:
| Bitcoin's price "in USD" makes more sense as a price "in
| USDT". It's completely unsurprising that Bitcoin went up
| relative to USDT after this news.
|
| The big question is when the peg of 1 USDT ~= 1 USD (or USDC)
| is going to break. Tether is going to do everything they can
| to maintain that peg as long as possible.
| xur17 wrote:
| > The big question is when the peg of 1 USDT ~= 1 USD (or
| USDC) is going to break. Tether is going to do everything
| they can to maintain that peg as long as possible.
|
| Yuup. Assuming USDT is a fraud, Tether likely makes very
| good money off of it, and is hence HEAVILY incentivized to
| keep it running as long as possible. I'd be very curious to
| hear theories as to what might cause it to collapse.
| adflux wrote:
| Complaints by companies trying to exchange usdt to usd
| xur17 wrote:
| But those companies would only complain if Tether stopped
| redemptions, which presumably would only occur if they
| ran out of cash. You'd need some other outside impetus to
| trigger it all.
| hackingforfun wrote:
| It looks like a Bitcoin futures ETF is nearing approval and
| could go live next week [1][2]. My guess is that people are
| pricing that in.
|
| [1] https://www.cnbc.com/2021/10/15/bitcoin-etfs-may-finally-
| mak...
|
| [2] https://twitter.com/JSeyff/status/1449010847074897933
| webinvest wrote:
| I could tell you, but because this information could reduce
| my purchasing power, I'm choosing to keep quiet.
|
| I'm not willing to share the short/medium term philosophy,
| catalysts, and predictable patterns. But I'll reshare the
| long term philosophy since I've already written about it 4
| months ago:
|
| https://news.ycombinator.com/item?id=27202204
|
| If you're smart and knowledgeable, you may be able to piece
| it out from my comment history.
| ur-whale wrote:
| > How does anyone explain any of this?
|
| Suppose you hold a big bunch of USDT (Tethers) right now.
|
| What would be be doing in light of these news?
|
| Exactly.
| osense wrote:
| Why not just convert to USDC / BUSD / some other
| stablecoin?
| webinvest wrote:
| Or Dai or Gemeni Dollars?
| Jasper_ wrote:
| How do you convert if nobody wants to buy your USDT?
| leesec wrote:
| I can explain - More people want to buy than sell
| ac29 wrote:
| Thats not really how it works - every transaction must have
| a buyer and a seller. When prices go up, buyers are simply
| willing to go deeper into the order book to get their
| orders filled.
| anonporridge wrote:
| More simply, more money (not people) is buying than is
| selling.
| arcticbull wrote:
| A complete lack of regulation in the markets.
| humaniania wrote:
| Same reason why prices went way up before MTGOX collapsed.
| People have "assets" in Bitfinex that they can't cash out for
| something with real value except by buying crypto and hoping it
| gets transferred out before reserves are depleted. They can't
| cash out actual fiat. So fiat prices on the failed exchange go
| up up up until the legit regulated exchanges eventually
| decouple and then the house of cards comes down.
| humaniania wrote:
| Keep in mind people will try to take advantage of arbitrage
| situations so this process can take a while. Go back and
| research MTGOX.
| graeme wrote:
| Where would one start to research this?
| Animats wrote:
| Can you convert those assets to Gemini's stablecoin, GUSD?
| Gemini is regulated as a trust company in New York State and
| has pass-through FDIC insurance. You should be able to sell
| GUSD on Gemini and wire transfer the proceeds out. Gemini
| claims no limits on the size of wire transfers. This is
| useful, because most other exchanges make large withdrawals
| difficult.
|
| It's hard to convert USDT to GUSD. Coinbase does't list GUSD.
| Changely says they will do it for a 2% fee. Bequant has a
| market, but US$20,000 would wipe out their order book. Hotbit
| claims a deeper market but has a US$10,000/day withdrawal
| limit. Bitfinex has de-listed GUSD. Probably because it was
| too convenient a way to convert Tether to real US dollars.
| Gemini does not list USDT.
|
| It's striking how difficult it is to convert large amounts of
| USDT to a hard currency.
| graeme wrote:
| Are there delays on Bitfinex transfers currently? And were
| people able to transfer out of MTGOX at all?
|
| I had wondered if there were parallels in the runup, but
| haven't heard widespread reports of people being able to
| transfer out yet. Or rather, more than the usual number of
| such reports, there are always some.
| buildbuildbuild wrote:
| This is a slap on the wrist. Tether's current market cap is $68.5
| billion of printed money that users assume is really held in bank
| reserves.
|
| Expect a massive cryptocurrency crash if Tether's regulatory
| downfall finally occurs; a majority of exchange trading pairs are
| between currencies and USDT. (not financial advice)
| technotony wrote:
| It's not about trading pairs, those can easily switch to USDC
| or other stables. The big challenge will be the futures markets
| which are nearly exclusively with USDT. If tether collapses so
| do all those futures, which presumably will cause chaotic
| algorithmic driven effects as hedging positions evaporate.
| chollida1 wrote:
| CME futures are all USD cash settled.
|
| Or are you referring to unregulated futures on some crypto
| exchanges?
| gammarator wrote:
| > those can easily switch to USDC or other stables.
|
| So why don't they? Why would literally anyone choose to hold
| USDT over any other stablecoin?
| humaniania wrote:
| What about the billions in exchange balances held in USDT?
| That's a lot of liability for the exchanges holding those,
| right?
| adflux wrote:
| You mean a liability for the users of that exchange
| paulpauper wrote:
| I think it would be the opposite. tether failing would force
| ppl to convert to BTC, ETH to preserve $.
| buildbuildbuild wrote:
| It's possible. But I would expect panic selling as charts
| make it _look_ like all cryptocurrency is crashing due to
| USDT's sudden decrease in value.
|
| Small exchanges could also lose liquidity from bad code that
| assumes USDT will always equal $1.
| adflux wrote:
| Tbh I wouldnt dare keep usd on an exchange when its
| crashing
| NicoJuicy wrote:
| Short term, yeah ( people converting). Long term, no ( way
| less pumping)
| davidgerard wrote:
| $41m is a quarter of Tether's present claimed excess reserves
| ($160m), so it's a bit more than a slap on the wrist.
|
| Of course, this assumes Tether aren't lying about that too.
| iskander wrote:
| >a majority of exchange trading pairs are between currencies
| and USDT. (not financial advice)
|
| Is that actually true? In my (limited) experience I have seen
| ETH and USDC much more frequently than USDT.
|
| There also seems to be a recent migration to algorithmic
| stablecoins like RAI which aren't pegged to the dollar but are
| (supposedly) designed to limit fluctuation in value. I suspect
| that without regulatory action against both USDC and
| decentralize stable tokens that crypto would recover from a
| Tether collapse.
| buildbuildbuild wrote:
| My source was a cursory look at
| https://coinranking.com/markets but I admittedly could dig
| deeper to verify this.
|
| I agree that prices would recover after a short term Tether-
| induced crash, and markets would almost certainly shift to
| DAI and similar decentralized stablecoins.
| iskander wrote:
| Wow, you're right, USDT is much more prevalent in the
| largest markets than I would have suspected. Is this a
| first mover effect? As far as I can tell USDT is the
| shakiest and least compelling stable.
| humaniania wrote:
| There are a bunch of sketchy unlicensed exchanges that
| are heavily invested in utilizing USDT. The Tether
| meltdown should be quite the show. All of those
| outstanding balances have to be reconciled somehow. Or
| they'll just close up shop and disappear and years later
| people will maybe get a small % back, like with MTGOX.
| iskander wrote:
| As someone with ambivalent interest in crypto, it seems
| like a Tether meltdown might be healthy for the space.
|
| It would wash out a lot of the accumulated speculative
| value and hopefully lead to a much more confident
| regulatory framework for the interface between blockchain
| money and real world money. It would also long-term
| strengthen fully decentralized aspects of the crypto
| ecosystem while flushing out those that don't really
| function independently of traditional finance but instead
| accumulate speculative valuation based on an unsafe
| interface with fiat and the financial sector.
|
| Winners all around (except for crypto speculators)?
| IG_Semmelweiss wrote:
| Can someone imagine a world where the fine for tether is
| sufficiently large , that they dont have a capacity to pay it,
| and thus, blowing up the entire thing ?
| robot_no_419 wrote:
| That's like imagining a world where governments hold
| billionaires and CEOs accountable for their greed and crime and
| their tax evasion. In other words, a pipe dream.
| mrh0057 wrote:
| The whole long blows up when enough people try to withdraw
| tether for dollars and they don't have enough to cover. As long
| as that doesn't happen it will be alive. Works just like a
| Ponzi Scheme or a run on a bank.
| unreal37 wrote:
| No, because Tether can issue it's own coins to pay for it.
|
| Like trying to fine the US Government.
| dragontamer wrote:
| > No, because Tether can issue it's own coins to pay for it.
|
| To a point, and that point is far larger than any of us
| imagined.
|
| But the Titan / Titanium collapse shows that you can't print
| money forever (or in the case of Titan / Titanium: print
| money automatically). It only takes a small downturn to make
| everything go to crap.
| roywiggins wrote:
| They still have to pay the fine in dollars, though. If you
| fine Tether a trillion dollars, they'll need to find people
| willing to pay them _one trillion dollars_ in exchange for
| newly-minted (and obviously unbacked) Tether.
|
| If you fined Tether one quadrillion dollars, they could mint
| a quadrillion Tether but they definitely won't have a
| quadrillion dollars to hand over.
|
| Also, if you can't pay a fine without dipping into your
| depositors' money you are insolvent by any reasonable
| definition.
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