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U.S. Regulators to Subpoena Crypto Exchange Bitfinex, Tether

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Re: U.S. Regulators to Subpoena Crypto Exchange Bitfinex, Tether

#111

Post by ffffffffff_ »

A points and a question:

Point: USDT is used as a holding point for people wanting to stay in crypto but not be subject to price movement of other coins. This could be used to not trigger a taxable event (even though recently, crypto to crypto transactions were deemed taxable by the IRS). When buying crypto in general, it's much easier/faster to start a transfer from another crypto as opposed to having to move fiat into the "cryptoverse".

Question: Why does it matter if Tether is backed at 1:1 ratio with USD? I understand that the people behind Tether have explicity said that each USDT is backed by $1 USD. Why are the legal implications of non-backed USDT different than other cryptocurrencies whose values are based on the market? Is it simiply because Tether has claimed USDT is backed?

Re: U.S. Regulators to Subpoena Crypto Exchange Bitfinex, Tether

#112

Post by dragonwriter »

machinecontrol wrote: post #19
SirensOfTitan wrote: post #12

Earlier quoted context omitted.

How is this related? USDT is effectively a centralized currency. Bitfinex has always been shady. Are you saying that exchanges that accept USDT will get hit hard by this?

If USDT goes to zero, every exchange that trades it becomes immediately insolvent.

> If USDT goes to zero, every exchange that trades it becomes immediately insolvent.

Nope. They'd only be insolvent if they had a legal binding commitment to redeem USDT 1:1 in dollars, and only if they didn't have sufficient other USD reserves to do so.

Re: U.S. Regulators to Subpoena Crypto Exchange Bitfinex, Tether

#113

Post by moduspol »

lurker456 wrote: post #103
js2 wrote: post #51

Earlier quoted context omitted.

Here’s what I don’t understand. You can exchange bitcoins for fiat currency. But afaik you can’t exchange USDT for fiat. So why is anyone willing to take the risk of holding on to USDT? Why are any exchanges even willing to touch it?

That's where I also get confused. So far the reasons I could come up with are: - the exchange got bought out silently and is now owned/controlled by the people behind tether - the exchange got paid to use tether (for example 0.5% of the volume as incentive) - the exchange holds a part of tether's fiat as guarantee - the exchange is run by people who are inexperienced in appraising counterparty risk - the exchange is…

What risks does the exchange incur from allowing the trade of tethers?

Exchanges make their money from people trading--not by holding their own reserves and betting on their values. If Tether value drops to zero, anyone holding Tethers would be upset, but exchanges would just have been profiting from all the trades necessary to bring that value down to zero.

Re: U.S. Regulators to Subpoena Crypto Exchange Bitfinex, Tether

#114

Post by vkou »

machinecontrol wrote: post #11
atarian wrote: post #5

What is the point of Tether? Is it for dodging taxes?

Tether is supposedly pegged to USD. Traders use it to store assets while avoiding crypto price volatility without having to deal with fiat currency.

How is not having to deal with fiat currency an advantage for traders?

They still need to do cost-basis accounting for taxes, and this just shifts their risk of to .

I understand how this benefits exchanges (Because they can claim they don't need to follow KYC), but how does it benefit their users?

They'll also eventually need to convert USDT into USD - which they can withdraw. If you have an exchange that you can withdraw USD from, why are you even keeping your balance in USDT? Just trade on that exchange...

It's like if the NYSE only allowed you to cash out in scrip. I understand how this benefits them, but how does it benefit me?

Re: U.S. Regulators to Subpoena Crypto Exchange Bitfinex, Tether

#115

Post by knownothing »

HockeyPlayer wrote: post #81

How trustworthy is Kraken? Tether looks like a good short since if it is a fraud it will go way down and if it isn't a fraud it will stay right where it is. I'm in the US and would like to short Tether. But I want to get paid if I'm right.

Good luck finding a counterparty.

Re: U.S. Regulators to Subpoena Crypto Exchange Bitfinex, Tether

#116

Post by gruez »

JumpCrisscross wrote: post #48
treve wrote: post #20

Earlier quoted context omitted.

Ponzi schemes also only harm those who inflict it on themselves.

> Ponzi schemes also only harm those who inflict it on themselves Ponzi schemers lie to their investors. (Madoff purported to run a reputable shop.) It’s harder to argue, to the broader public, that someone buying Tether with Bitcoin could reasonably think they made a legitimate investment.

>Ponzi schemers lie to their investors.

is that all of them, or most of them? because there are ponzi schemes that openly state what they are.

Re: U.S. Regulators to Subpoena Crypto Exchange Bitfinex, Tether

#117

Post by rmrm »

ebbv wrote: post #104
rmrm wrote: post #93

Earlier quoted context omitted.

Buying bitcoin with it and then selling the bitcoin immediately for USD, and banking it would mean they are at least solvent , is they key point he is getting at. Im not sure why anyone would want to trust money to that without audits, but its certainly possible. And quite important! Edit: the assumption seems to be that they are buying bitcoin and holding it, which would increase the bid and result in not being back…

They're solvent in that scenario, sure, because they committed fraud. That's the great thing about fraud, getting rich off of it.

Their assets equal liabilities in either case (whether selling USDT directly for USD, or cyclling them through BTC). Call it what you will, but in neither scenario is anyone rich. Tether if backed by USD at the end of the day is revenue neutral. What am I missing?

Re: U.S. Regulators to Subpoena Crypto Exchange Bitfinex, Tether

#118

Post by jhwang5 »

sxates wrote: post #99

I'm not saying that there's nothing worth investigating in the Crypto space, but I wish the SEC spent half the time it spends chasing down shady ICOs looking into fraud at Goldman Sachs and other Wall St. banks. You know, the institutions that whose scale dwarfs crypto and actually has enormous economic repercussions?

They do go after Wall St. banks - what makes you think SEC doesn't?

Re: U.S. Regulators to Subpoena Crypto Exchange Bitfinex, Tether

#119

Post by dullgiulio »

ceejayoz wrote: post #45
treve wrote: post #20

Earlier quoted context omitted.

Ponzi schemes also only harm those who inflict it on themselves.

https://en.wikipedia.org/wiki/Albanian_Civil_War > The Albanian Civil War, also known as the Albanian rebellion, Albanian unrest or the Pyramid crisis, was a period of civil disorder in Albania in 1997, sparked by Ponzi scheme failures . The government was toppled and more than 2,000 people were killed. It is considered to be either a rebellion, a civil war, or a rebellion that escalated into a civil war.

Until now, Bitcoin is not considered a systemic risk[1], which simply means that /when/ it will crash it won't drag the whole world economy down with it.

Lots of people will get burned pretty badly though. Like the saying goes, freezing feet and burning head makes for a good average temperature.

[1] https://www.economist.com/news/leaders/21732526-there-invest...

Re: U.S. Regulators to Subpoena Crypto Exchange Bitfinex, Tether

#120

Post by ThrustVectoring »

dragonwriter wrote: post #112
machinecontrol wrote: post #19

Earlier quoted context omitted.

If USDT goes to zero, every exchange that trades it becomes immediately insolvent.

> If USDT goes to zero, every exchange that trades it becomes immediately insolvent. Nope. They'd only be insolvent if they had a legal binding commitment to redeem USDT 1:1 in dollars, and only if they didn't have sufficient other USD reserves to do so.

The exchanges get sued by the Tether bagholders, and everyone else gets spooked and attempts to exit. So not insolvent, but no active business activities and a bunch of lawsuits incoming, and might as well be insolvent.
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