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Tether Says Stablecoin Is Only Backed 74% by Cash, Securities

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Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities

#171

Post by PhantomGremlin »

gpresot wrote: post #163
xref wrote: post #158

Earlier quoted context omitted.

Remember it’s simply Bitfinex saying they have 74% reserves, just like they used to say they had 100% reserves. There has still never been an audit. Nobody has seen their books. They don’t recognize the jurisdiction of the NY AG. Bitfinex is the only one who can give a number, and a company in that position usually places themselves in the most generous light, and they still only claimed 74%.

They claimed this 74% in filings to the NY Supreme Court, so, while I agree it is not as strong as an auditors' report, it is also a bit stronger than a PR release or a Twitter burst.

the NY Supreme Court

Before you get too excited about that phrase, the courts in New York State have funny names. The words "Supreme Court" have a much different meaning than they do in any other state.

https://en.wikipedia.org/wiki/New_York_Supreme_Court

Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities

#172

Post by carrja99 »

pontifier wrote: post #125

I looked into tethers withdrawal process, and the barriers to withdrawal are high enough that a run on tether is quite unlikely. It really only makes sense if you hold over a million tether, and even then you'd probably be better off selling on a USD exchange and converting for withdrawal there. It's a nice racket they have there.

I was surprised to see the site let's you create an account now... for the longest time you couldn't and the only way to buy / sell tether was second hand on exchanges for as long as I could remember.

That said, either tether.to account creation seemingly functional, I wonder how difficult they have made the process?

Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities

#173

Post by jerguismi »

tinco wrote: post #59

It's crazy that they messed this up, Tether is basically a money printing machine, all they had to do was be solvent. Let me start by saying I don't hold Tether nor have I ever, nor do I think it's a good idea. Tether is a fundamentally a risk free money making concept, it works just like gift certificates. The only thing Tether has to do is buy back Tether at any price lower than they sold it for and they make profi…

> It's crazy that they messed this up, Tether is basically a money printing machine, all they had to do was be solvent.

> Tether is a fundamentally a risk free money making concept

To me it sounds like you don't really understand the risks of tethers business. It is light-years away from being risk free, because you are on the mercy of the banks where you store the fiat. The banks can freeze your money any time, as they now did (AFAIK).

If you are operating a business with unclear regulation at this level, you can't really rely on banks like normal businesses can. The banks will cause problems with pretty high probability.

Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities

#174

Post by smoovb »

There are licensed and regulated stable coins on the rise ( like USDC, PAX ), that will play by all the rules, have better protections, be audit-able and have the ability to be revoked in cases of crime.

In a free market there is also a place for a non-US company to offer a product like Tether. Why this is at all the business of the AG of NY is the real question here. Who benefits from these AG actions?

Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities

#175

Post by notahacker »

hjk05 wrote: post #142
vegannet wrote: post #98

Earlier quoted context omitted.

If Tether worked as it was advertised there would be no profit opportunity. The purported reason Tether exists is to help the crypto markets deal with the liquidity problems because of how difficult Fiat banking is, essentially Tethers value proposition was “we (by some miracle) have reliable banking, we can buy and sell 1 Tether for 1 USD at any time regardless of other crypto currencies value”. In reality Tether is…

> If Tether worked as it was advertised there would be no profit opportunity Of cause there would. Even if the tokens are backed 1:1 by dollars it still has an exchange rate. So tether could issue at above 1 rates and buy at below 1 rates. That provides a very simple profit making scheme. For users, they would often like to “cash out to tether” quickly, which means they’d undercut the exchange rate thus providing tet…

> Of cause there would. Even if the tokens are backed 1:1 by dollars it still has an exchange rate. So tether could issue at above 1 rates and buy at below 1 rates. That provides a very simple profit making scheme.

If USDT is credibly backed by dollars this spread is tiny, not least because other holders of Tether can play the same game. And if USDT is backed by dollars held in cash in customer accounts as originally claimed, there's an enormous opportunity cost of not investing those dollars.

Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities

#176

Post by pavlov »

smoovb wrote: post #174

There are licensed and regulated stable coins on the rise ( like USDC, PAX ), that will play by all the rules, have better protections, be audit-able and have the ability to be revoked in cases of crime. In a free market there is also a place for a non-US company to offer a product like Tether. Why this is at all the business of the AG of NY is the real question here. Who benefits from these AG actions?

> "Why this is at all the business of the AG of NY is the real question here."

Because investors based in New York are being swindled by Bitfinex/Tether?

From the AG's site:

"In November 2018, the Attorney General issued subpoenas to Bitfinex and Tether, which are owned and operated by the same small group of individuals, and claim not to do business in New York. As alleged in court papers filed by the Attorney General’s office, the Bitfinex trading platform allows New Yorkers to purchase and trade virtual currencies, including the so-called “tether” stablecoin, a virtual currency the companies long claimed was “backed 1-to-1” by U.S. dollars held in cash reserve." https://ag.ny.gov/press-release/attorney-general-james-annou...

You can't escape financial regulations by claiming that you don't do business in jurisdiction X while simultaneously taking investment money from people in that jurisdiction.

Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities

#177

Post by qaq »

thinkmassive wrote: post #119
qaq wrote: post #95

Earlier quoted context omitted.

"There are now 1.90$ credited to both me and Bob, where before there was only 1$ credited to me. The 90 extra cents are now part of the money supply. They appeared out of thin air." I think you are confusing money supply and record keeping. The only spendable money is what bank actually has so if you and Bob where the only customers of that bank and bank loaned 90c of your 1 dollar to Bob the only money you could spe…

The Fed is not the only bank who can loan funds at a fractional reserve. You might want to read a bit more about how banking works.

Fractional reserve does not create money it just specifies what % of money a bank can loan out.

Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities

#178

Post by smoovb »

mikeyouse wrote: post #3
eindiran wrote: post #2

Honestly, 74% is a much higher number than I was expecting.

Conveniently enough, it works out that they're about $740 million short of their obligations. That's a lot of money.

If only some scary entity with far reaching powers could make everyone scared enough to make a run on the Tether bank...

Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities

#179

Post by smoovb »

empath75 wrote: post #97
eindiran wrote: post #2

Honestly, 74% is a much higher number than I was expecting.

They’ve been lying for years and are only admitting they’re not fully backed now because they got caught. Who knows how much they’re really missing.

Glad it's been brought to light, but does seem to be a problem that is solve-able.

Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities

#180

Post by manojlds »

granaldo wrote: post #145

This is going to sound absurd, why is the cryptocurrency market not reacting negatively? In fact prices are green and well https://www.coingecko.com/en Market is uninformed and do not know better...

Uninformed? Most sane traders know about the Tether issues (have been warning for years as well) and will only try to take advantage. They are not ignorant.
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