Earlier quoted context omitted.
Yes, because the areas where we ignore and accept it are highly regulated and insured as a result of hundreds of years of learnings at this point. People react negatively when they see it outside of that context because it is something we have repeatedly seen fail and cause instability. This isn't hard to understand.
Yes, that is a valid distinction to make, if the arguments/concerns around Tether were merely "hey, let's make sure regular banking regulation extends to this organization as well, to make sure it's all going in tip-top shape". But that's not why people bring up the figures. They're acting like it's inherently shady to have less than 100% (or 3, or whatever) cash reserves for something that ostensibly "has your money…
This is not correct.
Just because banks are fractional reserve, doesn't mean that they don't have enough assets to cover their deposits.
It means that they don't have liquid assets to cover their deposits.
If a bank ever fails to have enough assets to cover its deposits, it immediately become insolvent, and is taken away from its owners.
Tether does not have enough liquid + illiquid[1] assets to cover their deposits. If they did, they wouldn't keep dodging audits. They aren't running a fractional reserve bank, they are simply running a fraud.
The reason we let banks get away with this is because they are routinely audited, and are insured against insolvency. Tether is neither.
[1] The nature of their fraud is that they are grossly overvaluing their illiquid assets. Because they have never undergone an audit, they can get away with this - they can claim that their illiquid assets are worth , with no third party oversight.