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Tether Fined $41M for Lying About Reserves

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Re: Tether Fined $41M for Lying About Reserves

#101

Post by rsj_hn »

heurisko wrote: post #95
dragonwriter wrote: post #83

Earlier quoted context omitted.

> Isn't this pretty much the description of every company? Which is why we don't let private companies create currency willy-nilly anymore.

> Which is why we don't let private companies create currency willy-nilly anymore. As I understand, private banks extend loans, which while not being printing money, the loans being deposits (which can be withdrawn) the effect of creating currency is the same.

Correct, for the non-financial sector, "money" is currency in circulation (created by the government) and then liabilities of the financial sector (created by the private sector). This is true regardless of whether they are checking accounts, savings accounts, certificates of deposit, money market mutual funds, etc. It's all private money and we not only allow it but we subsidize and encourage it.

Re: Tether Fined $41M for Lying About Reserves

#102

Post by simonh »

heurisko wrote: post #95
dragonwriter wrote: post #83

Earlier quoted context omitted.

> Isn't this pretty much the description of every company? Which is why we don't let private companies create currency willy-nilly anymore.

> Which is why we don't let private companies create currency willy-nilly anymore. As I understand, private banks extend loans, which while not being printing money, the loans being deposits (which can be withdrawn) the effect of creating currency is the same.

Issuing tether was basically an unregulated bank loan system. With a regular loan the created money is destroyed when you repay it. In theory that would happen to the tether when you redeem it for dollars. The problem is really just that tether was lying about how they were operating.

Re: Tether Fined $41M for Lying About Reserves

#103

Post by pasabagi »

TameAntelope wrote: post #49
AlexandrB wrote: post #29

Earlier quoted context omitted.

And yet, they're still operating. This is the kind of thing that makes me think the whole cryptocurrency ecosystem is a house of cards. Cryptocurrency advocates seem to be really bad at spotting and punishing incompetent and malicious actors in their markets.

I think if you got a few beers in even the most adamant crypto advocate, you'd discover their thinking is more along the lines of, "The house of cards is out in the open with crypto, vs. hidden behind bureaucracy and obfuscation in traditional banking". With crypto, the "average" person gets to feel "in on it" in a way usually reserved for coked up Goldman associates. That is possibly not a good thing, as you're poin…

It's a misunderstanding of what the house of cards is about, though.

One of the first empires to use fiat currency was the Yuan dynasty, and it worked, because if your currency is backed by the mongols, you're absolutely going to act as if it makes sense, even if it seems crazy to you. The backing of money is not precious metals, nor currency, but rather force - a state can demand tax in it, and exact retribution if their taxes are not paid. The state could demand taxes in cowries, and people would collect cowries, because you are going to get imprisoned if you don't pay your tax.

The fiat-currency house of cards collapses when people think the state isn't going to be able to pay their bills and collect their dues. Cryptocurrencies are more like tulips. There's nothing behind the curtain - it's just a weird social eddy that's grown out of all proportion.

Re: Tether Fined $41M for Lying About Reserves

#104

Post by anm89 »

spywaregorilla wrote: post #93
bko wrote: post #88

Earlier quoted context omitted.

The difference is I can choose not to hold Tether. Removing my exposure to dollars as a US citizen is a lot harder. Not to mention people that are on a fixed income like my parents. So debasing fiat is a lot worse

That is part of being part of the society, yes.

So is having the right to hold other currencies and assets.

Tell that to an Argentinian who has had their life ruined because of the lack of foresight from the the people who run their society.

Re: Tether Fined $41M for Lying About Reserves

#105

Post by WalterSear »

BitwiseFool wrote: post #72
WalterSear wrote: post #26

Earlier quoted context omitted.

* They don't need to? If Tether, the company, disappeared, the market can decide what to do with the, now entirely unbacked, Tether cryptocurrency. * Tether, the company, can freeze specific Tethers they have issued, making them unusable as currency. Whoever shuts them down might be able to force them to do this en masse.

That's the thing, though, Tether is supposed to be holding all these assets and individuals are able to redeem Tethers proportionally. Leaving aside the strict notion of 1 Tether = 1 Dollar convertibility, just closing up shop would mean all those actual real world assets now belong to... who exactly?

I'm confused as to what 'real world assets' you are referring to.

If Tether goes away, any value goes with it, like a gift card to Blockbuster's.

Fwiw, it's likely just the pretence of redemption that would go away - it may never have been really there. Tether is explicit that they only redeem Tethers at their discretion. While they also specify that they will only redeem them for high value, non-US parties, I suspect this is misdirection.

There is no evidence of any appreciable redemption going on, though they have announced the burning of $1.5 billion Tethers - all in the last six months. According to Tether, this is because they just 'keep them for later'.

https://cointelegraph.com/news/tether-explains-why-it-hasnt-... https://cointelegraph.com/news/bitfinex-is-constantly-printi...

Re: Tether Fined $41M for Lying About Reserves

#106

Post by floatingatoll »

anm89 wrote: post #104
spywaregorilla wrote: post #93

Earlier quoted context omitted.

That is part of being part of the society, yes.

So is having the right to hold other currencies and assets. Tell that to an Argentinian who has had their life ruined because of the lack of foresight from the the people who run their society.

Incorrect, no such right is necessarily guaranteed by societies. For example, during much of the 1900s you were required to sell gold to the US government for USD rather than keep it under your mattress, and if you refused they had the right to seize it with force. For another example, negative savings interest rates in certain European countries.

Re: Tether Fined $41M for Lying About Reserves

#107

Post by tastyfreeze »

FireBeyond wrote: post #50
danuker wrote: post #11

> there was never more than $61.5 million backing Tether, even as more 442 million coins were circulating at one point. Ah, pulling the classic "fractional reserve" I see.

Hah. At one point Tether was claiming, during the days where they were holding on to the "1:1 backing!" that they were banking $2 billion A WEEK. And yet the cryptofans were telling us we were curmudgeons for not buying into the hype (or in this case, the bullshit).

From their website: "Every Tether token is always 100% backed by our reserves, which include traditional currency and cash equivalents and, from time to time, may include other assets and receivables from loans made by Tether to third parties, which may include affiliated entities (collectively, “reserves”)."

They don't claim 1:1 USD backing. They claim that every tether is backed by 1 USD of value. So, when their crypto holdings go up in value, TADA!, more reserves to print tether against. The problem here is they never explain what happens when the value of their backing assets goes down.

Re: Tether Fined $41M for Lying About Reserves

#108

Post by frankbreetz »

bko wrote: post #88
pfisherman wrote: post #13

Earlier quoted context omitted.

fiat debasing the currency. What I find ironic is that the crypto ecosystem still ended up with something like central banks, only in this case their mandate is make money for its owners, and they have no accountability or obligation to serve the general public.

The difference is I can choose not to hold Tether. Removing my exposure to dollars as a US citizen is a lot harder. Not to mention people that are on a fixed income like my parents. So debasing fiat is a lot worse

I believe a tether collapse would have a significant effect on the entire cryptocurrency ecosystem

Re: Tether Fined $41M for Lying About Reserves

#109

Post by kbenson »

rzwitserloot wrote: post #56
OneLeggedCat wrote: post #41

Earlier quoted context omitted.

> crypto ecosystem still ended up It's decades from its final form.

Perhaps. But we're, what? 10 years in and so far crypto has enabled 'I encrypted your data!' scams, caused political instability, been a vehicle for highly volatile investment (but the world wasn't hurting for such opportunities...), and served as a fine buzzword for dev teams around the world to get a sack of cash to update some systems. That's a pretty poor result for 10 years of this much investment and focus. The…

If that's the trend, by the time it reaches it's final form we'll all be smoking husks left over from the great AI uprising wars, but don't judge those AIs too harshly, that new testnet that paid out for verified kills was just too good to pass up.

Re: Tether Fined $41M for Lying About Reserves

#110

Post by gws »

Don’t really get you guys saying Tether should be shut down… the big banks get routinely fined with much bigger fines for much bigger crimes, are we gonna shut them all down then? At least Tether did not steal from nor defraud anyone. Just as a random example: https://www.justice.gov/opa/pr/jpmorgan-chase-co-agrees-pay-...
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