Earlier quoted context omitted.
Presumably, USDT would lose value. What then?
The entire cryptocurrency market would collapse and cryptocurrency would become usable again.
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Tether reserves backed by 2.9% cash
121–130 of 183 posts
Re: Tether reserves backed by 2.9% cash
#122I run ScamStableCrypto. I create a billion ScamStableCoins and claim they are worth $1 each. I give a billion ScamStableCoins to ScamCryptoExchange. ScamCryptoExchange is run by me. ScamCryptoExchange writes an IOU for one billion US dollars and gives it ScamStableCrypto (my right hand gives something to my left hand). I, as ScamStableCrypto, write down in my balance book that I have a billion dollars of Commercial P…
I simply don't understand why all this complicated stable coin stuff is even necessary. Why can't exchanges use USD instead of USDT, USDC, BUSD or whatever? There are trading pairs for other currencies like EUR, GBP, AUD, BRL, RUB. Why can't we have USD trading pairs?
Re: Tether reserves backed by 2.9% cash
#123I run ScamStableCrypto. I create a billion ScamStableCoins and claim they are worth $1 each. I give a billion ScamStableCoins to ScamCryptoExchange. ScamCryptoExchange is run by me. ScamCryptoExchange writes an IOU for one billion US dollars and gives it ScamStableCrypto (my right hand gives something to my left hand). I, as ScamStableCrypto, write down in my balance book that I have a billion dollars of Commercial P…
I simply don't understand why all this complicated stable coin stuff is even necessary. Why can't exchanges use USD instead of USDT, USDC, BUSD or whatever? There are trading pairs for other currencies like EUR, GBP, AUD, BRL, RUB. Why can't we have USD trading pairs?
Real fiat currencies come with much heavier regulation if you want to get money in and out of the traditional banking system.
Also, if you want to move money between exchanges or banks you'd have to use the regular transfer methods like ACH, SWIFT, SEPA, which oftentimes are not as fast and cheap as sending USDT between exchanges. That makes it much harder to exploit arbitrage opportunities and drives up the spread overall, for example.
Re: Tether reserves backed by 2.9% cash
#124Re: Tether reserves backed by 2.9% cash
#125> Chief Technical Officer Paolo Ardoino Can't say this news comes out as a surprise. I'm actually surprised by the fact that there are any reserves at all. What is really interesting about Bitfinex / Tether is to research the history of the people who started these entities, especially their history prior to Bitcoin's existence. Here's a taste: https://nicolaborzi.medium.com/the-lawless-rollercoaster-of-... As much a…
From your first link: "On November 5, 2018, as an executive of Tether Mr Devasini lent 900 million dollars to Bitfinex and as an executive of Bitfinex, Mr Devasini signed the receipt to Tether." That sounds totally legit and normal.
> That sounds totally legit and normal.
lol, maybe he has a twin brother :D
Re: Tether reserves backed by 2.9% cash
#126Earlier quoted context omitted.
Yeah, 100% agree. The notion of counter-party risk is understood by a tiny fraction of the folks who participate in finance.
At this kind of scale, I don't think there's such a thing as plain "cash" free of any counterparty risk - even just holding it in a bank account has risk attached (and most banks probably don't want an account with that much money in it because that would pose risks to them - they have the exact same problems finding somewhere to put it). US treasuries and AAA-rated bonds and commercial paper are about the best you c…
I remember reading about some folks who wanted to open a bank that wouldn't make any loans, but rather just take store all their deposits as excess reserves at the federal reserve. They would take a few basis points for themselves, but offer their customers a way to have truly cash deposits that earned some interest with the absolute minimum amount of counter-party risk.
The Federal Reserve didn't approve them to do that, because they were worried that it could "destabilize the financial system."
Re: Tether reserves backed by 2.9% cash
#127As a comparison, USDC reserves are 100% backed by US dollars held in custody accounts, currently 9.3B. https://www.centre.io/hubfs/pdfs/attestation/grant-thorton_c...
USDC's "custody accounts" aren't cash either: "US Dollars held in custody accounts are the total balances in accounts held by the Company at federally insured US depository institutions and in approved investments on behalf of the USDC holders at the Report Date."
That sounds like a bank account. Are you criticizing USDC for not being as safe as paper dollars in a mattress?
Re: Tether reserves backed by 2.9% cash
#128As a comparison, USDC reserves are 100% backed by US dollars held in custody accounts, currently 9.3B. https://www.centre.io/hubfs/pdfs/attestation/grant-thorton_c...
Out of curiosity, in the hypotethical future case where the custody accounts would start to "pay" negative interest, what would happen to USDC? To me, there are only a limited set of options: 1. the peg fails 2. the custody accounts are switched to riskier assets - with or without knowledge of USDC holders. This, of course, has implications to the "stablecoin" status. One could even argue that USDC becomes a de facto…
You can check how EURS deals with this, for better or worse https://eurs.stasis.net/transparency/
Re: Tether reserves backed by 2.9% cash
#129Earlier quoted context omitted.
Sounds like fantasy. Whatever they wrote you the IOU for also comes out of your book, so your balance is $0. Doesn’t work like that.
Yes, that is the scenario I am describing. I have a billion dollars of liabilities in the ScamStableCoins I issued and a billion dollar in "Assets" from the IOU I wrote myself. THus I am perfectly fully backed.
Yeah, technically correct I guess. Is there any realistic scenario where this would fly? This would be plain and clear fraud and not something allowed to go on for two years after multiple audits.
Re: Tether reserves backed by 2.9% cash
#130Earlier quoted context omitted.
At this kind of scale, I don't think there's such a thing as plain "cash" free of any counterparty risk - even just holding it in a bank account has risk attached (and most banks probably don't want an account with that much money in it because that would pose risks to them - they have the exact same problems finding somewhere to put it). US treasuries and AAA-rated bonds and commercial paper are about the best you c…
I remember reading about some folks who wanted to open a bank that wouldn't make any loans, but rather just take store all their deposits as excess reserves at the federal reserve. They would take a few basis points for themselves, but offer their customers a way to have truly cash deposits that earned some interest with the absolute minimum amount of counter-party risk. The Federal Reserve didn't approve them to do…
For there to be a "deposit only" bank, there must also be a "loan only" bank.
If the money just sits there in a bank account and rots for all eternity you get unemployment and deflation.
The solution to this problem has been to loan out money so that someone else invests the money on your behalf. Inflation exists as an incentive to invest your money and since future incomes are greater (thanks to inflation) it is not very difficult for the borrower to pay the loan back plus some.
Investing doesn't make sense if you have deflation. You can just sit on the money and get rich by on the backs of others. A growing unemployment rate is unavoidable. To maintain stability you would somehow have to get rid of all the useless people or make them work for goods instead of money.