Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Tether reserves backed by 2.9% cash

ft.com

Post reply on HN
Print view View original

41–50 of 183 posts

Re: Tether reserves backed by 2.9% cash

#41

Post by adflux »

skybrian wrote: post #35
scoopertrooper wrote: post #25

Earlier quoted context omitted.

Commercial paper definitely shouldn't be classed as cash. They can have quite a lot of risk attached to them. The biggest problem with this whole thing is that Tether is essentially acting as a unregulated and unaudited bank. It has a whole bunch of depositors that have the right to demand their funds within 72 hours, meanwhile many of their assets cannot be converted into cash within that period. Tether is highly su…

Where did you get “72 hours” from? That got me curious about what their rules actually are. From their terms of service [1]: > Tether reserves the right to delay the redemption or withdrawal of Tether Tokens if such delay is necessitated by the illiquidity or unavailability or loss of any Reserves held by Tether to back the Tether Tokens, and Tether reserves the right to redeem Tether Tokens by in-kind redemptions of…

It's a pyramid scheme, Works until people start to pull out their money collectively

Re: Tether reserves backed by 2.9% cash

#42

Post by nimchimpsky »

csomar wrote: post #34
Lionga wrote: post #31

Earlier quoted context omitted.

what defines an "approved investment" ?

> you agree Circle is free to use the funds provided for its own purposes prior to redemption subject to the terms of this Agreement. > Circle may also invest these fiat funds in highly-liquid, AAA-rated fixed income securities. I wrote about this here: https://omarabid.com/usd-stable-coins Only Gemini USD is fully backed by US treasuries. Everyone else is using this money to play roulette.

dai ?

Re: Tether reserves backed by 2.9% cash

#43

Post by atq2119 »

jbverschoor wrote: post #37

Does it really matter when banks have a reserve requirement of 0% since 2 years?

Sibling comments express justified disbelief at this question, but just in case: in our modern monetary system, reserve requirements aren't the "last resort" against bank runs. The central bank will jump in and provide the required liquidity to prevent a bank run as a last resort, and (since it is the entity which ultimately runs the monetary system) the central bank is by definition always able to do so. For a bank to fail in the modern system, it has to fail its capital requirements, which is a very different story (the keyword you'd be looking for here is the Basel regulations).

Tether cannot fall back to a central bank, so the cases are completely incomparable.

Re: Tether reserves backed by 2.9% cash

#44

Post by Animats »

StavrosK wrote: post #2

Why print money when a private company can just create its own? Just imagine what's going to happen when there's a bank run on Tether.

Just imagine what's going to happen when there's a bank run on Tether.

Tether FAQ: "Unfortunately, Tether has decided to stop serving U.S. individual and corporate customers altogether. As of January 1, 2018, no issuance or redeeming services will be available to these users."[1]

If there's a significant net outflow from Tether to USD, there's a good chance the whole thing comes apart.

Remember, with Tether, there is no potential upside. If you're not using it for something within days, don't keep any money in it.

[1] https://tether.to/faqs/

Re: Tether reserves backed by 2.9% cash

#45

Post by applepple »

maest wrote: post #38
jbverschoor wrote: post #37

Does it really matter when banks have a reserve requirement of 0% since 2 years?

The two are incomparable.

How are they any different? They both do fractional reserve banking. If anything, Tether is more robust because they aren't controlled by central banks.

Re: Tether reserves backed by 2.9% cash

#46

Post by tarsinge »

jbverschoor wrote: post #37

Does it really matter when banks have a reserve requirement of 0% since 2 years?

Yes because it's an unregulated offshore private company? In the physical world it's like giving money to someone in exchange for a piece of paper with "1 my token", freshly out of the printer. It's worse than banks.

Re: Tether reserves backed by 2.9% cash

#47

Post by tarsinge »

applepple wrote: post #45
maest wrote: post #38

Earlier quoted context omitted.

The two are incomparable.

How are they any different? They both do fractional reserve banking. If anything, Tether is more robust because they aren't controlled by central banks.

A random individual in the street can do fractional banking too, and by that reasoning is more robust than a bank. Why would you specifically trust Tether with your money?

Re: Tether reserves backed by 2.9% cash

#48

Post by beefield »

sickmate wrote: post #15

As 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 fractional reserve bank at this point.

Re: Tether reserves backed by 2.9% cash

#49

Post by applepple »

tarsinge wrote: post #47
applepple wrote: post #45

Earlier quoted context omitted.

How are they any different? They both do fractional reserve banking. If anything, Tether is more robust because they aren't controlled by central banks.

A random individual in the street can do fractional banking too, and by that reasoning is more robust than a bank. Why would you specifically trust Tether with your money?

I would trust a random individual more than a bank. There is a chance that the random individual might be honest... On the other hand, I know for sure that banks are running a pyramid scheme.
Post reply on HN