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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

#61

Post by b_tterc_p »

comex wrote: post #36
b_tterc_p wrote: post #33

Earlier quoted context omitted.

Bankruptcy doesn’t mean assets Why does the market allow this? ... I have no clue but I would guess that money laundering fits into it somewhere.

That’s not correct; Tether does nominally allow redeeming for USD, although only in bulk, and the service has opened and closed over time and generally been a mess AFAIK.

Fine. Sometimes they do, but legally are not obligated to do so. So it’s a moot point. They’re protected from runs because they don’t have to cash out. Their current terms of service state:

> 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 securities and other assets held in the Reserves. Tether makes no representations or warranties about whether Tether Tokens that may be traded on the Site may be traded on the Site at any point in the future, if at all.

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

#62

Post by driverdan »

Animats wrote: post #31
Havoc wrote: post #21

Surprised Tether is willing to open it's mouth on this subject. Glass houses...stones...

They have to. They're under investigation by the New York State Attorney General.[1] That sort of thing usually doesn't end well. [1] https://ag.ny.gov/press-release/attorney-general-james-annou...

They don't have to. The NYS AG doesn't have standing.

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

#63

Post by stordoff »

comex wrote: post #36
b_tterc_p wrote: post #33

Earlier quoted context omitted.

Bankruptcy doesn’t mean assets Why does the market allow this? ... I have no clue but I would guess that money laundering fits into it somewhere.

That’s not correct; Tether does nominally allow redeeming for USD, although only in bulk, and the service has opened and closed over time and generally been a mess AFAIK.

What parent claims used to be true:

> There is no contractual right or other right or legal claim against us to redeem or exchange your Tethers for money. We do not guarantee any right of redemption or exchange of Tethers by us for money. There is no guarantee against losses when you buy, trade, sell, or redeem Tethers.

https://web.archive.org/web/20171224172135/https://tether.to...

Currently:

> 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 securities and other assets held in the Reserves.

> Any individual who is a U.S. Person and any entity that is a U.S. Person is prohibited from using the Site or any Services, including but not limited to using a Digital Tokens Wallet on the Site

[and we know that there is a limit on the Reserves]. I'd be _extremely_ wary about claiming they can be redeemed.

https://tether.to/legal/

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

#64

Post by pbhjpbhj »

ShorsHammer wrote: post #58
bb88 wrote: post #54

Earlier quoted context omitted.

I think the difference is that in the end a Bank is backed and regulated by the US Government. Tether is not. So it is solvent or insolvent.

Do you think the US government could cover every single cent if all the depositors wanted their money out now? Not even physical cash, just a transfer to an overseas account. The money simply isn't there and the scales are enormous. US banks only can pay back 3-10% of cash deposits. The FDIC only has enough to cover a tiny proportion of bank liabilities. It seems very disingenuous for people in this thread to say "we…

The USA gov can just print the money to pay off the backed cash. Everyone gets their money. It may not be worth much if everyone actually demanded they could hold the dollar amount of their accounts in their hands in paper money - indeed, I imagine, you'd cause severe privations on the government funds in order to produce the money.

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

#65

Post by darawk »

Once again, people here are ranting about Tether, while the market price is re-converging to parity. I wonder who's right, the people yelling in the comments section, or the people with skin in the game? What's been established here is that Tether is 74% collateralized by cash and short term securities. The other 26% is in the form of a loan to Bitfinex. Bitfinex is a cash-generation machine, and should not have any trouble making payments on that loan. Your local bank has a much, much lower reserve ratio than this.

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

#67

Post by darawk »

bhouston wrote: post #7
chatmasta wrote: post #4

My bank only needs to keep 10% of its deposits backed by cash, securities. [0] [0] https://en.wikipedia.org/wiki/Reserve_requirement#United_Sta...

You are misunderstanding fractional reserve banking. Fractional reserve banking means that the bank only has to keep enough cash on hand to meet their expected reasonable obligations. Banks still need their books to balance. That means that their liabilities can not exceed their assets. A bank can be solvent on paper but if there was a rush to withdraw by their customers, they may not be able to pay cash for all with…

> Banks still need their books to balance. That means that their liabilities can not exceed their assets.

Tether's books do balance. They've made a loan to Bitfinex. That loan is an asset equal in value to the missing funds.

Now, you could make the case that Bitfinex is insolvent, and therefore you ought to mark down the value of that loan. However, Bitfinex is generating a ton of revenue, and should have no trouble making payments on that loan. So, your argument pretty much falls apart, unless you have some other reason to expect Bitfinex to miss payments.

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

#68

Post by stale2002 »

ShorsHammer wrote: post #58
bb88 wrote: post #54

Earlier quoted context omitted.

I think the difference is that in the end a Bank is backed and regulated by the US Government. Tether is not. So it is solvent or insolvent.

Do you think the US government could cover every single cent if all the depositors wanted their money out now? Not even physical cash, just a transfer to an overseas account. The money simply isn't there and the scales are enormous. US banks only can pay back 3-10% of cash deposits. The FDIC only has enough to cover a tiny proportion of bank liabilities. It seems very disingenuous for people in this thread to say "we…

It is literally impossible for the US to be "insolvent" when it comes to US dollars.

They just print more money.

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

#69

Post by b_tterc_p »

stordoff wrote: post #63
comex wrote: post #36

Earlier quoted context omitted.

That’s not correct; Tether does nominally allow redeeming for USD, although only in bulk, and the service has opened and closed over time and generally been a mess AFAIK.

What parent claims used to be true: > There is no contractual right or other right or legal claim against us to redeem or exchange your Tethers for money. We do not guarantee any right of redemption or exchange of Tethers by us for money. There is no guarantee against losses when you buy, trade, sell, or redeem Tethers. https://web.archive.org/web/20171224172135/https://tether.to... Currently: > Tether reserves the r…

Wow. The US ban seems... unbelievable considering it’s USD based. Surely this breaks some sort of commercial law that the government can swoop in on?

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

#70

Post by perl4ever »

ShorsHammer wrote: post #58
bb88 wrote: post #54

Earlier quoted context omitted.

I think the difference is that in the end a Bank is backed and regulated by the US Government. Tether is not. So it is solvent or insolvent.

Do you think the US government could cover every single cent if all the depositors wanted their money out now? Not even physical cash, just a transfer to an overseas account. The money simply isn't there and the scales are enormous. US banks only can pay back 3-10% of cash deposits. The FDIC only has enough to cover a tiny proportion of bank liabilities. It seems very disingenuous for people in this thread to say "we…

"Do you think the US government could cover every single cent if all the depositors wanted their money out now?

Not even physical cash, just a transfer to an overseas account. The money simply isn't there and the scales are enormous."

What do you mean by "money"? How can money "simply" not be available, when it's a matter of updating a row in a database? The issue is whether assets exist. Googling suggests the US contains assets worth $124 trillion; is that incredible to you?

And if we wanted to print $124 trillion of cash to represent all the assets, that would be silly, but just as doable as a wall on the Mexican border.

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