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It's surprising to me that the rather straightforward question of whether Tether (Bitfinex) is actually holding the dollar reserves against the issued tether to

by b1daly 9y ago

It's surprising to me that the rather straightforward question of whether Tether (Bitfinex) is actually holding the dollar reserves against the issued tether tokens is so difficult to answer. Just the fact that the company has not definitively disproved the accusations of fraud against it, which have been instesifying for weeks, is evidence that there is something to the charges. There is a not much discussed point I'm curious if anyone here has a perspective on. Tether has claimed that their business model is based, in part, on earning interest on the reserves they (supposedly) hold to back the issue tether tokens. It was pointed out by Bitcoin analyist Tone Vays the other day that such a business account should not be interest earning, as it is not supposed to be put at risk (by being lent out.) This strikes me as rather suspicious: that a significant part of the explanation for how Tether earns money doesn't make sense.

jraines 9y ago
It's probably part of their agreement with the bank(s) -- if they're even traditional banks -- not to reveal the relationship except to certain parties. And yeah, assuming all the funds do exist, I'd be amazed if they were being held in a risk-free non-interest bearing form. Which is why it's a bit crazy that Tether sticks to the peg so well -- the NPV of a Tether accounting for even non-conspiratorial risks has got to be less than $1
- panarky 9y ago
  > It's probably part of their agreement with the bank(s) The point is that Tether and Bitfinex have the power to publish their bank balances, and they could authorize their banks to confirm the deposits if they wanted to. Why would they refuse to do this, even while under intense suspicion of actually not controlling 1:1 reserves, unless the accusations were true? The question of interest is a distraction. Businesses usually hold cash in money market accounts or do short-term repo agreements to get a little yield with very low risk. But that yield would be at most 2% a year, so not relevant to the real question.
pg314 9y ago
> It was pointed out by Bitcoin analyist Tone Vays the other day that such a business account should not be interest earning, as it is not supposed to be put at risk (by being lent out.) Even zero-risk loans (usually) have a non-zero return. The yield on 1 month US treasuries is about 1% [1]. That is about the lowest risk asset you'll be able to find. Certainly lower risk than a business account at a bank. [1] https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield https://www.treasury.gov/resource-center/data-chart-center/i...

by b1daly 9y ago

jraines 9y ago

It's probably part of their agreement with the bank(s) -- if they're even traditional banks -- not to reveal the relationship except to certain parties. And yeah, assuming all the funds do exist, I'd be amazed if they were being held in a risk-free non-interest bearing form. Which is why it's a bit crazy that Tether sticks to the peg so well -- the NPV of a Tether accounting for even non-conspiratorial risks has got to be less than $1

panarky 9y ago
> It's probably part of their agreement with the bank(s) The point is that Tether and Bitfinex have the power to publish their bank balances, and they could authorize their banks to confirm the deposits if they wanted to. Why would they refuse to do this, even while under intense suspicion of actually not controlling 1:1 reserves, unless the accusations were true? The question of interest is a distraction. Businesses usually hold cash in money market accounts or do short-term repo agreements to get a little yield with very low risk. But that yield would be at most 2% a year, so not relevant to the real question.

pg314 9y ago

> It was pointed out by Bitcoin analyist Tone Vays the other day that such a business account should not be interest earning, as it is not supposed to be put at risk (by being lent out.) Even zero-risk loans (usually) have a non-zero return. The yield on 1 month US treasuries is about 1% [1]. That is about the lowest risk asset you'll be able to find. Certainly lower risk than a business account at a bank. [1] https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield https://www.treasury.gov/resource-center/data-chart-center/i...