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If there really is such a strong need for this 1:1 USD type service why not create a legit, fully transparent, US based company to compete. Use the float to gen

If there really is such a strong need for this 1:1 USD type service why not create a legit, fully transparent, US based company to compete. Use the float to generate income. Even 1 or 2% on 100s of millions adds up.

cperciva 9y ago
Never mind hundreds of millions; Tether has printed over two billion "dollars". But since the biggest market for this is money laundering, it's hard to imagine any "legit, fully transparent, US based companies" succeeding.
rajacombinator 9y ago
The whole point of tether is to create a link back to fiat while at the same time avoiding the iron fist of the Empire and it’s labyrinth of rules and regulations, using what they consider to be a legal loophole. (Good luck convincing the Imperial Stormtroopers of that ...) Having a US based company do this would be impossible and defeat the purpose.
bufferoverflow 9y ago
Because you need a bank that would agree to something like that. And that's what Tether has a problem with - all the banks dropped them.
- JumpCrisscross 9y ago
  > Because you need a bank that would agree to something like that And since the pitch is “we want anonymous international depositors to open and close accounts with you,” with extra steps added, no bank will agree.
  - cesarb 9y ago
    Does it even need that? ETFs can keep their price stable with as few as five or ten entities being allowed to trade the underlying basket of assets for the ETF. Those who aren't allowed to directly exchange the assets for the ETF can instead trade with those who are allowed, or trade with someone who can trade with them. There's no need for everyone to be able to deal directly with the ETF issuer, and the same should apply to USDT.
    - JumpCrisscross 9y ago
      > There's no need for everyone to be able to deal directly with the ETF issuer But there is the need for everyone to trust the ETF manager. Authorised participants (APs) must trust they can redeem ETF units for a basket of the underlying shares and vice versa. Other market participants, in turn, must trust that process to manage tracking risk. ETF managers earn that trust by contractually guaranteeing APs' creation/redemption rights, being regularly audited like normal companies, being regulated like securities companies, and having their holdings vouched for by other market participants, e.g. banks, clearing and settlement services, et cetera. Literally none of the preceding apply to Bitfinex nor Tether. More broadly, a structure like Tether is inherently incompatible with anti-money laundering. No jurisdiction will let a bank say "these $2 billion are held by unknown beneficial owners." If we wanted that, we'd just re-authorise numbered, i.e. anonymous, bank accounts.
- charlesdm 9y ago
  Thinking outside the box here -- why not just set up a bank? It might not be easy, but given the amount of capital floating around in crypto land, I assume it should be a non issue.
  - scott00 9y ago
    It's very hard to get regulatory approval for a banking charter right now. The FDIC has been approving less than 1 new bank a year since 2009, as compared to an average of 154 a year in the eight years prior to 2009[1]. And that's just one of several regulatory bodies that would need to approve a crypto bank. [1] https://www.bankdirector.com/index.php/magazine/archives/2nd-quarter-2017/new-crop-de-novo-banks/ https://www.bankdirector.com/index.php/magazine/archives/2nd...
    - charlesdm 9y ago
      There might be shell companies with a remaining active banking license, that were approved pre-2008? Seems like regulators are preferring that you acquire a charter over acquiring a new license.
- prostoalex 9y ago
  Commodity ETFs get by with having audited assets stored somewhere in the vault (GLD). They just need to be periodically audited by a trusted third party (or two).
nomailing 9y ago
If someone is interested in 1:1 USD crypto assets, I recommend looking into the mechanics of smart-assets such as bitUSD [1] on the Bitshares DEX. These are backed by at least 175% of equivalent value of Bitshares. Thereby these smart-assets achieve a stable 1:1 USD value in a decentralized way [2]. If the value of the collateral of a short position falls below 175%, the position is margin called automatically by the blockchain. Another advantage is that you can trade them within the blockchain without any central party [3]. In my opinion this decentralized bitUSD is much better in comparison to Tether, which is intransparent and centralized. In recent months trading volume really picked up esspecially in bitCNY/BTS, but also for bitUSD/BTS. I would be happy to hear other opinions about these decentralized alternatives. Disclaimer: I own some bitUSD, bitCNY, BTS, but I am not involved in other ways with the project. [1] https://wallet.bitshares.org/#/asset/USD https://wallet.bitshares.org/#/asset/USD [2] https://coinmarketcap.com/currencies/bitusd/ https://coinmarketcap.com/currencies/bitusd/ [3] https://wallet.bitshares.org/#/market/BTS_USD https://wallet.bitshares.org/#/market/BTS_USD
- naveen99 9y ago
  Is there sufficient incentive to issue bitusd if you hold bitshares ? I guess you can loan yourself about 60% of the value you hold in bitshares if you issue yourself some bitusd. but is it any more than a leveraged position in bitshares ? Could be risky for the issuer unless they are prepared to really support the price of bitshares.
  - nomailing 9y ago
    Yes, that is how I understand it. But I am also still learning about it. It was interesting to see the margin calls during the 40% price drop of the crypto market two weeks ago. Basically, before the drop some people had enough collateral above the 175% threshold, but during the drop these positions entered the margin call area and the orderbook of the decentralized exchange was automatically filled with USD buy orders, so that they were forced to close their position.
ThrustVectoring 9y ago
The major draw of Tethers is to allow people to "hold" "dollars" while avoiding anti-money laundering and know-your-customer laws. If you wanted online dollar handling services that abide by these laws, you get a bank account and send wire transfers and ACH transfers.
- ajhurliman 9y ago
  That's not true, it's very desirable to have something that spends like a crypto-currency (fast transaction time, low fees) but doesn't fluctuate wildly. Nobody's going to send a $1.00 ACH transfer to tip a web comic artist.
  - ThrustVectoring 9y ago
    People can and do all the time, they usually just link Paypal to their bank account (or something similar) as an intermediary to avoid handing out their bank account number to strangers. And furthermore, how is the web comic artist going to pay their rent? Landlords don't take tethers, so at some point they need to cash out to actual dollars and receive an ACH transfer from an exchange or the like. Are they really better off being forced to trust a crypto exchange?
wmf 9y ago
This was announced the other day (and promptly flagged off the front page): https://blog.trusttoken.com/trueusd-a-usd-backed-stablecoin-you-can-trust-9688796cfd0d https://blog.trusttoken.com/trueusd-a-usd-backed-stablecoin-...

cperciva 9y ago

Never mind hundreds of millions; Tether has printed over two billion "dollars". But since the biggest market for this is money laundering, it's hard to imagine any "legit, fully transparent, US based companies" succeeding.

rajacombinator 9y ago

The whole point of tether is to create a link back to fiat while at the same time avoiding the iron fist of the Empire and it’s labyrinth of rules and regulations, using what they consider to be a legal loophole. (Good luck convincing the Imperial Stormtroopers of that ...) Having a US based company do this would be impossible and defeat the purpose.

bufferoverflow 9y ago

Because you need a bank that would agree to something like that. And that's what Tether has a problem with - all the banks dropped them.

JumpCrisscross 9y ago
> Because you need a bank that would agree to something like that And since the pitch is “we want anonymous international depositors to open and close accounts with you,” with extra steps added, no bank will agree.
- cesarb 9y ago
  Does it even need that? ETFs can keep their price stable with as few as five or ten entities being allowed to trade the underlying basket of assets for the ETF. Those who aren't allowed to directly exchange the assets for the ETF can instead trade with those who are allowed, or trade with someone who can trade with them. There's no need for everyone to be able to deal directly with the ETF issuer, and the same should apply to USDT.
  - JumpCrisscross 9y ago
    > There's no need for everyone to be able to deal directly with the ETF issuer But there is the need for everyone to trust the ETF manager. Authorised participants (APs) must trust they can redeem ETF units for a basket of the underlying shares and vice versa. Other market participants, in turn, must trust that process to manage tracking risk. ETF managers earn that trust by contractually guaranteeing APs' creation/redemption rights, being regularly audited like normal companies, being regulated like securities companies, and having their holdings vouched for by other market participants, e.g. banks, clearing and settlement services, et cetera. Literally none of the preceding apply to Bitfinex nor Tether. More broadly, a structure like Tether is inherently incompatible with anti-money laundering. No jurisdiction will let a bank say "these $2 billion are held by unknown beneficial owners." If we wanted that, we'd just re-authorise numbered, i.e. anonymous, bank accounts.
charlesdm 9y ago
Thinking outside the box here -- why not just set up a bank? It might not be easy, but given the amount of capital floating around in crypto land, I assume it should be a non issue.
- scott00 9y ago
  It's very hard to get regulatory approval for a banking charter right now. The FDIC has been approving less than 1 new bank a year since 2009, as compared to an average of 154 a year in the eight years prior to 2009[1]. And that's just one of several regulatory bodies that would need to approve a crypto bank. [1] https://www.bankdirector.com/index.php/magazine/archives/2nd-quarter-2017/new-crop-de-novo-banks/ https://www.bankdirector.com/index.php/magazine/archives/2nd...
  - charlesdm 9y ago
    There might be shell companies with a remaining active banking license, that were approved pre-2008? Seems like regulators are preferring that you acquire a charter over acquiring a new license.
prostoalex 9y ago
Commodity ETFs get by with having audited assets stored somewhere in the vault (GLD). They just need to be periodically audited by a trusted third party (or two).

nomailing 9y ago

If someone is interested in 1:1 USD crypto assets, I recommend looking into the mechanics of smart-assets such as bitUSD [1] on the Bitshares DEX. These are backed by at least 175% of equivalent value of Bitshares. Thereby these smart-assets achieve a stable 1:1 USD value in a decentralized way [2]. If the value of the collateral of a short position falls below 175%, the position is margin called automatically by the blockchain. Another advantage is that you can trade them within the blockchain without any central party [3]. In my opinion this decentralized bitUSD is much better in comparison to Tether, which is intransparent and centralized. In recent months trading volume really picked up esspecially in bitCNY/BTS, but also for bitUSD/BTS. I would be happy to hear other opinions about these decentralized alternatives. Disclaimer: I own some bitUSD, bitCNY, BTS, but I am not involved in other ways with the project. [1] https://wallet.bitshares.org/#/asset/USD https://wallet.bitshares.org/#/asset/USD [2] https://coinmarketcap.com/currencies/bitusd/ https://coinmarketcap.com/currencies/bitusd/ [3] https://wallet.bitshares.org/#/market/BTS_USD https://wallet.bitshares.org/#/market/BTS_USD

naveen99 9y ago
Is there sufficient incentive to issue bitusd if you hold bitshares ? I guess you can loan yourself about 60% of the value you hold in bitshares if you issue yourself some bitusd. but is it any more than a leveraged position in bitshares ? Could be risky for the issuer unless they are prepared to really support the price of bitshares.
- nomailing 9y ago
  Yes, that is how I understand it. But I am also still learning about it. It was interesting to see the margin calls during the 40% price drop of the crypto market two weeks ago. Basically, before the drop some people had enough collateral above the 175% threshold, but during the drop these positions entered the margin call area and the orderbook of the decentralized exchange was automatically filled with USD buy orders, so that they were forced to close their position.

ThrustVectoring 9y ago

The major draw of Tethers is to allow people to "hold" "dollars" while avoiding anti-money laundering and know-your-customer laws. If you wanted online dollar handling services that abide by these laws, you get a bank account and send wire transfers and ACH transfers.

ajhurliman 9y ago
That's not true, it's very desirable to have something that spends like a crypto-currency (fast transaction time, low fees) but doesn't fluctuate wildly. Nobody's going to send a $1.00 ACH transfer to tip a web comic artist.
- ThrustVectoring 9y ago
  People can and do all the time, they usually just link Paypal to their bank account (or something similar) as an intermediary to avoid handing out their bank account number to strangers. And furthermore, how is the web comic artist going to pay their rent? Landlords don't take tethers, so at some point they need to cash out to actual dollars and receive an ACH transfer from an exchange or the like. Are they really better off being forced to trust a crypto exchange?

wmf 9y ago

This was announced the other day (and promptly flagged off the front page): https://blog.trusttoken.com/trueusd-a-usd-backed-stablecoin-you-can-trust-9688796cfd0d https://blog.trusttoken.com/trueusd-a-usd-backed-stablecoin-...