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Here’s what I don’t understand. You can exchange bitcoins for fiat currency. But afaik you can’t exchange USDT for fiat. So why is anyone willing to take the ri

by js2 9y ago

Here’s what I don’t understand. You can exchange bitcoins for fiat currency. But afaik you can’t exchange USDT for fiat. So why is anyone willing to take the risk of holding on to USDT? Why are any exchanges even willing to touch it?

JumpCrisscross 9y ago
> Why are any exchanges even willing to touch it? They’re earning fees from uninformed buyers coming from a community with an ideological aversion to governments. The first part makes it profitable. The last means the risk of their reporting you to the proper authorities is slim.
- jhwang5 9y ago
  Not sure why you are getting downvoted.
  - rocqua 9y ago
    Just guessing: The idea that the current value in bitcoin comes from crypto-anarchists rather than people speculating.
ceejayoz 9y ago
It lets the exchanges avoid dealing with USD, which they believe (IMO wrongly, but hey) exempts them from know-your-customer laws. A lot of Coinbase's customer service issues stem from KYC laws and the verification it requires. Some of them are being very squirrely with their users, telling you your "USD" balance which is actually USDT. Some may believe it's a fraud, but be happy to benefit from the apparent boost it's giving cryptocurrency values and think they're safe enough if it collapses.
- bby 9y ago
  How drastic do you think a contagion would be if Bitfinex is found to be fraudulent (meaning that everyone rushes out of USDT and buys crypto, then sends crypto to an exchange that accepts fiat)? There are so many exchanges that don't accept fiat.
- gruez 9y ago
  >they believe (IMO wrongly, but hey) exempts them from know-your-customer laws. but you need to be verified on bitfinex to withdraw both tether and (real) USD.
  - FireBeyond 9y ago
    KYC comes into effect on account opening, not withdrawal.
JustAnotherPat 9y ago
The whole point of USDT is to use on it exchanges that can't get USD on it. If you can hold USD, there's no need for tether, and there's no need to go the extra mile put your faith in a foreign corp that supposedly has to money to back it (buy risking your USD to buy them). The Tether foundation itself isn't going to buy back the USDT because then it will just have to burn them because it no longer has the supposed dollar backing it.
drcode 9y ago
A lot of exchanges have a hard time setting up traditional banking partners that can handle physical currency for them. If these exchanges don't offer USDT to their customers for parking money, they wouldn't have any customers anymore.
- jonknee 9y ago
  > A lot of exchanges have a hard time setting up traditional banking partners that can handle physical currency for them This week in "Laws are hard"
conanbatt 9y ago
I think the market believes that even if there is some level of foul play, bitfinex has the deep pockets to make it up to them, in at least the strange way they made it up to the people from the previous hacks. Bitfinex DOES seem to have very deep pockets to be able to respond somehow to it. I doubt bitfinex could pull off the self-heist move and dissapear.
andrewla 9y ago
You can exchange USDT for fiat, on demand, for exactly 1 USD/USDT, but only at Bitfinex. For bank wires, they charge a .1% fee, so technically I guess 0.999 USD for each 1 USDT. For verified customers, there is no withdrawal limit. Kraken offers a USD/USDT market that allows you to obtain fiat for your USDT, and the price stays fairly stable but the liquidity is low (thus slippage is high). It's currently trading at a discount; you could sell ~1M USDT for ~954k there. Kraken's withdrawal limits are way more severe than Bitfinex's, though, so it would take some time to get all of that out.
- spookthesunset 9y ago
  > You can exchange USDT for fiat, on demand, for exactly 1 USD/USDT, but only at Bitfinex My understanding is this isn't the case. My understanding is Bitfinex will take your USD and convert to USDT which you can then use to buy crypto. But it won't take your USDT and turn it back into dollars. In fact, my understanding is the only way to turn USDT back into USD is either directly through Kraken or indirectly through another exchange by going USDT -> BTC (or ETH/DOGE/whatever) -> USD. Bitfinex lost the ability to bank in USD a while ago, which is how this whole tether business was invented in the first place.
  - andrewla 9y ago
    As a US citizen, I can no longer access Bitfinex. My personal experience, when I could, is that you are never exposed to USDT on the site at all except as an option to transfer your deposited USD to another exchange via tether. They may have changed that, but I don’t know. As for withdrawing, you can’t withdraw to the US any more, but you can still make international USD wires to banks in other jurisdictions, specifically Taiwan and Hong Kong. I have not heard anything contradicting this, and have seen a fair bit confirming it.
    - spookthesunset 9y ago
      > My personal experience, when I could, is that you are never exposed to USDT on the site at all except as an option to transfer your deposited USD to another exchange via tether. One exciting "feature" of all this is that most tickers that price out crypto currency values treat USD and USDT as one and the same. I've yet to see Bitfinex, for example, show up on a ticker as "BTC / USDT" (which is what, in fact, the pairing is). It worries me because people use these things to inform their "investment" decisions and my hunch is most of the data they use is not quite on the up & up.
lurker456 9y ago
That's where I also get confused. So far the reasons I could come up with are: - the exchange got bought out silently and is now owned/controlled by the people behind tether - the exchange got paid to use tether (for example 0.5% of the volume as incentive) - the exchange holds a part of tether's fiat as guarantee - the exchange is run by people who are inexperienced in appraising counterparty risk - the exchange is run by people who like to take risks - the exchange expects to cover any potential losses with the profits they made so far - the exchange has been offered proof that the 1:1 peg is genuine (backed by the Chinese govt using US bonds) other ideas are welcome
- moduspol 9y ago
  What risks does the exchange incur from allowing the trade of tethers? Exchanges make their money from people trading--not by holding their own reserves and betting on their values. If Tether value drops to zero, anyone holding Tethers would be upset, but exchanges would just have been profiting from all the trades necessary to bring that value down to zero.
  - tlrobinson 9y ago
    IIRC some exchanges don’t make it clear you’re trading USDT, not USD. If Tether were to implode users might be able to sue the exchange to try to recover the USD value.
    - moduspol 9y ago
      For that case, maybe, but I'm correcting parent post's presumption that trading in tethers necessarily imparts some huge risk onto the exchange.
  - lurker456 9y ago
    Allegedly, some exchanges commingle USD and USDT without informing their users. For exchanges that don't do that, the question "Why would exchanges even touch it ?" is less applicable. As to why end users would touch it, that's obvious - a (potentially misguided) belief that things will work out fine.
mandel_ 9y ago
Up until this year many Americans could use USDT for accounting purposes. The IRS deemed crypto property (1031 exchange) meaning you could use like kind treatment and not pay taxes on the transactions ad they were both property. This treatment has officially ended in 2018.
Blindedwino 9y ago
You can't _easily_ exchange bitcoins for fiat currency, that's why USDT exists. Many banks are not accepting deposits coming from some shady offshore bank into a "normal people" account. The average Joe who's paper rich because he has 100 bitcoins on an exchange and sells them, there's a good chance their local bank branch won't be happy if he's receiving a wire transfer of $1M from the Virgin Islands or Cyprus. So instead, they keep that $1M as USDT and they can keep trading with it and still be paper rich. The same applies to exchanges, a lot of them are totally unbanked in the US. USDT allows them to play with Monopoly USD instead of the real thing.
- FireBeyond 9y ago
  > there's a good chance their local bank branch won't be happy if he's receiving a wire transfer of $1M Eh. If I'm Joe Average cashing out my 100 bitcoin in your situation, I call my bank manager a few days ahead, telling him to expect a wire transfer along those lines. I think the risk on such transactions is _far and away_ "will your exchange honor the cash out?", "how long will it take?" (up to 12 weeks for some exchanges) "will there be onerous restrictions on cash out limits?" (this example would be 100 consecutive days of $10K transfers) - much more so than "Will Chase Bank NA be happy to accept a wire transfer from Scotiabank BVI?"

by js2 9y ago

JumpCrisscross 9y ago

> Why are any exchanges even willing to touch it? They’re earning fees from uninformed buyers coming from a community with an ideological aversion to governments. The first part makes it profitable. The last means the risk of their reporting you to the proper authorities is slim.

jhwang5 9y ago
Not sure why you are getting downvoted.
- rocqua 9y ago
  Just guessing: The idea that the current value in bitcoin comes from crypto-anarchists rather than people speculating.

ceejayoz 9y ago

It lets the exchanges avoid dealing with USD, which they believe (IMO wrongly, but hey) exempts them from know-your-customer laws. A lot of Coinbase's customer service issues stem from KYC laws and the verification it requires. Some of them are being very squirrely with their users, telling you your "USD" balance which is actually USDT. Some may believe it's a fraud, but be happy to benefit from the apparent boost it's giving cryptocurrency values and think they're safe enough if it collapses.

bby 9y ago
How drastic do you think a contagion would be if Bitfinex is found to be fraudulent (meaning that everyone rushes out of USDT and buys crypto, then sends crypto to an exchange that accepts fiat)? There are so many exchanges that don't accept fiat.
gruez 9y ago
>they believe (IMO wrongly, but hey) exempts them from know-your-customer laws. but you need to be verified on bitfinex to withdraw both tether and (real) USD.
- FireBeyond 9y ago
  KYC comes into effect on account opening, not withdrawal.

JustAnotherPat 9y ago

The whole point of USDT is to use on it exchanges that can't get USD on it. If you can hold USD, there's no need for tether, and there's no need to go the extra mile put your faith in a foreign corp that supposedly has to money to back it (buy risking your USD to buy them). The Tether foundation itself isn't going to buy back the USDT because then it will just have to burn them because it no longer has the supposed dollar backing it.

drcode 9y ago

A lot of exchanges have a hard time setting up traditional banking partners that can handle physical currency for them. If these exchanges don't offer USDT to their customers for parking money, they wouldn't have any customers anymore.

jonknee 9y ago
> A lot of exchanges have a hard time setting up traditional banking partners that can handle physical currency for them This week in "Laws are hard"

conanbatt 9y ago

I think the market believes that even if there is some level of foul play, bitfinex has the deep pockets to make it up to them, in at least the strange way they made it up to the people from the previous hacks. Bitfinex DOES seem to have very deep pockets to be able to respond somehow to it. I doubt bitfinex could pull off the self-heist move and dissapear.

andrewla 9y ago

You can exchange USDT for fiat, on demand, for exactly 1 USD/USDT, but only at Bitfinex. For bank wires, they charge a .1% fee, so technically I guess 0.999 USD for each 1 USDT. For verified customers, there is no withdrawal limit. Kraken offers a USD/USDT market that allows you to obtain fiat for your USDT, and the price stays fairly stable but the liquidity is low (thus slippage is high). It's currently trading at a discount; you could sell ~1M USDT for ~954k there. Kraken's withdrawal limits are way more severe than Bitfinex's, though, so it would take some time to get all of that out.

spookthesunset 9y ago
> You can exchange USDT for fiat, on demand, for exactly 1 USD/USDT, but only at Bitfinex My understanding is this isn't the case. My understanding is Bitfinex will take your USD and convert to USDT which you can then use to buy crypto. But it won't take your USDT and turn it back into dollars. In fact, my understanding is the only way to turn USDT back into USD is either directly through Kraken or indirectly through another exchange by going USDT -> BTC (or ETH/DOGE/whatever) -> USD. Bitfinex lost the ability to bank in USD a while ago, which is how this whole tether business was invented in the first place.
- andrewla 9y ago
  As a US citizen, I can no longer access Bitfinex. My personal experience, when I could, is that you are never exposed to USDT on the site at all except as an option to transfer your deposited USD to another exchange via tether. They may have changed that, but I don’t know. As for withdrawing, you can’t withdraw to the US any more, but you can still make international USD wires to banks in other jurisdictions, specifically Taiwan and Hong Kong. I have not heard anything contradicting this, and have seen a fair bit confirming it.
  - spookthesunset 9y ago
    > My personal experience, when I could, is that you are never exposed to USDT on the site at all except as an option to transfer your deposited USD to another exchange via tether. One exciting "feature" of all this is that most tickers that price out crypto currency values treat USD and USDT as one and the same. I've yet to see Bitfinex, for example, show up on a ticker as "BTC / USDT" (which is what, in fact, the pairing is). It worries me because people use these things to inform their "investment" decisions and my hunch is most of the data they use is not quite on the up & up.

lurker456 9y ago

That's where I also get confused. So far the reasons I could come up with are: - the exchange got bought out silently and is now owned/controlled by the people behind tether - the exchange got paid to use tether (for example 0.5% of the volume as incentive) - the exchange holds a part of tether's fiat as guarantee - the exchange is run by people who are inexperienced in appraising counterparty risk - the exchange is run by people who like to take risks - the exchange expects to cover any potential losses with the profits they made so far - the exchange has been offered proof that the 1:1 peg is genuine (backed by the Chinese govt using US bonds) other ideas are welcome

moduspol 9y ago
What risks does the exchange incur from allowing the trade of tethers? Exchanges make their money from people trading--not by holding their own reserves and betting on their values. If Tether value drops to zero, anyone holding Tethers would be upset, but exchanges would just have been profiting from all the trades necessary to bring that value down to zero.
- tlrobinson 9y ago
  IIRC some exchanges don’t make it clear you’re trading USDT, not USD. If Tether were to implode users might be able to sue the exchange to try to recover the USD value.
  - moduspol 9y ago
    For that case, maybe, but I'm correcting parent post's presumption that trading in tethers necessarily imparts some huge risk onto the exchange.
- lurker456 9y ago
  Allegedly, some exchanges commingle USD and USDT without informing their users. For exchanges that don't do that, the question "Why would exchanges even touch it ?" is less applicable. As to why end users would touch it, that's obvious - a (potentially misguided) belief that things will work out fine.

mandel_ 9y ago

Up until this year many Americans could use USDT for accounting purposes. The IRS deemed crypto property (1031 exchange) meaning you could use like kind treatment and not pay taxes on the transactions ad they were both property. This treatment has officially ended in 2018.

Blindedwino 9y ago

You can't _easily_ exchange bitcoins for fiat currency, that's why USDT exists. Many banks are not accepting deposits coming from some shady offshore bank into a "normal people" account. The average Joe who's paper rich because he has 100 bitcoins on an exchange and sells them, there's a good chance their local bank branch won't be happy if he's receiving a wire transfer of $1M from the Virgin Islands or Cyprus. So instead, they keep that $1M as USDT and they can keep trading with it and still be paper rich. The same applies to exchanges, a lot of them are totally unbanked in the US. USDT allows them to play with Monopoly USD instead of the real thing.

FireBeyond 9y ago
> there's a good chance their local bank branch won't be happy if he's receiving a wire transfer of $1M Eh. If I'm Joe Average cashing out my 100 bitcoin in your situation, I call my bank manager a few days ahead, telling him to expect a wire transfer along those lines. I think the risk on such transactions is _far and away_ "will your exchange honor the cash out?", "how long will it take?" (up to 12 weeks for some exchanges) "will there be onerous restrictions on cash out limits?" (this example would be 100 consecutive days of $10K transfers) - much more so than "Will Chase Bank NA be happy to accept a wire transfer from Scotiabank BVI?"