4 ms·

The pitch is clearly a lie, but I'm also not too worried about them counting commercial paper and t-bills as "cash."

by dehrmann 6y ago

deleted 6y ago
[deleted]
rich_sasha 6y ago
Agreed re T-bills, with CP surely it depends on the issuer? Not the elephant in the room either way, I agree.
lvs 6y ago
Well that obviously depends on what the commercial paper is. The treasuries are going to be liquid under most conditions, but who knows with paper.
adflux 6y ago
Also what's the paper and who issued? AAA or dogshit wrapped in catshit?
- grey-area 6y ago
  The giveaway is that they don’t even disclose what this commercial paper is or who the issuers are. Given their history of fraud the most likely explanation is they are shell companies run by the same people and the money doesn’t exist.
  - initplus 6y ago
    I do wonder to what extent Tether has a symbiotic relationship with large exchanges, and what the loans are denominated in. It's easy to imagine how issuing loans denominated in USDT would be attractive to Tether. And that debt can be converted into an asset on Tether's balance sheet. And voila the tether is backed.
scoopertrooper 6y ago
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 susceptible to a bank run and isn't eligible for federal deposit insurance.
- skybrian 6y ago
  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 securities and other assets held in the Reserves. Also, US citizens aren’t allowed to use their service at all. This seems sort of like an unregulated ETF that keeps all profits from investments for themselves. Easy money if you get it. If they don’t get too greedy it seems like they could keep it going indefinitely? [1] https://tether.to/legal/ https://tether.to/legal/
  - adflux 6y ago
    It's a pyramid scheme, Works until people start to pull out their money collectively
    - nootropicat 6y ago
      Insolvency is different from illiquidity.
      - adflux 6y ago
        You are assuming the paper backing the coin is proper
    - 6y ago
Clewza313 6y ago
T-bills are OK, but it's entirely unclear what the "commercial paper" consists of. Amy Castor notes that if Tether gives USDT for free to large customers like Binance etc, that loan would be a form of commercial paper. https://amycastor.com/2021/05/13/tethers-first-breakdown-of-reserves-consists-of-two-silly-pie-charts/ https://amycastor.com/2021/05/13/tethers-first-breakdown-of-... And quite a few exchanges are offering crazy interest rates (up to 10%) for USDT deposits, which strongly implies they're getting some for free: https://cryptoprijzen.com/en/crypto-interest/compare-tether-interest-rates/ https://cryptoprijzen.com/en/crypto-interest/compare-tether-...
- tonfa 6y ago
  > And quite a few exchanges are offering crazy interest rates (up to 10%) for USDT deposits, which strongly implies they're getting some for free I'd think the 10% is due to the high risk of default. (Someone else receives it, but usually only gives a crypto collateral, there's a fairly high chance of default since if the lender gets wiped there's a high chance the collateral won't be sufficient and it might snowball from there as all the lending platform try to liquidate at the same time) It's comparable to investing in junk bonds (but since it's call "savings/interests" most users won't realize the default risk.
Marazan 6y ago
What if the commercial paper was IOUs from cryto-exchanges that were issued in return for un-backed Tether. The IOU then being treated as backing. What if "crypto-exchanges" just means Bitfinex and no-one else. You notice that they carefully said the secured loans were against non-partner entities. They said nothing of the sort about the commercial paper.
- FabHK 6y ago
  And then when things go downhill and you want to redeem your USDT, they'll hand you a bunch of IOUs from Binance. Good luck redeeming those.
DebtDeflation 6y ago
>The pitch is clearly a lie, but I'm also not too worried about them counting commercial paper and t-bills as "cash." The pitch being a lie is EXACTLY the problem. Tether is supposed to be nothing more than the gateway between crypto and the rest of the financial system. There is no reason for them to hold anything other than deposits at insured institutions. There is no reason for them to be making loans. There is no reason for them to be paying above market interest rates to holders,
- raducu 6y ago
  Anything that can prop crypto prices is a valid reason and anything that threatens the price is a damn lie.

The pitch is clearly a lie, but I'm also not too worried about them counting commercial paper and t-bills as "cash."

deleted 6y ago

[deleted]

rich_sasha 6y ago

Agreed re T-bills, with CP surely it depends on the issuer? Not the elephant in the room either way, I agree.

lvs 6y ago

Well that obviously depends on what the commercial paper is. The treasuries are going to be liquid under most conditions, but who knows with paper.

adflux 6y ago

Also what's the paper and who issued? AAA or dogshit wrapped in catshit?

grey-area 6y ago
The giveaway is that they don’t even disclose what this commercial paper is or who the issuers are. Given their history of fraud the most likely explanation is they are shell companies run by the same people and the money doesn’t exist.
- initplus 6y ago
  I do wonder to what extent Tether has a symbiotic relationship with large exchanges, and what the loans are denominated in. It's easy to imagine how issuing loans denominated in USDT would be attractive to Tether. And that debt can be converted into an asset on Tether's balance sheet. And voila the tether is backed.

scoopertrooper 6y ago

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 susceptible to a bank run and isn't eligible for federal deposit insurance.

skybrian 6y ago
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 securities and other assets held in the Reserves. Also, US citizens aren’t allowed to use their service at all. This seems sort of like an unregulated ETF that keeps all profits from investments for themselves. Easy money if you get it. If they don’t get too greedy it seems like they could keep it going indefinitely? [1] https://tether.to/legal/ https://tether.to/legal/
- adflux 6y ago
  It's a pyramid scheme, Works until people start to pull out their money collectively
  - nootropicat 6y ago
    Insolvency is different from illiquidity.
    - adflux 6y ago
      You are assuming the paper backing the coin is proper
  - 6y ago

Clewza313 6y ago

T-bills are OK, but it's entirely unclear what the "commercial paper" consists of. Amy Castor notes that if Tether gives USDT for free to large customers like Binance etc, that loan would be a form of commercial paper. https://amycastor.com/2021/05/13/tethers-first-breakdown-of-reserves-consists-of-two-silly-pie-charts/ https://amycastor.com/2021/05/13/tethers-first-breakdown-of-... And quite a few exchanges are offering crazy interest rates (up to 10%) for USDT deposits, which strongly implies they're getting some for free: https://cryptoprijzen.com/en/crypto-interest/compare-tether-interest-rates/ https://cryptoprijzen.com/en/crypto-interest/compare-tether-...

tonfa 6y ago
> And quite a few exchanges are offering crazy interest rates (up to 10%) for USDT deposits, which strongly implies they're getting some for free I'd think the 10% is due to the high risk of default. (Someone else receives it, but usually only gives a crypto collateral, there's a fairly high chance of default since if the lender gets wiped there's a high chance the collateral won't be sufficient and it might snowball from there as all the lending platform try to liquidate at the same time) It's comparable to investing in junk bonds (but since it's call "savings/interests" most users won't realize the default risk.

Marazan 6y ago

What if the commercial paper was IOUs from cryto-exchanges that were issued in return for un-backed Tether. The IOU then being treated as backing. What if "crypto-exchanges" just means Bitfinex and no-one else. You notice that they carefully said the secured loans were against non-partner entities. They said nothing of the sort about the commercial paper.

FabHK 6y ago
And then when things go downhill and you want to redeem your USDT, they'll hand you a bunch of IOUs from Binance. Good luck redeeming those.

DebtDeflation 6y ago

>The pitch is clearly a lie, but I'm also not too worried about them counting commercial paper and t-bills as "cash." The pitch being a lie is EXACTLY the problem. Tether is supposed to be nothing more than the gateway between crypto and the rest of the financial system. There is no reason for them to hold anything other than deposits at insured institutions. There is no reason for them to be making loans. There is no reason for them to be paying above market interest rates to holders,

raducu 6y ago
Anything that can prop crypto prices is a valid reason and anything that threatens the price is a damn lie.