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The amount of money a bank (or loosely equivalent crypto entity) can make holding deposits and making loans out of them is far lower than the amount it can make
by pjlegato 5y ago
The amount of money a bank (or loosely equivalent crypto entity) can make holding deposits and making loans out of them is far lower than the amount it can make by printing new fiat (or crypto tokens) out of thin air and loaning them out (/selling them.)
Usually, this works fine, they make a lot of money, and everyone's happy. When there's some unexpected macroeconomic issue, which empirically happens with some regularity, they have massive problems as loans default en masse (or everyone tries to redeem their token for USD at once.)
- SpicyLemonZest 5y agoAnd it's critical to note that Tether has, in fact, refused to process any redemptions for any US client since 2018.
- skybrian 5y agoI’m wondering why non-US intermediaries couldn’t do it?
- wmf 5y agoThere's no evidence that Tether does redemptions for anyone.
- anonymoushn 5y agoIf you ask any trading desk in the space they will tell you they personally regularly do this.
- wmf 5y agoWhat bank did the wire transfer come from?
- SpicyLemonZest 5y agoAccording to their stated policy (https://tether.to/fees/ https://tether.to/fees/), a non-US intermediary would have to: * Pay them a nonrefundable $150 fee. * Wait for your account to be verified, if you're approved - they have "sole discretion to approve or not approve accounts" * Send them a minimum of 100,000 USDT * Pay an additional $1000. To be clear, it's likely that all of this is a lie and they simply aren't processing redemptions for anyone. I'm not aware of any documented story from the last few years of someone successfully performing a Tether redemption. The US policy is just easier to talk about because it's explicit: they say, in black and white (https://tether.to/faqs/ https://tether.to/faqs/), that "no issuance or redeeming services will be available to these users".
- notahacker 5y agoThe other difference is that loaning out to unconnected parties /= selling the tokens and keeping the uncollateralized bit as profit. Banks with outstanding loans might have issues with the timing of repayments, they might more rarely make so many bad loans that their expected future income is less than they loaned out, but they haven't simply pocketed the money depositors paid in.
- rsync 5y ago"When there's some unexpected macroeconomic issue, which empirically happens with some regularity, they have massive problems as loans default en masse (or everyone tries to redeem their token for USD at once.)" "Nobody knows you're swimming naked until the tide goes out ..."