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I don't doubt that Tether is used to evade regulation and oversight. Tether, the company, certainly seems to be pretty shady. But, it isn't only used for that.

I don't doubt that Tether is used to evade regulation and oversight. Tether, the company, certainly seems to be pretty shady. But, it isn't only used for that. The reason tether, the coin, initially took off, was that exchanges (including 2 bit upstarts with no financial or technical chops using off the shelf software) needed a way to transfer funds between them. They could, in theory, have driven trucks of cash between each others offices without regulation, but that's not feasible. They could have transferred regular cryptocurrencies like bitcoin, but that creates an exchange risk that they can't handle. Hence Tether. In practice, real USD were not up to this task. It's possible that "the task" itself is the problem. If exchanges were established, bigger, more trustworthy and capable companies... they'd probably trust each other and clear transactions weekly or something.

toomuchtodo 5y ago
Can you explain why USD was not up to the task? Why could they not move real dollars between themselves or their accounts held at regulated banks?
- dalbasal 5y ago
  Transaction costs, speed, the willingness of banks to do that kind of business, the assurity that banks will not panic and reverse transactions or shut the account down. Tether, until it inevitably explodes, just works. The reality of modern business banking is that it works, effectively, on a whitelist basis. They don't just let a totally new business category open an account transacting millions per day just because they don't know of anything illegal. I take your point that these are, under the hood, regulatory... but that doesn't really change that much. We could reverse the questions. Why would an exchange prefer to hold tether than USD? I fully agree with you on Tether, the company. I also agree that it has gone way past exchanges. That said, it is true that working within the normal financial system is extremely difficult for anything new, with big needs for financial services.

toomuchtodo 5y ago

Can you explain why USD was not up to the task? Why could they not move real dollars between themselves or their accounts held at regulated banks?

dalbasal 5y ago
Transaction costs, speed, the willingness of banks to do that kind of business, the assurity that banks will not panic and reverse transactions or shut the account down. Tether, until it inevitably explodes, just works. The reality of modern business banking is that it works, effectively, on a whitelist basis. They don't just let a totally new business category open an account transacting millions per day just because they don't know of anything illegal. I take your point that these are, under the hood, regulatory... but that doesn't really change that much. We could reverse the questions. Why would an exchange prefer to hold tether than USD? I fully agree with you on Tether, the company. I also agree that it has gone way past exchanges. That said, it is true that working within the normal financial system is extremely difficult for anything new, with big needs for financial services.