You're not entirely wrong, but we need to compare apples to apples: Capital = excess of assets over liabilities => capacity to satisfy creditors medium term (s

You're not entirely wrong, but we need to compare apples to apples: Capital = excess of assets over liabilities => capacity to satisfy creditors medium term (solvency) That's at least 7% to 13% of the balance sheet for banks, and currently 0.26% for Tether. Reserves = cash (and equivalents) in the vault => capacity to pay out immediately (liquidity) Minimum reserves required used to be 3% to 10% of deposits, if I read this correctly, but are now 0% indeed, as you point out. Actual bank reserves, however, are much larger than what is required, even when the requirement was > 0 [see 1]. Tether holds about 5% in cash or Treasury bills. So it seems that banks fare much better on both ratios than Tether. [1] https://www.federalreserve.gov/releases/h3/Current/ https://www.federalreserve.gov/releases/h3/Current/