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> there was never more than $61.5 million backing Tether, even as more 442 million coins were circulating at one point. Ah, pulling the classic "fractional res
by danuker 5y ago
> there was never more than $61.5 million backing Tether, even as more 442 million coins were circulating at one point.
Ah, pulling the classic "fractional reserve" I see.
- pfisherman 5y ago<insert crypto rant> fiat <more crypto rant > debasing the currency. What I find ironic is that the crypto ecosystem still ended up with something like central banks, only in this case their mandate is make money for its owners, and they have no accountability or obligation to serve the general public.
- DennisP 5y agoPlay centralized games, win centralized prizes.
- rgrieselhuber 5y agoExactly.
- OneLeggedCat 5y ago> crypto ecosystem still ended up It's decades from its final form.
- tmcw 5y agoGive it a few decades, it'll still be early, somehow.
- rzwitserloot 5y agoPerhaps. But we're, what? 10 years in and so far crypto has enabled 'I encrypted your data!' scams, caused political instability, been a vehicle for highly volatile investment (but the world wasn't hurting for such opportunities...), and served as a fine buzzword for dev teams around the world to get a sack of cash to update some systems. That's a pretty poor result for 10 years of this much investment and focus. The internet was waaaaaaaaaaaaay more useful 10 years in. I don't think crypto gets to claim the benefits of the oft touted protection against centralized bullies or scams. Quite the opposite: You need to go pretty deep into political dictatorships before crypto on net balance seems favourable. So far crypto coins are far more likely to be fleeced, and the vast majority of crypto holding folks are working with mostly centralized entities (such as Tether), which rate, as far as trustability and good shepherdship goes, not in a good place. Better than Pol Pot and Mugabe. Maybe. Oof. So if it's decades from its final form, when is it going to deliver on its first actually useful to humanity milestone? I'm still waiting.
- bonestamp2 5y ago> so far crypto has enabled 'I encrypted your data!' scams These scams existed long before crypto. But, crypto currencies are a better solution to international money transfers so of course they became the preferred currencies for these scams.
- varjag 5y agoIt took crypto to make them Web scale.
- lottin 5y agoIf cryptocurrencies were a better solution, they would have been widely adopted. Instead, they have been adopted by people who can't use real money for one reason or another, e.g. criminals. Which tells us they are a poor substitute for real money.
- exdsq 5y agoOr those without decent banking access
- lottin 5y agoI don't know that one can use crypto without a bank account. Is there a black market where you can buy/sell crypto with/for cash?
- exdsq 5y agoIn several African countries people use their phone credit as a currency to barter and there are trials to use crypto instead with on/off cash ramps in the same way as the phone credit works but with the additional benefit of things like financial records to start building credit scores
- lottin 5y ago
- dylan604 5y ago> their mandate is make money for its owners, Isn't this pretty much the description of every company? I understand feduciary responsibilities blah blah, but if the company didn't think they could do both then they wouldn't be running the legitimate buisness. If it was started to intentionally dupe people that's an entirely different thing.
- lazaroclapp 5y ago> Isn't this pretty much the description of every company? For the most part, sure. But that's the parent's point, I think. Central banks are not companies, they are part of the public financial infrastructure of a nation (or, in the EU case, group of nations).
- jameshart 5y ago> Central banks are not companies Actually... it's complicated. The Bank of England, for example, was nationalized only in 1946, and it remains technically a company which is owned by the state, not actually part of the government. In the US, the Fed is... well, it's not a company, but it's also not not a company... or group of companies... See https://en.wikipedia.org/wiki/Federal_Reserve_Bank https://en.wikipedia.org/wiki/Federal_Reserve_Bank
- tialaramex 5y agoYeah, the Bank of England even used to offer account services to employees after it was nationalized. Which would be scandalous if we found it in some dubious ex-Soviet republic today, albeit there maybe they're lending the Bank's President $10M with no real security and the Bank of England was offering employees mortgages and similar modest run-of-the-mill secured loans. The UK owns a whole bunch of banks and entities that would need a banking license if they weren't owned by the government, of which only the Bank of England acts as a central bank, but there are also a bunch of commercial banks in (or at least operating in) the UK that are named after parts of the UK even though they're not owned by the government, including the Bank of Scotland.
- ChainOfFools 5y agodecentralization is at best nothing more than a polite name for the transition period from one centralized regime to another. like all mirages, it dissolves when you get too close.
- dragonwriter 5y ago> What I find ironic is that the crypto ecosystem still ended up with something like central banks, only in this case their mandate is make money for its owners, and they have no accountability or obligation to serve the general public So, like private currency-printing banks before government monopolies (and like private banks, which subject to central regulation still create money though they don't print currency), not like central banks.
- jayd16 5y agoBut the point of the article is that they essentially did print currency, no?
- dragonwriter 5y agoThe point of the article is rather that they violated the rules on creation of “money” [0] by means other than issuing legal-tender currency, and are being punished for that violation. [0] viewed broadly, but I won't quibble about that.
- majormajor 5y ago> So, like private currency-printing banks before government monopolies (and like private banks, which subject to central regulation still create money though they don't print currency), not like central banks. Yes, nothing prevents a crypto bank from "creating money" (aka lending) in the same way that a fiat bank does. Loan out your deposits. It's that easy. Not having it blow up on you in a run-on-the-bank scenario is the harder part than "creating the money". ;)
- bko 5y agoThe difference is I can choose not to hold Tether. Removing my exposure to dollars as a US citizen is a lot harder. Not to mention people that are on a fixed income like my parents. So debasing fiat is a lot worse
- itsoktocry 5y ago>The difference is I can choose not to hold Tether. Removing my exposure to dollars as a US citizen is a lot harder. Did you miss the part about them lying? "I have a right to choose to buy something" for whom the value is deceptively obfuscated is quite the argument.
- roenxi 5y agoIf the US Fed lies, do they get fined? Pretty sure the answer is no, because they have so much power they don't need to lie. They do what they like then change the rules so they can do the same thing legally. The argument here isn't that what Tether is going is good (it isn't). It is that if the government did it, it would come with "and all you plebs have to join in because bankers making money is good for us all".
- spywaregorilla 5y agoThat is part of being part of the society, yes.
- anm89 5y agoSo is having the right to hold other currencies and assets. Tell that to an Argentinian who has had their life ruined because of the lack of foresight from the the people who run their society.
- floatingatoll 5y agoIncorrect, no such right is necessarily guaranteed by societies. For example, during much of the 1900s you were required to sell gold to the US government for USD rather than keep it under your mattress, and if you refused they had the right to seize it with force. For another example, negative savings interest rates in certain European countries.
- matheusmoreira 5y agoYeah, it sucks. The problem is USD though. It taints everything it touches but people are still forced to use it. People use cryptocurrencies as an investment and convert to fiat in order to transact. They refuse to transact directly in cryptocurrencies. They would work if some country was crazy enough to sell barrels of oil for cryptocurrency, indirectly setting the price of everything else. That will probably get them invaded and destroyed by the US military for threatening the hegemony of the petrodollar.
- lmkg 5y agoOn the initial headline I thought that $41 million would be negligible compared to the central role they have in the crypto ecosystem. But apparently that fine is 2/3 of their backing reserves.
- boole1854 5y agoCorrection: it is 2/3rds of what their reserves were back in 2017. The amount of Tether in circulation has increased over 150-fold since then, so presumably their reserves have increased as well.
- delecti 5y ago> The amount of Tether in circulation has increased over 150-fold since then, so presumably their reserves have increased as well. They just got punished for not having actual reserves match their circulation. What basis is there to presume that their reserve is matching their circulation now?
- 35fbe7d3d5b9 5y agohttps://tether.to/wp-content/uploads/2021/08/tether_assuranceconsolidated_reserves_report_2021-06-30.pdf https://tether.to/wp-content/uploads/2021/08/tether_assuranc... This all boils down to two questions in my mind: 1) Do you trust the unsigned report from the auditor, who appears to be a fairly unknown entity? 2) Do you trust the asserted quality of the commercial paper, which makes up 50% of the putative reserves?
- FireBeyond 5y agoThis is not an audit. That's why it says "Accountant's Report". Because a real accountancy firm/auditor would risk their ability to practice by calling it something it's not. The last time Tether claimed to have something that was an "actual" audit, they claimed they couldn't release it to the public because ... "... it is in Mandarin". Here's the big problem with this attestation: > Our opinion is limited solely to the CRR and the corresponding consolidated total assets and consolidated total liabilities as of 30 June 2021, at 11:59 PM UTC. Activity prior to and after this time and date was not considered when testing the balances and information described above. They're very, and repeatedly clear that this is a snapshot. There is nothing stopping Tether taking a 72 hour loan before this attestation and then closing that loan after it. They claim $6B in cash holdings, in an undisclosed bank, presumably Deltec, whose "deputy CEO" demonstrated in an interview (among other problems) that he did not know the names of the two banking licenses available to banks in that country, and he wasn't sure which one they had. You can't get a mortgage with a simple attestation of funds - why should it be okay for these guys?
- SandB0x 5y agoThis is simply insolvency, not fractional reserve.
- AlexandrB 5y agoAnd yet, they're still operating. This is the kind of thing that makes me think the whole cryptocurrency ecosystem is a house of cards. Cryptocurrency advocates seem to be really bad at spotting and punishing incompetent and malicious actors in their markets.
- usrusr 5y agoWhile they are not completely divested, self-interest mandates that they still hype what they try to get out of. And after that, they simply don't care and pride discourages them from being vocal about their apparent change of heart. Some might be good at spotting, but they will be excellent at staying quiet about their conclusions.
- wbsss4412 5y agoIt’s really an amazing case study in what happens when* you take libertarian ideology to its conclusion. Edit: typo*
- CryptoPunk 5y agoLibertarian ideology has resulted in Tether being replaced by USDC in Ethereum DeFi. Your claim is based on the bizarre premise that people are only intelligent when formulating mandates for otherd, while they can only exercis if formulating a course of action for themselves
- wbsss4412 5y ago> Your claim is based on the bizarre premise that people are only intelligent when formulating mandates for otherd, while they can only exercis if formulating a course of action for themselves I’m not sure where my statement implied what you are assuming here. I think you may have your dogmatic blinders on. Both tether, and crypto unrelated to tether are implicated in what I stated. That doesn’t make tether any less a result of libertarian ideology drawn to its conclusion.
- FireBeyond 5y agoHah. At one point Tether was claiming, during the days where they were holding on to the "1:1 backing!" that they were banking $2 billion A WEEK. And yet the cryptofans were telling us we were curmudgeons for not buying into the hype (or in this case, the bullshit).
- bonestamp2 5y agoSome of us who like crypto also knew it was bullshit.
- zomglings 5y agoThere has always been a healthy amount of skepticism about Tether in the crypto community. Your cryptofans narrative does not accurately reflect reality.
- SkyPuncher 5y agoYea, I'm on the edge of crypto and I knew that Tether has always been viewed is questionnable.
- chrononaut 5y agoIsn't the trouble that Tether substantially influences the solvency of all other stabletokens and the value of cryptocurrencies themselves (in relation to X fiat)? For example (admittedly this is probably way off-base here), let's say there were only two stablecoins (USDT and USDC), and only one of which had true 1:1 buyback (USDC) where >=1 entity would exchange one USDC for 1 USD (I know the reality of USDC is muddle too). Let's also say the amount of USDT in circulation was $10b and the amount of USDC in circulation was $1b. If there's a well-established "distrust" of USDT, where people only "temporarily" keep it on hand or use it as an intermediary, they're still using it to acquire other cryptocurrency, and thus inflating prices, right? If everyone attempts to exit onto the USDC, the available supply will dry quickly, causing the <X Crypto>/USDC price to plummet (?). Thus even if you thought Tether was intolerable I feel like it's an implossible belief to simultaneously think (1) that Tether is a scam, and (2) cryptocurrency can be seen a store of value. (I know there are others who recognize and highlight other utilities of cryptocurrencies). (I am super interested in the flaws in this logic because as an aside, if there's any general reading material regarding these kind of economic thought experiments, doesn't have to even be crypto-related, I will certainly take any recommendations! I find them really fascinating. Someone mentioned a Darknet Diaries episode on counterfeit currency; Probably the first thing I have to look into.)
- trident5000 5y agoDepends what that means. Dollar reserve could be low because investment reserve is high. Would need to see the numbers.
- sneak 5y agoI'm sure that the 68.5 billion-with-a-b tethers they have out there now must be backed, though, right? Surely they learned their lesson when they only had 442 million tethers issued and only 61.5 million dollars in the bank.
- deleted 5y ago[deleted]
- ceph_ 5y ago> 442 million Current market cap is up to 70 billion! 90% of which has been printed in the last 2 years, and wasn't even covered by the report. Looks like they're going on a last ditch printing spree
- deleted 5y ago[deleted]