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> Only 3.87% of Tether was backed by dollars For comparison: Citibank had only 11.73% Tier 1 capital in their 2021 report: https://www.citigroup.com/citi/inves

> Only 3.87% of Tether was backed by dollars For comparison: Citibank had only 11.73% Tier 1 capital in their 2021 report: https://www.citigroup.com/citi/investor/quarterly/2021/ar20_en.pdf https://www.citigroup.com/citi/investor/quarterly/2021/ar20_... Couldn't find a breakout of their Tier 1, but it includes high-quality credit items as well, so actual dollars is well below 11.73%. So in other words: SiliconAngle.com is writing clickbait and doesn't understand modern banking.

bpt3 4y ago
Did Citibank claim that its value was one-to-one backed with U.S. dollar reserves until they were caught not doing so? If not, they're probably not a relevant comparison to Tether.
- onlyrealcuzzo 4y ago
  Irrelevant because for >99% of depositors (NOTE - not total deposits) FDIC insurance will pay them out in the event of a bank run. For the vast majority of users - the difference in 1:1 backing and FDIC insurance is irrelevant. This is the reason you'll almost certainly never see a global bank run. It's the reason why we probably will eventually see a Tether bank run.
  - bpt3 4y ago
    We agree, the person I was responding to doesn't seem to grasp that.
- jpmattia 4y ago
  > Did Citibank claim that its value was one-to-one backed with U.S. dollar reserves until they were caught not doing so? If not, they're probably not a relevant comparison to Tether. I'm not getting what you're saying here: They should make good on their initial message from several years ago? They should now keep all assets in dollars and not earn interest?
  - bpt3 4y ago
    > They should make good on their initial message from several years ago? Yes. > They should now keep all assets in dollars and not earn interest? Since that was how they initially generated interest in the asset, yes.
caymanjim 4y ago
Real banks practice fractional-reserve banking, where they are required to hold a percentage of assets as cash or central bank deposits. It's well-regulated and diversified. It's audited. Individual account holders' deposits are insured (FDIC in the US). This is all well-known and understood and reliable. Runs can still happen, shady accounting practices can still happen, and sometimes banks fail. Sometimes they fail catastrophically, and people can lose money, but it's about as trustworthy as things get. Tether does not claim to be a fractional-reserve bank. They claim that 100% of the assets are backed by US dollar cash deposits. It's their entire raison d'etre. Except no one is enforcing it. It's not even remotely the same thing as a fractional-reserve bank.
- jpmattia 4y ago
  > They claim that 100% of the assets are backed by US dollar cash deposits. Still? (ie link?) All I see is: “All Tether tokens are pegged at 1-to-1 with a matching fiat currency and are backed 100% by Tether's reserves.” (link here: https://tether.to/en/transparency/ https://tether.to/en/transparency/)
  - albroland 4y ago
    Yeah, they continuously try to rewrite history. The original whitepaper directly stated "Each tether issued into circulation will be backed in a one to one ratio with the equivalent amount of corresponding fiat currency held in reserves by Hong Kong based Tether Limited." For further reading, see the CFTC settlement
  - GaylordTuring 4y ago
    The fact that this comment is downvoted means that at least some people here doesn’t understand how to use the downvoting function. I think the comment highly contributed to the discussion by pointing out what Tether states today (and asking for more information if available). How is this not a constructive comment?
- Quinner 4y ago
  In the US, the required reserve ratio has been 0% since March 2020. I personally wouldn't view the traditional financial system as about as trustworthy as things get.
dfdaffg423rag 4y ago
I don't think anyone's going around using shares of Citibank stock as currency, are they? Because that's one of the many criteria that need to be true for that comparison to make any sense. Blows my mind because stablecoins could be so easy-- hold some cash and hold some US treasuries. Pocket the interest. Become rich.
- jpmattia 4y ago
  > hold some cash and hold some US treasuries. Pocket the interest. Become rich. Not getting what you're saying here: Only banks should have that privilege?
  - dfdaffg423rag 4y ago
    I'm saying, if you're making a US dollar backed stablecoin, you could do it with minimal risk and still profit handsomely by just holding US treasuries. Instead, we have stablecoins backed by all sorts of things like commercial paper in cryptocurrency exchanges.
    - namdnay 4y ago
      Who is going to put their money in a stable coin paying 0.2% interest when the guy next door is offering 20%? Answer:anyone sane, but they wouldn’t be there in the first place
  - JumpCrisscross 4y ago
    > Only banks should have that privilege? Yes, in exchange for the privilege of money creation you need tight regulations and public disclosures. Banking left unregulated turns into this mess time and time again. You'd think people would be more disciplined about betting private money creators. But they aren't. They never are. Particularly not when their neighbor is showing orders of magnitudes of paper gains. This was true in antiquity. It was true in our era of free banking. It's proven true, again, in crypto.
    - 4y ago
jcranmer 4y ago
Tether's latest report says that it held about $140 million more in assets than liabilities, out of a $78 billion liability. It also says it holds about $5 billion in cryptocurrencies. So a 3% fall in cryptocurrencies would make Tether literally insolvent--or about an averagely bad day in cryptocurrency. Let that sink in for a minute: Tether, by its own admission is barely solvent, so barely solvent a single not-especially-bad day would render them insolvent. Now consider that this barely solvent state has persisted for their entire reports--they've always cited a very-barely-solvent state of their finances. Given that Tether has already admitted to lying in the past (and essentially cooking the books to mislead the public into thinking they were solvent), and that the books always seem to come out just perfectly not-quite-insolvent despite investing in very volatile assets, is it more likely that Tether has somehow found an investment strategy that just barely keeps them solvent, or that they are in fact insolvent and using every it's-technically-not-lying trick they can to get people not to realize it? For what it's worth, as far as I understand it, Tether's Tier 1 capital isn't 3.87% but... 0.0%. Nothing Tether has produced has indicated any capital that can be raided to provide extra assets in the case that assets lose value--note that such capital isn't a part of the asset/liability ratio.

bpt3 4y ago

Did Citibank claim that its value was one-to-one backed with U.S. dollar reserves until they were caught not doing so? If not, they're probably not a relevant comparison to Tether.

onlyrealcuzzo 4y ago
Irrelevant because for >99% of depositors (NOTE - not total deposits) FDIC insurance will pay them out in the event of a bank run. For the vast majority of users - the difference in 1:1 backing and FDIC insurance is irrelevant. This is the reason you'll almost certainly never see a global bank run. It's the reason why we probably will eventually see a Tether bank run.
- bpt3 4y ago
  We agree, the person I was responding to doesn't seem to grasp that.
jpmattia 4y ago
> Did Citibank claim that its value was one-to-one backed with U.S. dollar reserves until they were caught not doing so? If not, they're probably not a relevant comparison to Tether. I'm not getting what you're saying here: They should make good on their initial message from several years ago? They should now keep all assets in dollars and not earn interest?
- bpt3 4y ago
  > They should make good on their initial message from several years ago? Yes. > They should now keep all assets in dollars and not earn interest? Since that was how they initially generated interest in the asset, yes.

caymanjim 4y ago

Real banks practice fractional-reserve banking, where they are required to hold a percentage of assets as cash or central bank deposits. It's well-regulated and diversified. It's audited. Individual account holders' deposits are insured (FDIC in the US). This is all well-known and understood and reliable. Runs can still happen, shady accounting practices can still happen, and sometimes banks fail. Sometimes they fail catastrophically, and people can lose money, but it's about as trustworthy as things get. Tether does not claim to be a fractional-reserve bank. They claim that 100% of the assets are backed by US dollar cash deposits. It's their entire raison d'etre. Except no one is enforcing it. It's not even remotely the same thing as a fractional-reserve bank.

jpmattia 4y ago
> They claim that 100% of the assets are backed by US dollar cash deposits. Still? (ie link?) All I see is: “All Tether tokens are pegged at 1-to-1 with a matching fiat currency and are backed 100% by Tether's reserves.” (link here: https://tether.to/en/transparency/ https://tether.to/en/transparency/)
- albroland 4y ago
  Yeah, they continuously try to rewrite history. The original whitepaper directly stated "Each tether issued into circulation will be backed in a one to one ratio with the equivalent amount of corresponding fiat currency held in reserves by Hong Kong based Tether Limited." For further reading, see the CFTC settlement
- GaylordTuring 4y ago
  The fact that this comment is downvoted means that at least some people here doesn’t understand how to use the downvoting function. I think the comment highly contributed to the discussion by pointing out what Tether states today (and asking for more information if available). How is this not a constructive comment?
Quinner 4y ago
In the US, the required reserve ratio has been 0% since March 2020. I personally wouldn't view the traditional financial system as about as trustworthy as things get.

dfdaffg423rag 4y ago

I don't think anyone's going around using shares of Citibank stock as currency, are they? Because that's one of the many criteria that need to be true for that comparison to make any sense. Blows my mind because stablecoins could be so easy-- hold some cash and hold some US treasuries. Pocket the interest. Become rich.

jpmattia 4y ago
> hold some cash and hold some US treasuries. Pocket the interest. Become rich. Not getting what you're saying here: Only banks should have that privilege?
- dfdaffg423rag 4y ago
  I'm saying, if you're making a US dollar backed stablecoin, you could do it with minimal risk and still profit handsomely by just holding US treasuries. Instead, we have stablecoins backed by all sorts of things like commercial paper in cryptocurrency exchanges.
  - namdnay 4y ago
    Who is going to put their money in a stable coin paying 0.2% interest when the guy next door is offering 20%? Answer:anyone sane, but they wouldn’t be there in the first place
- JumpCrisscross 4y ago
  > Only banks should have that privilege? Yes, in exchange for the privilege of money creation you need tight regulations and public disclosures. Banking left unregulated turns into this mess time and time again. You'd think people would be more disciplined about betting private money creators. But they aren't. They never are. Particularly not when their neighbor is showing orders of magnitudes of paper gains. This was true in antiquity. It was true in our era of free banking. It's proven true, again, in crypto.
  - 4y ago

jcranmer 4y ago

Tether's latest report says that it held about $140 million more in assets than liabilities, out of a $78 billion liability. It also says it holds about $5 billion in cryptocurrencies. So a 3% fall in cryptocurrencies would make Tether literally insolvent--or about an averagely bad day in cryptocurrency. Let that sink in for a minute: Tether, by its own admission is barely solvent, so barely solvent a single not-especially-bad day would render them insolvent. Now consider that this barely solvent state has persisted for their entire reports--they've always cited a very-barely-solvent state of their finances. Given that Tether has already admitted to lying in the past (and essentially cooking the books to mislead the public into thinking they were solvent), and that the books always seem to come out just perfectly not-quite-insolvent despite investing in very volatile assets, is it more likely that Tether has somehow found an investment strategy that just barely keeps them solvent, or that they are in fact insolvent and using every it's-technically-not-lying trick they can to get people not to realize it? For what it's worth, as far as I understand it, Tether's Tier 1 capital isn't 3.87% but... 0.0%. Nothing Tether has produced has indicated any capital that can be raided to provide extra assets in the case that assets lose value--note that such capital isn't a part of the asset/liability ratio.