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Ok, but they could still do some wealth management solution that's practically risk free. With the amount of deposits they don't even need to beat inflation to

by yreg 4y ago

Ok, but they could still do some wealth management solution that's practically risk free. With the amount of deposits they don't even need to beat inflation to turn significant profit.

JumpCrisscross 4y ago
> they could still do some wealth management solution that's practically risk free Mechanically, what does this mean? When someone buys Tether from you, to which bank account do you have them wire the money? By the way, your suggestion is a reasonable leap. But it still involves handling U.S. dollars, and now you've added a new regulated area (wealth management). It's easy to imagine the transgressions starting small. Say you have someone ready to wire you $100mm. You don't yet have a bank account, but you're working on it. Do you tell them to pound sand? Or do you temporarily use a side account, to hold the funds until the main one is ready?
- yreg 4y ago
  How is this issue relevant to keeping vs. losing the treasury funds?
  - JumpCrisscross 4y ago
    > How is this issue relevant to keeping vs. losing the treasury funds? It's relevant to the difficulty of launching and operating a U.S. dollar stablecoin.
    - yreg 4y ago
      Fine, operating a stable coin is not trivial. What I meant by saying 'it seems easy on paper' is that the need to be profitable shouldn't force you to make decisions which eventually lead your treasury to not being valuable enough to back the minted coins. Also: Perhaps I don't understand how tether works, but I don't see why they need to be liable for holding customer funds. Why do they need a deposit/withdrawal process at all? Can't they just do the following? IF USDT on open markets is <$1 THEN buy coins and burn them IF USDT on open markets is >$1 THEN mint coins and sell them And then they can do whatever they want with the treasury, no? Store it in banks or buy US treasury bonds, etc. Just don't lose it.
- stickfigure 4y ago
  How about something like "You buy US treasury bonds, then give those bonds to us in exchange for xyzcoin"? Likewise redemptions always paid in treasury bonds? I'm not very familiar with how treasuries get bought/sold/transferred between parties. But they seem pretty cash-equivalent, Uncle Sam will sell as much as you want, and your profit margin is baked into it.
  - JumpCrisscross 4y ago
    > Likewise redemptions always paid in treasury bonds? This is better! But a couple issues. One, this means the U.S. Treasury has an open book into your in and outflows. Not sure that's Tether's vibe. Two, you've limited yourself to people who can transfer Treasuries. Given Tether doesn't provide consumer redemption, this isn't a huge issue. But transferring Treasuries takes more financial savvy than wiring cash, and that savvy is likely to ask for their interest (as is common in collateral arrangements).

by yreg 4y ago

Ok, but they could still do some wealth management solution that's practically risk free. With the amount of deposits they don't even need to beat inflation to turn significant profit.

JumpCrisscross 4y ago

> they could still do some wealth management solution that's practically risk free Mechanically, what does this mean? When someone buys Tether from you, to which bank account do you have them wire the money? By the way, your suggestion is a reasonable leap. But it still involves handling U.S. dollars, and now you've added a new regulated area (wealth management). It's easy to imagine the transgressions starting small. Say you have someone ready to wire you $100mm. You don't yet have a bank account, but you're working on it. Do you tell them to pound sand? Or do you temporarily use a side account, to hold the funds until the main one is ready?

yreg 4y ago
How is this issue relevant to keeping vs. losing the treasury funds?
- JumpCrisscross 4y ago
  > How is this issue relevant to keeping vs. losing the treasury funds? It's relevant to the difficulty of launching and operating a U.S. dollar stablecoin.
  - yreg 4y ago
    Fine, operating a stable coin is not trivial. What I meant by saying 'it seems easy on paper' is that the need to be profitable shouldn't force you to make decisions which eventually lead your treasury to not being valuable enough to back the minted coins. Also: Perhaps I don't understand how tether works, but I don't see why they need to be liable for holding customer funds. Why do they need a deposit/withdrawal process at all? Can't they just do the following? IF USDT on open markets is <$1 THEN buy coins and burn them IF USDT on open markets is >$1 THEN mint coins and sell them And then they can do whatever they want with the treasury, no? Store it in banks or buy US treasury bonds, etc. Just don't lose it.
stickfigure 4y ago
How about something like "You buy US treasury bonds, then give those bonds to us in exchange for xyzcoin"? Likewise redemptions always paid in treasury bonds? I'm not very familiar with how treasuries get bought/sold/transferred between parties. But they seem pretty cash-equivalent, Uncle Sam will sell as much as you want, and your profit margin is baked into it.
- JumpCrisscross 4y ago
  > Likewise redemptions always paid in treasury bonds? This is better! But a couple issues. One, this means the U.S. Treasury has an open book into your in and outflows. Not sure that's Tether's vibe. Two, you've limited yourself to people who can transfer Treasuries. Given Tether doesn't provide consumer redemption, this isn't a huge issue. But transferring Treasuries takes more financial savvy than wiring cash, and that savvy is likely to ask for their interest (as is common in collateral arrangements).