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Yes that's one way to make money. They also make currently 4.75% on $67B of issued Tether = $3B+ per year just by buying US Treasuries. Even if they were under

Yes that's one way to make money. They also make currently 4.75% on $67B of issued Tether = $3B+ per year just by buying US Treasuries. Even if they were undercapitalized in the past my guess is they are fine now

michpoch 4y ago
That's not exactly how it works. You can't make 4.75% of $67B if you never had $67B in real dollars. They could have as well never received any USD / fiat.
- drexlspivey 4y ago
  > They could have as well never received any USD / fiat What do you mean by that? What do they do with the tether they issue then?
  - riffraff 4y ago
    They mean there is no proof they issued tether for real money, and instead they could have issued it for collateral in crypto or IOU by other crypto entities. Which would explain why nobody in the financial industry knows them even if they supposedly manage 60B$.
    - drexlspivey 4y ago
      Why would you exchange tether for crypto or IOUs that are super risky and have no cash flow instead of risk free dollars that you get to keep the interest? First one sounds like suicide while the second is a very lucrative business.
      - JumpCrisscross 4y ago
        > Why would you exchange tether for crypto or IOUs They’re your own IOUs [1]. Imagine if SBF had Tether. [1] https://ag.ny.gov/press-release/2021/attorney-general-james-ends-virtual-currency-trading-platform-bitfinexs-illegal https://ag.ny.gov/press-release/2021/attorney-general-james-...
      - oneoff786 4y ago
        Because there’s someone dumber willing to give you money for it
      - lazide 4y ago
        Because no banks will work with them and the US gov’t is constantly trying to track them down - and has a stranglehold on USD banking in the world. Read the NYAG report, it’s pretty crazy.
        evdubs 4y ago
        They work with Deltec Bank. https://tether.to/en/tether-banking-relationship-announced/ https://tether.to/en/tether-banking-relationship-announced/ From https://www.deltecbank.com/2022/09/01/the-history-of-stablecoins/ https://www.deltecbank.com/2022/09/01/the-history-of-stablec... > Tether > Launched in 2014, Tether (USDT) came to extraordinary success with a current market capitalization exceeding 67 billion USD. > This stablecoin fixes the issues inherent in the previous three. It relies not upon volatile reserves or the idea of persistent arbitrage trading, but on hard reserves of fiat currency. For every Tether coin in existence, there is one US dollar in a vault backing its existence. > In this way, the stablecoin handles a complete theoretical rout with ease. Tether continues to serve the burgeoning digital asset space while garnering the implicit affection of regulators.
        lazide 4y ago
        Glad they finally found someone - well maybe. Interesting relationships with FTX - apparently SBF gave them a $50 million loan to keep operating, and they’re neck deep in that mess. https://www.forbes.com/sites/davidjeans/2023/01/15/ftx-deltec-bank-jean-chalopin-moonstone/?sh=7a576b6011e4 https://www.forbes.com/sites/davidjeans/2023/01/15/ftx-delte... Might want to give them a year or two before figuring that isn’t another smokescreen.
        evdubs 4y ago
        That's not as concerning as a bank that lent money to FTX, though, right? If you take a loan from someone that goes bankrupt, you pay them back through whatever process is established by the bankruptcy court. If you loan money to someone that goes bankrupt, you're most likely sitting on a loss. Deltec's response is that they're awaiting instructions on how to repay the loan: https://www.deltecbank.com/2023/01/16/deltec-bank-trust-limited-statement-on-recent-events/ https://www.deltecbank.com/2023/01/16/deltec-bank-trust-limi...
      - tsimionescu 4y ago
        Because it costs them nothing to "create" 1M USDT and exchange it for nothing. So, they create 1M USDT out of thin air, and "sell" it to some crypto exchange that wants to claim it can redeem 1M$, in exchange for some other crypto or IOUs or whatever. The exchange is happy because it can now sell 1M more USDT. Tether is happy because they got something that is nominally worth 1M$ at no cost to them. Of course, someone somewhere in the future will be left holding the bag. But if they can keep it going, and if they do manage to sell some USDT for real money (which they certainly did), then they can still make a load of profit.
loeg 4y ago
My impression (which may be mistaken) was that they were locked out of buying US Treasuries directly due to things like not complying with AML/KYC.
chollida1 4y ago
They almost certainly don’t own treasuries in any meaningful amount. While the treasury market is large the players are small and no one claims to work with tether. You can’t roll billions in treasuries without all the major players knowing who you are. And if they did they would release their cusips and put this to bed as there is only downside for them by withholding the cusips
- evdubs 4y ago
  > They almost certainly don’t own treasuries in any meaningful amount. Attestation reports from BDO Italia state that they hold US Treasuries and that this makes up the core of their holdings. https://tether.to/en/transparency/#reports https://tether.to/en/transparency/#reports > While the treasury market is large the players are small and no one claims to work with tether. Even firms like Cumberland who are known to participate in the Tether creation/redemption process do not talk about working with Tether https://protos.com/tether-minted-usdt-stablecoin-crypto-two-alameda-cumberland/ https://protos.com/tether-minted-usdt-stablecoin-crypto-two-... For the US Treasury market, the players are not small. Maybe that was believable for the commercial paper dealings for Tether, but you can just directly buy from the US Treasury at auction, or go through a banking partner like Deltec Bank, and none of "the players" will know anything about you. > You can’t roll billions in treasuries without all the major players knowing who you are. Of course you can. Direct and indirect bidders for US Treasury bills are routinely in the dozens of billions. No need to go through a primary dealer. > And if they did they would release their cusips and put this to bed as there is only downside for them by withholding the cusips Would you honestly be convinced if their attestation reports included CUSIPs? Do you think that people would still clamor for an audit and just move the goalposts to "anyone can look up CUSIPs for US Treasuries. Why aren't the primary dealers confirming their purchases?"
  - chollida1 4y ago
    > Would you honestly be convinced if their attestation reports included CUSIPs? Yes because that would be verifiable and we could know the counterparty holding them and ask for verification. If they verified they are holding those cusips for Tether then we're good. And I don't' think you understand the treasury market as well as you think you do. Its a very transparent market. Everyone knows all the players, especially at the 10's of billions size. If they honestly were buying treasuries through Deltec then we would know, I assure they they are not as Deltec doesn't really participate in this market

michpoch 4y ago

That's not exactly how it works. You can't make 4.75% of $67B if you never had $67B in real dollars. They could have as well never received any USD / fiat.

drexlspivey 4y ago
> They could have as well never received any USD / fiat What do you mean by that? What do they do with the tether they issue then?
- riffraff 4y ago
  They mean there is no proof they issued tether for real money, and instead they could have issued it for collateral in crypto or IOU by other crypto entities. Which would explain why nobody in the financial industry knows them even if they supposedly manage 60B$.
  - drexlspivey 4y ago
    Why would you exchange tether for crypto or IOUs that are super risky and have no cash flow instead of risk free dollars that you get to keep the interest? First one sounds like suicide while the second is a very lucrative business.
    - JumpCrisscross 4y ago
      > Why would you exchange tether for crypto or IOUs They’re your own IOUs [1]. Imagine if SBF had Tether. [1] https://ag.ny.gov/press-release/2021/attorney-general-james-ends-virtual-currency-trading-platform-bitfinexs-illegal https://ag.ny.gov/press-release/2021/attorney-general-james-...
    - oneoff786 4y ago
      Because there’s someone dumber willing to give you money for it
    - lazide 4y ago
      Because no banks will work with them and the US gov’t is constantly trying to track them down - and has a stranglehold on USD banking in the world. Read the NYAG report, it’s pretty crazy.
      - evdubs 4y ago
        They work with Deltec Bank. https://tether.to/en/tether-banking-relationship-announced/ https://tether.to/en/tether-banking-relationship-announced/ From https://www.deltecbank.com/2022/09/01/the-history-of-stablecoins/ https://www.deltecbank.com/2022/09/01/the-history-of-stablec... > Tether > Launched in 2014, Tether (USDT) came to extraordinary success with a current market capitalization exceeding 67 billion USD. > This stablecoin fixes the issues inherent in the previous three. It relies not upon volatile reserves or the idea of persistent arbitrage trading, but on hard reserves of fiat currency. For every Tether coin in existence, there is one US dollar in a vault backing its existence. > In this way, the stablecoin handles a complete theoretical rout with ease. Tether continues to serve the burgeoning digital asset space while garnering the implicit affection of regulators.
        lazide 4y ago
        Glad they finally found someone - well maybe. Interesting relationships with FTX - apparently SBF gave them a $50 million loan to keep operating, and they’re neck deep in that mess. https://www.forbes.com/sites/davidjeans/2023/01/15/ftx-deltec-bank-jean-chalopin-moonstone/?sh=7a576b6011e4 https://www.forbes.com/sites/davidjeans/2023/01/15/ftx-delte... Might want to give them a year or two before figuring that isn’t another smokescreen.
        evdubs 4y ago
        That's not as concerning as a bank that lent money to FTX, though, right? If you take a loan from someone that goes bankrupt, you pay them back through whatever process is established by the bankruptcy court. If you loan money to someone that goes bankrupt, you're most likely sitting on a loss. Deltec's response is that they're awaiting instructions on how to repay the loan: https://www.deltecbank.com/2023/01/16/deltec-bank-trust-limited-statement-on-recent-events/ https://www.deltecbank.com/2023/01/16/deltec-bank-trust-limi...
    - tsimionescu 4y ago
      Because it costs them nothing to "create" 1M USDT and exchange it for nothing. So, they create 1M USDT out of thin air, and "sell" it to some crypto exchange that wants to claim it can redeem 1M$, in exchange for some other crypto or IOUs or whatever. The exchange is happy because it can now sell 1M more USDT. Tether is happy because they got something that is nominally worth 1M$ at no cost to them. Of course, someone somewhere in the future will be left holding the bag. But if they can keep it going, and if they do manage to sell some USDT for real money (which they certainly did), then they can still make a load of profit.

loeg 4y ago

My impression (which may be mistaken) was that they were locked out of buying US Treasuries directly due to things like not complying with AML/KYC.

chollida1 4y ago

They almost certainly don’t own treasuries in any meaningful amount. While the treasury market is large the players are small and no one claims to work with tether. You can’t roll billions in treasuries without all the major players knowing who you are. And if they did they would release their cusips and put this to bed as there is only downside for them by withholding the cusips

evdubs 4y ago
> They almost certainly don’t own treasuries in any meaningful amount. Attestation reports from BDO Italia state that they hold US Treasuries and that this makes up the core of their holdings. https://tether.to/en/transparency/#reports https://tether.to/en/transparency/#reports > While the treasury market is large the players are small and no one claims to work with tether. Even firms like Cumberland who are known to participate in the Tether creation/redemption process do not talk about working with Tether https://protos.com/tether-minted-usdt-stablecoin-crypto-two-alameda-cumberland/ https://protos.com/tether-minted-usdt-stablecoin-crypto-two-... For the US Treasury market, the players are not small. Maybe that was believable for the commercial paper dealings for Tether, but you can just directly buy from the US Treasury at auction, or go through a banking partner like Deltec Bank, and none of "the players" will know anything about you. > You can’t roll billions in treasuries without all the major players knowing who you are. Of course you can. Direct and indirect bidders for US Treasury bills are routinely in the dozens of billions. No need to go through a primary dealer. > And if they did they would release their cusips and put this to bed as there is only downside for them by withholding the cusips Would you honestly be convinced if their attestation reports included CUSIPs? Do you think that people would still clamor for an audit and just move the goalposts to "anyone can look up CUSIPs for US Treasuries. Why aren't the primary dealers confirming their purchases?"
- chollida1 4y ago
  > Would you honestly be convinced if their attestation reports included CUSIPs? Yes because that would be verifiable and we could know the counterparty holding them and ask for verification. If they verified they are holding those cusips for Tether then we're good. And I don't' think you understand the treasury market as well as you think you do. Its a very transparent market. Everyone knows all the players, especially at the 10's of billions size. If they honestly were buying treasuries through Deltec then we would know, I assure they they are not as Deltec doesn't really participate in this market