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> It's well known in cryptocurrency circles that their coin is not backed 1:1 to USD, similar to FTX, only that FTX crashed and this was found out the easy way.

> It's well known in cryptocurrency circles that their coin is not backed 1:1 to USD, similar to FTX, only that FTX crashed and this was found out the easy way. Being speculated about is not the same as “known”. In fact every tether investigation seems to end up showing they are even over capitalize and hold more than 1:1! My understanding of the audit situation was that the big accounting firms have refused to do it, presumably due to pressure from someone to not get involved.

JumpCrisscross 2y ago
> every tether investigation seems to end up showing they are even over capitalize and hold more than 1:1 The one adversarial investigation I know of found the opposite [1]. > presumably due to pressure from someone to not get involved Not how audit works. [1] https://ag.ny.gov/sites/default/files/2021.02.17_-_settlement_agreement_-_execution_version.b-t_signed-c2_oag_signed.pdf https://ag.ny.gov/sites/default/files/2021.02.17_-_settlemen...
- alchemist1e9 2y ago
  The NYAG settlement you keep posting didn’t find that Tether was unbacked or below 1:1. It focused on transparency issues and the fact that funds were not always properly segregated. There were periods when reserves included assets like receivables or funds temporarily seized by authorities (e.g., Crypto Capital), but there was NO finding that USDT wasn’t fully backed. In fact, Tether has often shown it holds more than the necessary reserves, as evidenced in various attestations and reports post-settlement, and even in the report you keep posting NEVER they claim USDT isn’t fully solevent! It’s funny how the no-coiner crowd keeps pushing the idea that Tether is some crypto scam destined to collapse, yet every single investigation, including the NYAG’s, has failed to back up that narrative. The reality is Tether has proven time and again that their USDT is fully backed and their business is profitable. The desperation to prove otherwise is just not supported by the facts.
cool_dude85 2y ago
Can you link one of these investigations that show that tether is backed more than 1:1 with the USD?
- alchemist1e9 2y ago
  I will try to find it. I would also point out they hold excess reserves in Bitcoin. My guess is nobody can get them on not being 1:1 but this idea of AML violations as the attack vector makes a lot of sense.
  - JumpCrisscross 2y ago
    > they hold excess reserves in Bitcoin We had precisely the same amount of information about FTX's Bitcoins as we do for Tether, for what it's worth.
    - alchemist1e9 2y ago
      bc1qjasf9z3h7w3jspkhtgatgpyvvzgpa2wwd2lr0eh5tx44reyn2k7sfc27a4 Isn’t that the public Tether bitcoin address with over 75K coins? https://platform.arkhamintelligence.com/explorer/address/bc1qjasf9z3h7w3jspkhtgatgpyvvzgpa2wwd2lr0eh5tx44reyn2k7sfc27a4 https://platform.arkhamintelligence.com/explorer/address/bc1... That's precisely A LOT more than anyone knew about FTX's non-existent Bitcoin.
      - deleted 2y ago
        [deleted]
      - JumpCrisscross 2y ago
        That is a wallet with a lot of Bitcoins in it. We don't know to what degree it's controlled by Tether. We don't know the degree to which it's otherwise encumbered. If I recall correctly, FTX also pointed to wallets with Bitcoins in them from time to time. To be clear, I am not saying Tether is committing fraud. Just that to the extent there have been investigations, they came up short, and that them being short is not even among the main risks to their existence.
jujube3 2y ago
It would be very simple for Tether to just hold $1 for each 1 Tether coin. They could invest their cash in safe assets like treasury bills that yield 4% or more. Meanwhile, they pay no interest in Tethers. So they get a 4% return for doing nothing at all. As far as I know, there is no evidence that they are doing anything else. (There is some evidence that they did something else in the past, when interest rates were way lower.) But this hasn't stopped tons of people from speculating that they are.
- from-nibly 2y ago
  If it was that easy then we'd probably see more banks that do just that.
  - pavlov 2y ago
    That is what banks do. But it’s more complicated because the current trading value of a bond is not the same as the expected return you’d get if you hold it to maturity. Last year Silicon Valley Bank and others got into trouble for this reason. Let’s say you invested $100M into a 10-year bond when interest rates were at 2%. With interest, you’ll be getting back about $122M in ten years. Nice. But what if you’re a bank and suddenly every depositor wants to withdraw that $100M? You can’t wait ten years. You need to sell the bond. Now you face the problem that interest rates are at 4%. Somebody with $100M can invest it in a 10-year bond that will return $148M instead of your measly $122M. So nobody will pay full price for your 2% bond because they can get a better return elsewhere.
    - from-nibly 2y ago
      But banks also make loans, and do fractional reserve banking, so obviously owning bonds isn't enough.
      - jujube3 2y ago
        The Fed doesn't let banks do this because it would be "too safe" https://en.wikipedia.org/wiki/Narrow_banking https://en.wikipedia.org/wiki/Narrow_banking

JumpCrisscross 2y ago

> every tether investigation seems to end up showing they are even over capitalize and hold more than 1:1 The one adversarial investigation I know of found the opposite [1]. > presumably due to pressure from someone to not get involved Not how audit works. [1] https://ag.ny.gov/sites/default/files/2021.02.17_-_settlement_agreement_-_execution_version.b-t_signed-c2_oag_signed.pdf https://ag.ny.gov/sites/default/files/2021.02.17_-_settlemen...

alchemist1e9 2y ago
The NYAG settlement you keep posting didn’t find that Tether was unbacked or below 1:1. It focused on transparency issues and the fact that funds were not always properly segregated. There were periods when reserves included assets like receivables or funds temporarily seized by authorities (e.g., Crypto Capital), but there was NO finding that USDT wasn’t fully backed. In fact, Tether has often shown it holds more than the necessary reserves, as evidenced in various attestations and reports post-settlement, and even in the report you keep posting NEVER they claim USDT isn’t fully solevent! It’s funny how the no-coiner crowd keeps pushing the idea that Tether is some crypto scam destined to collapse, yet every single investigation, including the NYAG’s, has failed to back up that narrative. The reality is Tether has proven time and again that their USDT is fully backed and their business is profitable. The desperation to prove otherwise is just not supported by the facts.

cool_dude85 2y ago

Can you link one of these investigations that show that tether is backed more than 1:1 with the USD?

alchemist1e9 2y ago
I will try to find it. I would also point out they hold excess reserves in Bitcoin. My guess is nobody can get them on not being 1:1 but this idea of AML violations as the attack vector makes a lot of sense.
- JumpCrisscross 2y ago
  > they hold excess reserves in Bitcoin We had precisely the same amount of information about FTX's Bitcoins as we do for Tether, for what it's worth.
  - alchemist1e9 2y ago
    bc1qjasf9z3h7w3jspkhtgatgpyvvzgpa2wwd2lr0eh5tx44reyn2k7sfc27a4 Isn’t that the public Tether bitcoin address with over 75K coins? https://platform.arkhamintelligence.com/explorer/address/bc1qjasf9z3h7w3jspkhtgatgpyvvzgpa2wwd2lr0eh5tx44reyn2k7sfc27a4 https://platform.arkhamintelligence.com/explorer/address/bc1... That's precisely A LOT more than anyone knew about FTX's non-existent Bitcoin.
    - deleted 2y ago
      [deleted]
    - JumpCrisscross 2y ago
      That is a wallet with a lot of Bitcoins in it. We don't know to what degree it's controlled by Tether. We don't know the degree to which it's otherwise encumbered. If I recall correctly, FTX also pointed to wallets with Bitcoins in them from time to time. To be clear, I am not saying Tether is committing fraud. Just that to the extent there have been investigations, they came up short, and that them being short is not even among the main risks to their existence.

jujube3 2y ago

It would be very simple for Tether to just hold $1 for each 1 Tether coin. They could invest their cash in safe assets like treasury bills that yield 4% or more. Meanwhile, they pay no interest in Tethers. So they get a 4% return for doing nothing at all. As far as I know, there is no evidence that they are doing anything else. (There is some evidence that they did something else in the past, when interest rates were way lower.) But this hasn't stopped tons of people from speculating that they are.

from-nibly 2y ago
If it was that easy then we'd probably see more banks that do just that.
- pavlov 2y ago
  That is what banks do. But it’s more complicated because the current trading value of a bond is not the same as the expected return you’d get if you hold it to maturity. Last year Silicon Valley Bank and others got into trouble for this reason. Let’s say you invested $100M into a 10-year bond when interest rates were at 2%. With interest, you’ll be getting back about $122M in ten years. Nice. But what if you’re a bank and suddenly every depositor wants to withdraw that $100M? You can’t wait ten years. You need to sell the bond. Now you face the problem that interest rates are at 4%. Somebody with $100M can invest it in a 10-year bond that will return $148M instead of your measly $122M. So nobody will pay full price for your 2% bond because they can get a better return elsewhere.
  - from-nibly 2y ago
    But banks also make loans, and do fractional reserve banking, so obviously owning bonds isn't enough.
    - jujube3 2y ago
      The Fed doesn't let banks do this because it would be "too safe" https://en.wikipedia.org/wiki/Narrow_banking https://en.wikipedia.org/wiki/Narrow_banking