Posted by dcgudeman 10/25/2024
Timing its collapse is foolhardy. Concluding it must collapse isn't. It's a shadow bank run without deposit insurance nor AML.
One, because the consequences of an AML failure are immediately catastrophic: a dollar stablecoin can't reasonably survive without access to the dollar financial system. Tether's unregulated status means enforcement options are zero or ban. (Banks can be fined and put under compliance regimes.) Running a perfect AML programme indefinitely is impossible. There is no indication Tether runs much of an AML programme at all.
Two, because bank-like structures are inherently unstable. Asset values fluctuate. The banks they hold cash or assets at will fail, sometimes beyond deposit insurance limits. Unlike banks, Tether has the benefit of being able to block redemptions. But they can only do that so many times before a regulator takes notice.
In summary, Tether exists at the pleasure of American regulators and the consequences of losing favour are collapse. They're compliance-wise and financially unstable. The consequences of a single failure won't be catastrophic. But eventually they will fail for the same reason every bank without deposit insurance will, eventually, fail.
Other commenters have hinted the path is “sanctions” for not enforcing some controls..
Personally I can’t wait for governments to go after stable coins, then Bitcoin will really “moon”!
There are plenty of regulated stablecoins [1]. Hell, my state is launching one [2].
Governments usually have to subpoeana banks to get transaction records. With a stablecoin, those records are centralised.
[1] https://home.treasury.gov/system/files/136/StableCoinReport_...
[2] https://www.ledgerinsights.com/state-of-wyoming-plans-stable...
If it happens, accumulate.
Depending on the reason, I'd also say it would be worth buying Meta, NVDA, TSLA, etc. on a 20% dip, especially if they were going into a season where, historically, they makes their largest gains.
Source? I'm seeing Fitzgerald say "Cantor Fitzgerald manages 'many many' of" Tether's assets (not all) and that he can vouch for their balance sheet [1]. But not that Cantor manages all of its assets nor that it's all in Treasuries.
[1] https://www.bloomberg.com/news/articles/2024-01-16/tether-s-...
I personally would take this with a grain of salt as they have a direct financial interest in Tether looking solid and prestigious and continuing its present operations.
I am old enough to remember when investment banks touting their mortgage backed securities business before the collapse in 2008.
What I am getting is that he simply said that he holds some of tether’s assets. Why and how would that make him privy to the entirety of tether’s balance sheet?
He says that Tether can redeem any request because his company holds their money. If Tether is unbacked this is security fraud
"Do you know how many disadvantaged minorities are invested in crypto? Especially after we allowed them to invest their social security into it, with matching contributions from the state if they agree to hodl? Are you a racist monster?"
Meanwhile 90% of black people will have 90% of their savings in crypto, accounting for less than 2% of all crypto holdings.
FTX so far was barely a speedbump. All it taught politicians is that there's a lot of money in doing what crypto whales say, and absolutely no consequences even if it goes belly up in the worst way.