The CFTC doesn't have that authority; a company can only get shut down for a criminal offense and Tether is not accused of any crime. Only the Department of Justice can prosecute or investigate crimes, the CFTC is an independent agency and as such has no authority to do so.
All the CFTC can do is levy a fine, so both parties are fairly indifferent as to whether that money comes from a judgement or from a settlement. There could be some minor benefit of not having to admit any "wrongdoing" for press release purposes, but overall it makes no difference.
Per the CFTC's Enforcement website, they can bring civil enforcement actions in court--without the other party present aka ex-parte--seeking to freeze and enjoin the operations of a person or entity they can convince a judge is violating the Commodity Exchange Act.
From [0]: "At the conclusion of an investigation, the Division may recommend that the Commission initiate administrative proceedings or seek injunctive and ancillary relief on behalf of the Commission in United States District Courts around the country. Administrative sanctions may include orders imposing civil monetary penalties, suspending, denying, revoking or restricting registration and exchange trading privileges, and orders of restitution. The Commission also may obtain temporary restraining orders and preliminary and permanent injunctions in Federal court to halt ongoing violations. Other relief may include appointment of a receiver, a freeze of assets, restitution, and disgorgement of unlawfully acquired benefits. The CEA also provides that the Commission may obtain certain temporary relief on an ex parte basis (that is, without notice to the other party). When those enjoined violate court orders, the Division may seek to have the offenders held in contempt.
When the Division obtains evidence that criminal violations of the CEA have occurred, it may refer the matter to the Department of Justice for prosecution.
CFTC does not prosecute crimes. CFTC could make a referral to DoJ, but where a regulatory agency can both engage in civil enforcement actions and make criminal referrals, even when it does both in the same case, the civil action will usually be filed and often resolved before any visible action (indictment, etc.) on the criminal referral.
So, the resolution of the civil case doesn’t mean anything with regard to any potential criminal charges.
I'm more surprised that anyone still holds Tether, unless they're stuck with it. The company has been caught in lies several times before, it's not as if a $41M fine will turn them honest.
The lending rates are higher because lenders are paid a premium for owning a potentially worthless (USDT denominated) credit. The idiom that comes to mind is "picking up pennies in front of a steamroller".
It flips back and forth with USDC, which one is higher, at least on compound.finance. Right now USDC is higher, but it's been different. Here are the historical charts (click the "borrow" tab, doesn't seem to be a way to link it with that one selected):
The rates are mostly affected by sudden changes in demand.
The demand for Tether comes mostly from Binance and the other centralized Asian exchanges.
The demand for Circle dollars comes from the DeFi ecosystem and FTX.
Basic question: why doesn't this affect the currency pair exchange rate? If lending rates reflect the (realistic!) idea that holding 1 USDT is less valuable than holding 1 USD, how does 1 USDT trade at par?
If the price is under $1, the backer can purchase the coins with reserves and pocket the difference. The price will only depart from the peg if selling forces the market price down and the backer doesn't have enough reserves to purchase tokens sold beneath the peg. This scenario is similar to a bank run and would require high selling volume to set if off.
The lending rates are determined by a separate mechanism and reflect the probability of a future departure from the peg.
The rumor is the backer is using the reserves to trade crypto. You won't ever see an attack on Teather during a crypto bull run as the reserves will be strong.
In the depths of a crash, the potential is definitely there. Last time Bitfinex bailed out Teather when its reserves came up short. So to really see Teather fail, we probably need a crypto crash and a weakened Bitfinex.
This is why people still use Teather. Even though it is risky, the current market dynamics make a failure unlikely.
IMHO failure due to embezzlement (Teather reserves stolen by an inside man) is a real possibility. The management team has already proven to be very shady...
Once the peg is broken it will collapse quickly. That means it's in their interest to keep the peg. If they have enough reserves (hard to imagine they have even 5% in cash but maybe they managed to buy enough BTC with their tokens to keep afloat for a while) they can keep the facade going for a very long time (until some kind of bank run is triggered).
The last few years of BTC, ETH, and DeFi all collapse quickly if the USDT peg fails.
How much crypto is borrowed on platforms like Compound against USDT? That collateral takes a 5% haircut, we’ll see painful liquidations. 10% or 20%? Fire sale everywhere.
> How much crypto is borrowed on platforms like Compound against USDT?
Close to zero. Compound, Aave, Maker - none of them allow folks to use USDT as collateral to borrow against. You can lend it for yield, and borrow it from others, but you can't use it as collateral.
There are some riskier protocol that allow it (rari, cream) but those are much smaller.
>I'm more surprised that anyone still holds Tether,
The price BTC shooting up right now (it is around $61k as I write this) is probably because lots of USDT holders are starting to realize what a bad idea that is.
If you were in their shoes ... what would you be doing right now?
For the past 3-4 years, this has happened time and time again whenever tether is in the news in bad light. It's beginning to sound like a broken record at this point "this event is finally going to do tether in!" Nothing will happen like it did before, cryptocurrency doesn't operate the same way international law expects it to abide by. It's all rigged.
I haven't looked into it, but it looks like they lied about being backed by cash (or at least, somehow implied it).
Now they claim to be backed by cash and cash equivalents, namely a lot of "commercial paper" (short term debt obligations), which is widely believed to be in Chinese markets.
For some reason though, they won't reveal exactly what it is they hold. It could be that they think the market will not react kindly to the kind of assets they hold, or that they entered some kind of weird agreement no to reveal them.
I highly doubt they're not backed by assets whose face value adds up to the total UST distribution, because multiple auditors have said they were fully backed. But it is possibly that some of these assets are junk that won't (or have a high risk not to) redeem at face value.
Even in very bad scenarios, UST could fall to 0.8$ if 20% of Tether's asset default (and they burned through profits). Problematic but not quite such as a risk as it going to zero, which is why people still hold it.
Tether got few attestations from an unknown company a few times, but they have also been caught red handed by NYAG for moving funds a day before attestation snapshot is taken, and moved it the day after.
For the uninitiated, attestation verifies a single point in time, so it's easy to game it. And this is something tether has done.
The problem is worse than that. They also use their BTC holdings as part of their assets they hold, which allows them to pump the BTC/USDT rate (print USDT, use it to buy BTC, see prices of BTC going up because of artificial demand, say "BTC is up, our holdings have increased in value and we can print more", rinse and repeat.
Once they do circular dependency with BTC and tether, they might even go one step further and back 1000 tethers with 1000 tethers they hold themselves.
No. "Pump[ing]" by buying something is entirely legal. And the price should come down just as much when you are trying to cash in, so the mechanism doesn't really work, or anyone with enough money could just do it repeatedly using whatever traded asset they want.
"Pump and dump" refers to promoting some investment by other means, usually spreading some false news.
> "Pump[ing]" by buying something is entirely legal.
I beg to differ. The Securities and Exchanges Act of 1934 criminalizes all sorts of things that are deemed market manipulation, and inflating the price of a security by false trading, i.e. selling it to yourself or a conspirator, is one of the very things it was created to prohibit.
makes me wonder if they loaned Tethers to their buddies (or themselves) so they can buy cryptos then "backed" the Tethers with the loans. wouldn't surprise me given the kind of unscrupulous scumbags that are often found operating crypto related ventures.
Really any large reserve of stagnant cash is a flat out attractive nuisance for fraud and theft - while also failing to invest it properly. Of course their whole shtick is warmed over gold-bug fallacies.
You hold it if you want to use the money to trade crypto, because banks really don't like you moving around large amounts of money.
So you hold USDT in a wallet instead of transferring it back to the bank. It's also a lot faster to transfer money using stablecoins then it is with banks.
If your regular bank account is in USD that thinking is reasonable. But if your bank account is in another currency you might hold tether to protect yourself against hyperinflation or other things you can't control in your home currency.
> why this is something they can settle rather than something that gets them completely shut down
I'm a Tether sceptic. I wouldn't want to be the regulator (note: not prosecutor, different standards) to shut it down.
There was a moment when I suspected Tether may hold U.S. dollar money market securities. That would mean a collapse could spill to our financial markets. But that doesn't seem to be the case. The only people who would get hurt in its wake seems to be those who choose to keep using Tether despite the screaming warnings.
Those same people would make you public enemy No. 1 for bringing down the house of cards. So given the problem is contained to the people who oppose its solution, there isn't a great argument for allocating regulatory resources to this over anything else.
The fact the number of Tethers in circulation basically never goes down even when the crypto market gets more then halved says it all as far as I'm concerned, but without an investigation it is speculation. I was referring to the ratio highlighted by the article.
I'm not saying they shouldn't be shut down, but I genuinely wonder how that process would work. People don't have an account with Tether itself, so how would they be able to compel people to "return?" the Tethers and get their cash back?
* They don't need to? If Tether, the company, disappeared, the market can decide what to do with the, now entirely unbacked, Tether cryptocurrency.
* Tether, the company, can freeze specific Tethers they have issued, making them unusable as currency. Whoever shuts them down might be able to force them to do this en masse.
That's the thing, though, Tether is supposed to be holding all these assets and individuals are able to redeem Tethers proportionally. Leaving aside the strict notion of 1 Tether = 1 Dollar convertibility, just closing up shop would mean all those actual real world assets now belong to... who exactly?
I'm confused as to what 'real world assets' you are referring to.
If Tether goes away, any value goes with it, like a gift card to Blockbuster's.
Fwiw, it's likely just the pretence of redemption that would go away - it may never have been really there. Tether is explicit that they only redeem Tethers at their discretion. While they also specify that they will only redeem them for high value, non-US parties, I suspect this is misdirection.
There is no evidence of any appreciable redemption going on, though they have announced the burning of $1.5 billion Tethers - all in the last six months. According to Tether, this is because they just 'keep them for later'.
> Tether is not a US-based company. So does US have the authority to shut them down?
You are talking about a country that managed to force foreign banks to rat on US citizens accounts abroad. You are talking about a country that conducts drone assassinations on their own citizens overseas, without trial.
USA has de-facto authority on a lot of country where they feel entitled to (hard power), save maybe from Russia or China and India mainly. Russia because they actually have little ties with USA economically and politically since the war in Libya, China because of the exact opposite as it poses a systemic risk to USA, India because they don't trust the US who are "allied" with Pakistan.
Often when USA and the EU clash, ultimately the EU tend to bend the knee (soft power). The Trump era was a significant exception.
There is an entire branch of the Department of Treasury designed to enforce stiff sanctions and financial penalties against people, companies, and even countries that defy US regulations.
If the federal government decides Tether needs shut down, it won't be a struggle.
Since I didn't really talk through this before, a bit of an effort post.
OFAC sanctioned Suex, a crypto exchange based in the Czech Republic, less than a month ago[1]. As far as I can tell it is gone from the face of the earth. Here's why:
> As a result of today’s designation, all property and interests in property of the designated target that are subject to U.S. jurisdiction are blocked, and U.S. persons are generally prohibited from engaging in transactions with them. Additionally, any entities 50% or more owned by one or more designated persons are also blocked. In addition, financial institutions and other persons that engage in certain transactions or activities with the sanctioned entities and individuals may expose themselves to sanctions or be subject to an enforcement action.
suex.io. 676 IN SOA ns-648.awsdns-17.net. awsdns-hostmaster.amazon.com. 1 7200 900 1209600 86400
suex.io's hosting is gone due to OFAC's ruling: Amazon is barred from providing them service.
They used to take Visa & Mastercard[2] – even if they were online today, they wouldn't find a payment processor in the world willing to touch them: that would expose the payment processor to OFAC sanctions which is as close to "existential risk" as you can get in finance.
Suex was listed on the SDN list[3]. As a result no US based exchange can touch any crypto from those addresses. If, say, you wanted to cash out that crypto by sending it to Coinbase, they'd be legally required to freeze it and deny you access to it: otherwise, they're at risk of OFAC sanctions.
Every bank in the US monitors the OFAC SDN list, and as a result, they will be monitoring transactions. If Suex attempted to move their money into a bank account controlled by the US, they'd be blocked. But most likely their accounts are already frozen, because OFAC jurisdiction attaches when funds pass through any US financial institution or any foreign financial institution owned by a US person.
OFAC has recently decided that the mere presence of US dollars in a financial transaction is sufficient to establish jurisdiction: if Suex had their entirely foreign owned bank process any transactions in dollars, this would cause a US counterparty to indirectly provide financial services to an SDN. This risks sanctions at their foreign-owned bank.
At the end of the day, most global financial institutions assume a US nexus is present and deny any service to targets of US sanctions – the risk is much lower.
To wrap this up, OFAC has published an interesting guide[4] to sanctions that directly relate to cryptocurrency, and it's well worth a read.
This is really interesting. I've long thought of as the US' empire being a primarily financial one (as opposed to military, like many other past empires) and I didn't even realize OFAC existed until reading your comment, much less the types of activities they engage in. This certainly cements my suspicions even more about the financial empire of the US and how they exercise that power.
What is the difference between a financial empire, a military empire, and a resource empire (eg petrodollar) ? Each aspect reinforces the others. If the US didn't have the military, it couldn't enforce financial laws outside of its borders. If the US didn't have energy, it couldn't run its military. If the US didn't have a reserve currency, then it wouldn't be able to obtain as many resources.
The difference is we use debt and currency as the primary means of control and domination, as opposed to storming in and killing people. Obviously two sides of the same coin (empire) but different methods.
Thank you for such a detailed comment (do you work in finance?). I never realized how easily US can control/destroy "bad" financial properties.
Among the points you mentioned, the most significant one is Visa and Mastercard. These are effectively the only 2 payment processors out there today, and if they deny you service, you are dead. AWS can be replaced and you don't need an intermediary exchange if you can find a payment processor.
Because the "misleading statement" (i.e. deliberate lie) is the entire basis of Tether's business. The service they claim to provide is fiat backing for their cryptocurrency and they didn't do that. That's not "a few inaccuracies", it's fraud.
When we’re talking about organizations who exist solely in the realm of toying with people’s finances, a “misleading statement” is nothing more than a lie. They were misleading people. There is a reason some things come along with incredibly complex language to explain the nuances of what is actually happening as accurately as possible.
We can’t attempt to downplay “misleading statement” in an effort to misdirect away from why they were misleading people.
Don’t really get you guys saying Tether should be shut down… the big banks get routinely fined with much bigger fines for much bigger crimes, are we gonna shut them all down then?
At least Tether did not steal from nor defraud anyone.
Just as a random example: https://www.justice.gov/opa/pr/jpmorgan-chase-co-agrees-pay-...
Tether did defraud people. They lied on their website, claiming a) audits (which they never completed a single one of) and b) 1:1 backing of each Tether with a dollar in the bank (which they didn't have).
You are right, they lied, and people could have been harmed if there were a “bank run” on Tether.
But in practice there was not and nobody suffered any damage, zero, nada, nicht.
While big banks got fined for actually taking money illegally out of people’s pockets and nobody said let’s shut them down
Just because something is built upon fraud doesn't mean it will face imminent collapse. Usually it's events that put notable financial pressure on institutions that reveal their underlying flaws. The extent of the fraud notionally influences how easily it will end up collapsing. Hence why Madoff was able to keep up his scandal for quite a long time.
I don't see where the GP poster wrote anything like "I guess its ok. Might as well pack it up and let them carry on with manipulation, lying and profiting." - could you quote the relevant passage? Did they edit their comment?
Haha, what? Maybe if you're an institutional investor or whale (or another exchange is doing something for you), but for several years the closest thing Tether had to a redemption "policy" (beyond the fine print that said they had zero obligation to redeem) was:
* Only for holdings of over $30,000
* 90-180 day waiting period
* non-US nationals
It was so bad, that people put out bounties for anyone who could prove that Tether or Bitfinex (whatever, they're the same) had redeemed USDT. I believe one bounty was in the order of $5,000.
Bernie Madoff was also able to handle withdrawls from his fund to a limited extent prior to its collapse.
Also, are there entities redeeming USDT into USD? Or does it always involve intermediary crypto? (I am not actually familiar with the extent of cryptoexchanges out there that deal with fiat, so genuinely curious.)
Big banks operate under regulation and oversight, not from financial havens, don't have CEOs (sorry deputy CEOs) who give interviews from gaming chairs and who aren't aware on what banking license their bank holds (actual quote: "There are actually two banking licenses here, one is... I forget the name, but that's the one I think we have. The other is the one everyone is talking about. We might also have that, too."
Will reply here rather than in all the sub-threads: I’m not saying lying is good, I’m pointing my finger at the paradox that on one side everybody is scandalized that Tether is not shut down, on the other everybody is happy to keep their money with big institutions that are proven to be even worse.
Yeah. The truth is the entire banking system is running the exact same scam ad Tether. The only difference is the governments think banks are too important to allow the consequences of their actions to catch up with them. So whenever there's a bank run and there's no money in the bank, the government bails them out.
This suggestion runs counter to the US system of finance. The secret service was created to protect the value of the dollar against attempts like those made by tether. Why would the government today want to do a 180 and give up the power of the dollar? If there was another major collapse by messing with the crypto too abruptly, it would probably help establish the dollar for a while longer. I don’t think that such an event would be a bad thing for the global economy either.
I am blown away. 61.5 million dollars for $68,536,825,819 (68 billion dollars.) Maybe not the same in 2017 but damn, how does this even work without anyone panicking?
It was something like ~400 million tether at the time, not 68 billion. The recent run-up post-dates the period of this malfeasance (and is probably also fraudulent in some way).
Banks do the same thing. How do banks work without anybody panicking? Liquidity injections. The government will literally print money and give it to banks so they can fulfill withdrawals during bank runs. If the governments didn't bail them out, they'd be insolvent.
Banks do not have enough cash on hand to meet their liabilities (deposits), but they are for the most part net-positive over all assets and liabilities. They aren't just burning depositor's money, they're putting it into mortgages and riskier loans. So while they cannot afford a quick payout above 10% of total deposits, the assets are there in the form of loans and securities.
The effect is the same: people want to cash out and they can't. The solution is the same: bail out the banks in order to avoid even worse economic impact. I don't see why banks deserve this royal treatment while Tether doesn't.
Whether Tether was or wasn't responsible with the money is another matter entirely. I fully support any efforts to hold them accountable for their actions there.
Banks don't get that special treatment for free. They pay for insurance and comply with regulations. Some of those regulations exist to reduce the risks associated with FDIC insurance, and a lot of those regulations exist to force banks to serve important social functions.
You can fault banking regulation for not being stringent enough, and I won't argue with you. But I'll never understand how "fuck banks getting special treatment" should ever translate into "therefore wildcat banks are a GREAT idea, right?"
Or, to put it another way: I don't want to bail out the big banks; why in fuck's sake would I want to bail out Tether speculators?
> therefore wildcat banks are a GREAT idea, right?
They're not. Cryptocurrency is not even supposed to have banks in the first place! It was supposed to put an end to all that stuff. People should not be exchanging crypto for fiat, they should be transacting directly in crypto.
Instead the exchanges became banks and people invented USDT because dealing with USD is hell on earth. There was supposed to be no need to ever deal with USD or any other fiat currency. Everything crypto was invented to solve became integral to the crypto market
...
> I don't want to bail out the big banks; why in fuck's sake would I want to bail out Tether speculators?
I don't want that either. I want banks to face the consequences of their risk taking. It's never gonna happen though. They'll keep bailing out the banks. So there's no reason they shouldn't do the same for crypto.
<insert crypto rant> fiat <more crypto rant > debasing the currency.
What I find ironic is that the crypto ecosystem still ended up with something like central banks, only in this case their mandate is make money for its owners, and they have no accountability or obligation to serve the general public.
The difference is I can choose not to hold Tether. Removing my exposure to dollars as a US citizen is a lot harder. Not to mention people that are on a fixed income like my parents. So debasing fiat is a lot worse
Pretty sure the answer is no, because they have so much power they don't need to lie. They do what they like then change the rules so they can do the same thing legally.
The argument here isn't that what Tether is going is good (it isn't). It is that if the government did it, it would come with "and all you plebs have to join in because bankers making money is good for us all".
Incorrect, no such right is necessarily guaranteed by societies. For example, during much of the 1900s you were required to sell gold to the US government for USD rather than keep it under your mattress, and if you refused they had the right to seize it with force. For another example, negative savings interest rates in certain European countries.
> during much of the 1900s you were required to sell gold to the US government for USD rather than keep it under your mattress, and if you refused they had the right to seize it with force
Many considered this a violation of their rights. Justly so. I would say that "no such right is necessarily guaranteed" is only true in the sense that no rights at all are necessarily guaranteed.
That's nice, but regardless, the law stood for forty years, even surviving the Supreme Court^.
Society abrogates individual rights by its very existence, and anarchic utopias that exclude all abrogation tend to fail comically^^ and/or catastrophically^^^. It turns out that compromise is a necessary factor of coexistence with other human beings, especially those we disagree with. If you don't feel that your rights are being abrogated by society in some regard, then you either are unfamiliar with the unconscious rights we all take for granted, and/or your circumstances align with the corruption that rich and well-connected people benefit from.
In the US, the Constitution guarantees you specific and inalienable rights, and lays out clear terms that the government is not permitted to violate without consequence. While corruption exists, and no constitution is ever written or enforced perfectly, your declaration that no rights are guaranteed is incorrect for US citizens in the US. Other countries have similar guarantees of rights, such as the EU and GDPR, not to mention many older ones as well, so that statement is incorrect in various ways for those as well. Societies vary wildly in who is granted rights and what rights those are and when they may be abrogated without consequence. Corruption is endemic to virtually all modern societies, small and large. Regardless, rights are granted in most of them.
I respect those that feel that their rights are violated by the laws of the society they are members of, but that is no excuse to declare provably false statements ("no rights at all") as if they're facts. You'll need to invest more effort in your arguments to make headway with that declaration, or define what "rights" means to you that lets you declare that you have none, or declare that the society you are a member of does not guarantee you personally any rights whatsoever.
^^^ A popular counterexample is an Icelandic system of government from a thousand years ago, frequently held up as an example of libertarian utopia that lasted for centuries. However, the governmental laws that implemented the godord specifically abrogated the rights of the citizens of Iceland, binding them without individual consent to the societal system of godords, laws, courts, judgments, and enforcements. If you ignored the judgment of the courts, you were stripped of your societal right to live; anyone could kill you without being punished for doing so. Ironically, this meant that in this ancient system, societal outlaws were truly freed from all abrogations of their rights, as they were cast out from society as a whole. However, being marked for murder by those who do accept societal abrogations tends to diminish the enjoyment somewhat.
A relatively recent large-scale case from the U.S. that comes to mind is the internment of Japanese-Americans. I'm not sure if I can point to a specific Constitutional amendment that it violated (4th amendment on seizing a person without probable cause? Probably 9th amendment, that there are are additional rights not enumerated), but I think most declarations of rights cover a right to liberty unless one is charged with a crime or other strictly limited exceptions, and it seems clear that the Japanese internment violated that.
Interestingly enough, the Supreme Court of the time seems to have upheld part of what was done to the Japanese-Americans[1]. "In effect, the two rulings held that, while the eviction of American citizens in the name of military necessity was legal, the subsequent incarceration was not"[2]. About the first ruling, Wiki says: "Chief Justice John Roberts explicitly repudiated the Korematsu decision in his majority opinion in the 2018 case of Trump v. Hawaii. The case is often cited as one of the worst Supreme Court decisions of all time."
We haven't gotten as far as large-scale violations in the U.S. of a right to not be killed by official government policy (death penalty notwithstanding). (Also notwithstanding the FDA delaying the introduction of lifesaving drugs.) It has certainly happened in other countries, though. In the small scale, the U.S. government does sometimes assassinate individuals, and seems not too squeamish about killing whoever else is in the blast radius (some may protest that those people aren't citizens). I would admit it's pretty unlikely they'll go that far on this particular right (in the absence of a revolution), but for the majority of rights, it seems there will be circumstances where politicians will plead "emergency" as a reason to violate them, and often enough will get their way.
> We haven’t gotten as far as large-scale violations in the U.S. of a right to not be killed by official government policy
If you ignore the genocide of Native Americans, which in many cases did not stop once those Native Americans accepted US government jurisdiction, maybe.
It's up to you how to interpret the law, and it's up to the justice system and/or law enforcement and/or military to decide to punish you if it disagrees with your interpretation of the rules of society. I am not you, I am not your lawyer (this is not legal advice), and I am not a member of a societal authority such as those above; therefore, I have no viewpoint on whether you specifically owe some debt to society or not. You'll need to resolve that yourself or with the cooperation of your lawyer.
This is the big question mark, and why I sigh when people shrug it off.
How much of the demand for these tokens is being driven by money that never really existed? 100%? 50%? 0.02%?
There’s no way of knowing until it crashes - then what? e.g. if the price dives by 50%, and that really equates to 200% of the actual capital ever invested, what happens then?
I was listening to Darknet Diaries episode 102 today about the Canadian money printer, and I was thinking the entire way through it that it was basically describing tether but with paper and ink.
It got especially eye-opening when he talked about having to manage how it was released into circulation slowly so as no-one could track where it was coming from.
It would at least open the door to more regulation, not to mention prudence on the parts of investors. I can't escape the feeling some of these risks aren't being priced in properly.
I don't think very many average people are invested in crypto significantly, if at all, despite the hype, so hopefully the harm would be limited.
^ This is the reason why more folks in crypto should be worried about and enraged by tether. Inevitably, there will be a market condition that leads to tether being insolvent. And when that day comes the people that get hurt will be every day crypto holders. The people running tether will run off with many, many millions of dollars and many will wonder how the heck this happened. And it'll lead to regulation. And centralization.
> What I find ironic is that the crypto ecosystem still ended up with something like central banks, only in this case their mandate is make money for its owners, and they have no accountability or obligation to serve the general public
So, like private currency-printing banks before government monopolies (and like private banks, which subject to central regulation still create money though they don't print currency), not like central banks.
> So, like private currency-printing banks before government monopolies (and like private banks, which subject to central regulation still create money though they don't print currency), not like central banks.
Yes, nothing prevents a crypto bank from "creating money" (aka lending) in the same way that a fiat bank does. Loan out your deposits. It's that easy.
Not having it blow up on you in a run-on-the-bank scenario is the harder part than "creating the money". ;)
The point of the article is rather that they violated the rules on creation of “money” [0] by means other than issuing legal-tender currency, and are being punished for that violation.
[0] viewed broadly, but I won't quibble about that.
Perhaps. But we're, what? 10 years in and so far crypto has enabled 'I encrypted your data!' scams, caused political instability, been a vehicle for highly volatile investment (but the world wasn't hurting for such opportunities...), and served as a fine buzzword for dev teams around the world to get a sack of cash to update some systems.
That's a pretty poor result for 10 years of this much investment and focus. The internet was waaaaaaaaaaaaay more useful 10 years in.
I don't think crypto gets to claim the benefits of the oft touted protection against centralized bullies or scams. Quite the opposite: You need to go pretty deep into political dictatorships before crypto on net balance seems favourable. So far crypto coins are far more likely to be fleeced, and the vast majority of crypto holding folks are working with mostly centralized entities (such as Tether), which rate, as far as trustability and good shepherdship goes, not in a good place. Better than Pol Pot and Mugabe. Maybe.
Oof.
So if it's decades from its final form, when is it going to deliver on its first actually useful to humanity milestone? I'm still waiting.
> I don't think crypto gets to claim the benefits of the oft touted protection against centralized bullies or scams.
The big problem here is that the core benefit of cryptocurrency is in removing the bank as a middle man. But the bank is the chokepoint where governments impose constraints.
When you're up against an authoritarian government imposing unreasonable constraints, that's what you need. But it works the same against any constraints. So if you want constraints on "money laundering" or processing transactions related to criminal activity, those constraints are gone too.
The constraints are already gone for anyone willing to break the law. You can't un-invent Bitcoin, so from here on drug dealers will be able to use it or something like it to transfer their drug money etc. That's happened, it's in the past, no regulations you put on law-abiding people will undo it because the people doing it are already the people breaking the law.
We still have all the regulations. They just don't work anymore. We're still paying the cost and the benefit has evaporated. But for all the honest people who are following the law, the regulations still apply. The overhead is still there. All the paperwork and the false positives.
So you can use Bitcoin to buy drugs but you can't use it to buy a sandwich, because to accept Bitcoin the sandwich shop would have to deal with filing fees and lawyers that the drug dealer is just ignoring. Regular people don't get the benefit until we have a regulatory system that makes it as easy to accept cryptocurrency as it is to accept cash.
You can't uninvent Bitcoin but you can certainly make it illegal, making it all but useless for drug trade or money laundering. Nobody needs a currency that you can't exchange for, you know, real currency that you can buy real things with. So although the government doesn't have the power to eliminate Bitcoin, they do have the power to make it useless. I don't think they will though, because guess who is using it for bribes and money laundering?
Making it illegal doesn't affect its utility for illegal activity. Criminals already break the law. It would cause a one-time decline in value but that only matters to speculators. The value would still be non-zero because it's global and there exist places where it isn't illegal.
Even if it was somehow illegal everywhere, the value still wouldn't be zero because of black markets. The drug user uses it to buy drugs, the drug dealer uses it to buy guns, the gun runner uses it to buy stolen art, the fence uses it to buy stolen goods from petty thieves who use it to buy drugs.
Black markets would also exist to exchange it for cash or ordinary commodities so that someone else could get it to buy drugs/guns/art/whatever.
And it has utility over using physical cash or gemstones or bullion in that you can transfer it over the internet.
Making it illegal makes it vastly less useful for illegal purposes. Legitimate transactions provide cover, it’s like the difference between a sniper in a forest or an empty parking lot. If your factory selling a truck full of AK-47’s you want to actually be able to buy steel to make more AK-47’s. If bitcoin’s illegal you now need to find a buyer for the guns and another buyer for the bitcoins.
The steel mill was probably going to want dollars instead of Bitcoin regardless, so the only difference is that they do the trade for dollars on a black market exchange. This is likely to get folded into the money laundering process anyway -- the Bitcoin goes to unspecified offshore location to get turned into dollars that come back as a clean payment for "consulting services" or what have you.
There is no need for additional "cover" at that point because the illicit transaction is already illicit. If someone just took that Bitcoin and bought a house, the IRS would have questions. It would have to be laundered first. The output of the money laundering process is clean dollars regardless of whether the input is illegal because of the illegal source or illegal because of the illegal source and currency.
Do you expect the guy laundering money to accept bitcoins without charging extra? Because if the guy selling bitcoins takes ~10% from the AK-47 buyer and the guy laundering money also takes his ~10% cut for using bitcoins on top of his X% cut for laundering money, suddenly it’s starting to look really unappealing.
The real appeal of bitcoin for illegal purposes is it’s effectively a poor but really cheap way to launder money. Try and deposit even 1 million in cold hard cash and the banking system throws up red flags, liquidate 1 million in bitcoin and that looks significantly more legit at least on the surface. It doesn’t help if you’re under investigation, but then again it’s cheap.
> Do you expect the guy laundering money to accept bitcoins without charging extra?
That's the entire purpose of using them.
Someone who has a million dollars in physical cash either needs to get someone local to launder it, which might be hard to find or require paying them a thick margin, or they have to find a way to ship a huge amount of physical cash to the place it's being laundered and risk it being seized at border crossings etc.
Someone who has a million dollars in Bitcoin can buy money laundering as a service over the internet from the lowest bidder who has a good reputation. The Bitcoin gets transferred to some place with favorable banking rules, gets liquidated there where it's either not illegal or the local authorities are corrupt, and it comes back as dollars. Since it's possible to do it over the internet, you have competition from all over the world including some favorable jurisdictions, so the margins get smaller than they would be if you had to find someone locally.
Money laundering can’t just be done in an arbitrary location. You need to transfer money back into your country’s banking system while looking legitimate to safely spend it.
Put another way, banks are already operating on digital money that’s the problem.
> when is it going to deliver on its first actually useful to humanity milestone
Technologically speaking, most cryptocurrencies are utterly useless. Bitcoin included. There are some good projects though.
Monero, for example. It allows people to transact without anybody knowing anything about the details of the transaction. Where the money came from, where it's going, how much money was moved. Everything is obfuscated. Block chain analysis is at the very least hard and inconclusive, if not impossible. So it essentially works like digital cash.
This is an invaluable achievement that allows people to reclaim their financial privacy in a world where governments think it's acceptable to surveil everyone.
> so far crypto has enabled 'I encrypted your data!' scams
These scams existed long before crypto. But, crypto currencies are a better solution to international money transfers so of course they became the preferred currencies for these scams.
If cryptocurrencies were a better solution, they would have been widely adopted. Instead, they have been adopted by people who can't use real money for one reason or another, e.g. criminals. Which tells us they are a poor substitute for real money.
In several African countries people use their phone credit as a currency to barter and there are trials to use crypto instead with on/off cash ramps in the same way as the phone credit works but with the additional benefit of things like financial records to start building credit scores
Can you provide a link? None of this makes any sense. Why would anybody buy phone credit and then use that to barter instead of just buying whatever they need directly? How do you build a credit score from a record of transactions? Why do Africans that don't have access to banking are so worried about building a credit score? So many questions...
If that's the trend, by the time it reaches it's final form we'll all be smoking husks left over from the great AI uprising wars, but don't judge those AIs too harshly, that new testnet that paid out for verified kills was just too good to pass up.
Yeah, it sucks. The problem is USD though. It taints everything it touches but people are still forced to use it. People use cryptocurrencies as an investment and convert to fiat in order to transact. They refuse to transact directly in cryptocurrencies.
They would work if some country was crazy enough to sell barrels of oil for cryptocurrency, indirectly setting the price of everything else. That will probably get them invaded and destroyed by the US military for threatening the hegemony of the petrodollar.
Isn't this pretty much the description of every company? I understand feduciary responsibilities blah blah, but if the company didn't think they could do both then they wouldn't be running the legitimate buisness. If it was started to intentionally dupe people that's an entirely different thing.
Objectives and incentives are extremely powerful drivers of mass behavior in large organizations. Maximizing profit is a much different objective that contributing to the social good. That is why some functions are best fulfilled by non profits and government.
There world is full of cases where products or services are degraded in order to maximize profit. Has DRM ever made for a better gaming experience? Do clickbait articles result in a better informed public?
> Which is why we don't let private companies create currency willy-nilly anymore.
As I understand, private banks extend loans, which while not being printing money, the loans being deposits (which can be withdrawn) the effect of creating currency is the same.
Issuing tether was basically an unregulated bank loan system. With a regular loan the created money is destroyed when you repay it. In theory that would happen to the tether when you redeem it for dollars. The problem is really just that tether was lying about how they were operating.
Correct, for the non-financial sector, "money" is currency in circulation (created by the government) and then liabilities of the financial sector (created by the private sector). This is true regardless of whether they are checking accounts, savings accounts, certificates of deposit, money market mutual funds, etc. It's all private money and we not only allow it but we subsidize and encourage it.
Private banks can only extend loans so much as they have the money already.
Yes, it's a juggling act: Person A still has $1000 on the ledger in their deposit even if the bank lends $800 of that to Person B, so if the people with deposits want to cash out all at the same time, and the bank can't pull back what they've lended out fast enough, you have big problems!
But they aren't just adding numbers to a cell in a spreadsheet without having the money to back it - a loan that can't be used to pay someone or to be turned into cash is useless. You can't just start a bank and issue yourself a thousand dollars into your own account and expect to be able to use it for anything. This would be closer to the credit card model - short term credit without taking deposits, making money on the repayment - but again, good luck issuing yourself your own credit card to buy a bunch of stuff with to "create money."
And they also aren't doing anything that couldn't be done with crypto!
> Yes, it's a juggling act: Person A still has $1000 on the ledger in their deposit even if the bank lends $800 of that to Person B
Fractional reserve banking isn't up-to-date with the modern banking system, where in many cases, like in the UK, and in the US as of 2020, there are no reserve requirements. [1]
> But they aren't just adding numbers to a cell in a spreadsheet without having the money to back it
I disagree; this is the reality. Banks don't have to wait for deposits to extend loans. When creating a loan involves novel financial instruments to hide or offload the loan's risk, this has caused massive bubbles, as in the 2008 mortgage crisis.
This credit they extend to customers is "broad money" that, while not being created by the central bank, is effectively the same, as it is the deposit for someone else, which can be withdrawn.
Lending, and the maintenance of the depository accounts where lent money not withdrawn in cash must end up, is much more tightly regulated than it was in the era of willy-nilly private currency issuance, as well as direct currency issuance itself being reserved for the State.
> Isn't this pretty much the description of every company?
For the most part, sure. But that's the parent's point, I think. Central banks are not companies, they are part of the public financial infrastructure of a nation (or, in the EU case, group of nations).
Actually... it's complicated. The Bank of England, for example, was nationalized only in 1946, and it remains technically a company which is owned by the state, not actually part of the government.
In the US, the Fed is... well, it's not a company, but it's also not not a company... or group of companies...
Yeah, the Bank of England even used to offer account services to employees after it was nationalized. Which would be scandalous if we found it in some dubious ex-Soviet republic today, albeit there maybe they're lending the Bank's President $10M with no real security and the Bank of England was offering employees mortgages and similar modest run-of-the-mill secured loans.
The UK owns a whole bunch of banks and entities that would need a banking license if they weren't owned by the government, of which only the Bank of England acts as a central bank, but there are also a bunch of commercial banks in (or at least operating in) the UK that are named after parts of the UK even though they're not owned by the government, including the Bank of Scotland.
To be fair, unlike Tether, the Bank of Scotland actually does hold actual cash worth the same as the notes they issue.
Also, although these banks have permission to issue notes (whereas if you went around issuing "bank notes" you'd likely get arrested) the notes aren't necessarily worth anything except in the sense that you can assume the Banks will give you Bank of England notes for them if it came to it since they're required to hold those.
They aren't legal tender (Scotland doesn't really bother having legal tender laws anyway) and retailers can choose not to accept them if they want. You won't have a problem exchanging them for tourist stuff in Edinburgh or buying a fish supper in Dundee, but good luck getting some random corner store owner down South in Cornwall or Essex to accept them - even though these notes are in some sense worth the same as Bank of England notes, there is no law requiring retailers to accept any notes and so they might just tell you to fuck off with your weird-looking money.
The decision-making body of the Federal Reserve System – the thing that sets monetary policy, among other things – is a government agency (the Board of Governors of the Federal Reserve.)
The rest of the system is, as you note, complicated, but the rest of the system doesn’t set monetary policy.
On the initial headline I thought that $41 million would be negligible compared to the central role they have in the crypto ecosystem. But apparently that fine is 2/3 of their backing reserves.
Correction: it is 2/3rds of what their reserves were back in 2017. The amount of Tether in circulation has increased over 150-fold since then, so presumably their reserves have increased as well.
> The amount of Tether in circulation has increased over 150-fold since then, so presumably their reserves have increased as well.
They just got punished for not having actual reserves match their circulation. What basis is there to presume that their reserve is matching their circulation now?
This is not an audit. That's why it says "Accountant's Report". Because a real accountancy firm/auditor would risk their ability to practice by calling it something it's not.
The last time Tether claimed to have something that was an "actual" audit, they claimed they couldn't release it to the public because ...
"... it is in Mandarin".
Here's the big problem with this attestation:
> Our opinion is limited solely to the CRR and the corresponding consolidated total assets and consolidated total liabilities as of 30 June 2021, at 11:59 PM UTC. Activity prior to and after this time and date was not considered when testing the balances and information described above.
They're very, and repeatedly clear that this is a snapshot. There is nothing stopping Tether taking a 72 hour loan before this attestation and then closing that loan after it.
They claim $6B in cash holdings, in an undisclosed bank, presumably Deltec, whose "deputy CEO" demonstrated in an interview (among other problems) that he did not know the names of the two banking licenses available to banks in that country, and he wasn't sure which one they had.
You can't get a mortgage with a simple attestation of funds - why should it be okay for these guys?
While I wouldn't say that their reserve is matching now ( I do not know) there were a few threads on twitter that I read a while back that stated that the folks behind tether were increasing the supply (of tether) to artificially inflate the value of their bitcoin holdings - which is something that they could have liquidated in exchange for more fiat since then. Obviously this is all conjecture.
This is the best reference I could find in relation to what I've said above:
In newly published research, with Amin Shams of Ohio State University, he finds evidence that Bitcoin’s 2017–2018 bubble was inflated by a lesser-known digital currency called Tether. [0]
There has always been a healthy amount of skepticism about Tether in the crypto community. Your cryptofans narrative does not accurately reflect reality.
Isn't the trouble that Tether substantially influences the solvency of all other stabletokens and the value of cryptocurrencies themselves (in relation to X fiat)?
For example (admittedly this is probably way off-base here), let's say there were only two stablecoins (USDT and USDC), and only one of which had true 1:1 buyback (USDC) where >=1 entity would exchange one USDC for 1 USD (I know the reality of USDC is muddle too). Let's also say the amount of USDT in circulation was $10b and the amount of USDC in circulation was $1b. If there's a well-established "distrust" of USDT, where people only "temporarily" keep it on hand or use it as an intermediary, they're still using it to acquire other cryptocurrency, and thus inflating prices, right? If everyone attempts to exit onto the USDC, the available supply will dry quickly, causing the <X Crypto>/USDC price to plummet (?).
Thus even if you thought Tether was intolerable I feel like it's an implossible belief to simultaneously think (1) that Tether is a scam, and (2) cryptocurrency can be seen a store of value. (I know there are others who recognize and highlight other utilities of cryptocurrencies).
(I am super interested in the flaws in this logic because as an aside, if there's any general reading material regarding these kind of economic thought experiments, doesn't have to even be crypto-related, I will certainly take any recommendations! I find them really fascinating. Someone mentioned a Darknet Diaries episode on counterfeit currency; Probably the first thing I have to look into.)
There are three very interesting threads in your comment, as I see them:
1. Tether influencing solvency of other stablecoins.
2. (Tightly related to point 1) Inflation of Tether as it becomes an intermediary.
3. That it is logically inconsistent to view Tether as a scam while also viewing cryptocurrency as a store of value.
Point 3: There is a difference between a store of value and a store of value that is stable with respect to some specific other value.
Consider Bitcoin and Ethereum. The rules by which these blockchains operate are quite transparent. The software is free (as in freedom). Anybody in the world with the means can run a node and participate in these blockchains. Thousands of people are doing so right now. These currencies are open in a sense that no other currency has been open in the entire history of the human race.
Tether on the other hand is completely opaque about its operations. In fact, the people at Tether actively spread misinformation about how Tether operates. It has repeatedly dodged and attempted to fabricates audits of its reserves.
Given all of this, I do not see any logical inconsistency between thinking of Bitcoin and Ethereum as stores of value which is largely orthogonal to the value of the fiat that you hold while simultaneously thinking of Tether as a scam stablecoin whose value is pegged to that of a fiat currency.
Point 1: I agree with you that the existence of Tether improves the solvency of other stablecoins. It reduces the pressure on anyone backing another stablecoin by offering an alternative means of a holder of that stablecoin to realize the dollar value of their stablecoin holdings (albeit with a slight overhead in transaction costs).
I think this is more significant of a factor for centralized stablecoins like USDC than it is for decentralized stablecoins like DAI, although I suspect the existence of USDT puts less pressure on collateralized DAI positions as well.
This is not a compelling reason to encourage or even tolerate the existence of Tether. A true stable coin would not experience any significant difficulties even if Tether became insolvent. I believe that decentralized stablecoins like DAI would only experience negligible effects from Tether's insolvency.
Point 2: This is a very good point and I don't understand it well enough theoretically to confidently make predictions about how it would play out on the market.
My intuition tells me that the most powerful factor against inflating prices of USDC in your scenario is that Coinbase (and the USDC consortium) will stick to their position and always offer $1 in exchange for 1 USDC.
The other factor is that there are many more legitimate stablecoins that could partly fill in the vacuum that Tether would create if it imploded. So not all attention would be focused on USDC. If people really needed a stablecoin, then they would not want to purchase an asset whose value was increasing.
There are a lot of parameters involved, though, and I find this very hard to reason about. Would love any input here.
From their website: "Every Tether token is always 100% backed by our reserves, which include traditional currency and cash equivalents and, from time to time, may include other assets and receivables from loans made by Tether to third parties, which may include affiliated entities (collectively, “reserves”)."
They don't claim 1:1 USD backing. They claim that every tether is backed by 1 USD of value. So, when their crypto holdings go up in value, TADA!, more reserves to print tether against. The problem here is they never explain what happens when the value of their backing assets goes down.
And yet, they're still operating. This is the kind of thing that makes me think the whole cryptocurrency ecosystem is a house of cards. Cryptocurrency advocates seem to be really bad at spotting and punishing incompetent and malicious actors in their markets.
I think if you got a few beers in even the most adamant crypto advocate, you'd discover their thinking is more along the lines of, "The house of cards is out in the open with crypto, vs. hidden behind bureaucracy and obfuscation in traditional banking".
With crypto, the "average" person gets to feel "in on it" in a way usually reserved for coked up Goldman associates. That is possibly not a good thing, as you're pointing out.
Sure, but anything which is open about crypto is also open in the financial system. It isn’t “hidden” away, people just don’t do the necessary studying to learn the underlying incredible complexity necessary for an actual world scale financial system.
It’s only hidden in the sense that the definition of “decathect” is hidden. The definition isn’t “hidden”, I just haven’t looked into and learned its definition and i havent considered all the implications of its material interactions with the world yet.
This notion of “hidden” will not be solved by a coin were it to become ubiquitous. People would just have to learn a completely different set of complexities—many of which will actually be hidden by the grifters who take advantage of lack of regulations.
Much of (not all, but much) of this “hidden” argument rests on people who would just prefer simple barter/exchange—but they just don’t seem to understand the complexities that scale inevitably brings. Along with this is that they just don’t understand that crypto is not an answer to the scale complexity problems.
And if someone attempts to make a coin which addresses these complexities, oops, now we’re back to a complex, messy, and steep learning curve.
All of the grifts that we’ve seen throughout society’s history with finance will be repeated in the coin sphere and these people will sadly fall victim to these same grifts yet again.
Does our current financial system have problems? Absolutely. Does crypto solve them without reintroducing previously patched bugs? Nope. Not at all.
It's a misunderstanding of what the house of cards is about, though.
One of the first empires to use fiat currency was the Yuan dynasty, and it worked, because if your currency is backed by the mongols, you're absolutely going to act as if it makes sense, even if it seems crazy to you. The backing of money is not precious metals, nor currency, but rather force - a state can demand tax in it, and exact retribution if their taxes are not paid. The state could demand taxes in cowries, and people would collect cowries, because you are going to get imprisoned if you don't pay your tax.
The fiat-currency house of cards collapses when people think the state isn't going to be able to pay their bills and collect their dues. Cryptocurrencies are more like tulips. There's nothing behind the curtain - it's just a weird social eddy that's grown out of all proportion.
In my opinion it's a house of cards (and Ponzi scheme), but combined with the John Maynard Keynes observation that the market can reman irrational longer than you can stay solvent (if you were to bet against it)
Why would they? If you're invested in Crypto - you don't want it to go down. It's better to look the other way while someone is pumping and hope they never start dumping.
While they are not completely divested, self-interest mandates that they still hype what they try to get out of. And after that, they simply don't care and pride discourages them from being vocal about their apparent change of heart. Some might be good at spotting, but they will be excellent at staying quiet about their conclusions.
Libertarian ideology has resulted in Tether being replaced by USDC in Ethereum DeFi.
Your claim is based on the bizarre premise that people are only intelligent when formulating mandates for otherd, while they can only exercis if formulating a course of action for themselves
> Your claim is based on the bizarre premise that people are only intelligent when formulating mandates for otherd, while they can only exercis if formulating a course of action for themselves
I’m not sure where my statement implied what you are assuming here. I think you may have your dogmatic blinders on.
Both tether, and crypto unrelated to tether are implicated in what I stated. That doesn’t make tether any less a result of libertarian ideology drawn to its conclusion.
The last sentence of my last comment has a mistype. It should be "while they can only exercise naivety when formulating a course of action for themselves."
As for my point, it's pretty simple: the market moves away from tether on its own just as libertarian ideology suggests it would.
Those who use tether are aware of the risks and are choosing to use it anyway, and if they lose money no one will bail them out.
I suggest you reevaluate what you think a libertarian market, where adults are treated like adults and not like children who are subordinate to high up regulators, evolves into.
And really, that's what you're implying: that certain people, should control other people, for their own good, and I find it bizarre that any one would advocate for that when you can see the extreme inequality and dysfunction this approach has produced in traditional finance.
I think it's holding to your belief - not to the belief in a free society - that requires having ideological blinkers on.
Current market cap is up to 70 billion! 90% of which has been printed in the last 2 years, and wasn't even covered by the report. Looks like they're going on a last ditch printing spree
Sure, if you'd like to collect your winnings in bottle caps and IOUs.
And if the exchange you are shorting it on doesn't wipe your position out through a margin call, in one of those strange moments where due to a mysterious glitch, tether breaks the USD peg for a few seconds.
If you're looking for easier money, I'd recommend card-counting at a speak-easy ran by the mob, before I'd recommend getting into this business.
No, but apparently they can tell people "this is worth $1" and people will believe them, even if there's nothing backing it. On a long enough timeline what you say might be true, but in the short term it seems that most people haven't gotten the memo.
It's worth one dollar because, at least until now, Tether has sold as many as people will buy for 1 dollar, and bought as many as people will sell for 1 dollar. I get that everyone hates Tether, and I'm not a huge fan myself, but that doesn't mean that high school econ gets thrown out because you're emotional.
The CFTC claims to be helping end-customers by doing this kind of thing, but it is really taking money that could have been distributed off the table. Fining (and perhaps requiring the dismissal of) Tether's corporate officers would likely instill more discipline, but fining the company just hurts the customer.
No. This teaches scammers and customers alike that this is a risky business. Fining the corporate officers is almost certainly off the table, because Tether appears to be some form of limited liability corporation (but I don't know anything about the law in HK). Play stupid games, win stupid prizes. I'd hope the founders end up in jail for what appears to be blatant fraud... but chances are, they'll just move on to the next thing after Tether crumples.
>"The mission of the Commodity Futures Trading Commission is to promote the integrity, resilience, and vibrancy of the U.S. derivatives markets through sound regulation."
I don't see how punishing customers accomplishes that goal.
The CFTC provides "sound regulation," not insurance. Insurance protects customers. Regulation by the CFTC is meant to protect "the U.S. derivatives markets." They aren't there to protect customers.
If the customers wanted a safe investment, they should have used an insured vehicle for that.
It would be better to confiscate Tether's entire reserve, force them to allow tether holders to cash out (for fractional amounts), and punish the execs directly.
> perhaps requiring the dismissal of) Tether's corporate officers
That's okay, they'll just go to work for Bitfinex. Remember when the two claimed they were independent? And then Bitfinex loaned Tether $800M, and we'll call the two people who signed the loan contract for Bitfinex "Corporate Officer A" and "Corporate Officer B". Meanwhile, on the other side of the contract, we'll call the people who signed on behalf of Tether uhh... "Corporate Officer A" and "Corporate Officer B".
Or they'll go work for Deltec. Whose Deputy CEO will give interviews saying that "they can see the flow of all the Tether, because we are in the system and can see every transaction". Another legit, arms-length financial relationship, evidently...
