> they cashed out everyone's Tether balances to fiat?
"Cashing out" means receiving hard currency. It appears Bitfinex plans on converting Tether balances into Bitfinex brokerage balances. This still depends on Bitfinex paying out dollars for its obligations, regardless of whether they're cryptocurrency Tethers or broker balance entries in a spreadsheet.
The actual announcement was linked above. Any time before the cutoff Bitfinex will continue to support USDT:USD at parity, and all USD and EUR deposits will be denominated in the fiat currency, not the tether equivalent.
> Any time before the cutoff Bitfinex will continue to support USDT:USD at parity
What does "support" mean? I thought it was notoriously difficult to convert Tether into hard currency.
> all USD and EUR deposits will be denominated in the fiat currency
Will previous deposits, which were held as Tether, be converted into hard currency? (Bitfinex has recently been having issues redeeming hard currency deposits [1].)
The cynic in me sees Bitfinex attempting to convert Tether, a secured redeemable obligation, into brokerage deposits, unsecured obligations in most jurisdictions.
I don't know what you mean by this -- depositing USDT into Bitfinex has always immediately credited your USD balance. Until this announcement, they have always treated USDT as simply a method for depositing USD, with no explicit conversion necessary.
What I mean by "support" is that before the cutoff (at 14:30 UTC on 2018-11-27, four and a half hours from now) any USDT deposits will be credited to the USD account balance of the user who made the deposit, as it has in the past.
> depositing USDT into Bitfinex has always immediately credited your USD balance
This doesn't mean anything if that U.S. dollar balance cannot be redeemed for actual U.S. dollars. Saying "I have 1 USDT" or "I have 1 U.S. dollar on deposit at Bitfinex" is roughly equivalent--both depend on Bitfinex honoring its end of the deal.
Of course the same is true for any bank or bank-like entity, all the way up the chain to the Federal Reserve.
I don't know a lot about Bitfinex, but it seems that the relevant questions are:
1) If you have "X U.S. dollars on deposit at Bitfinex", how easy is it to transfer that balance to an external account? (Maybe possible with a fee?)
2) Can you withdraw the balance in person directly for USD cash? (lol)
3) Does the federal government offer any type of legal guarantee/protection/insurance for the balance? (Hahahahah)
If anyone knows the answers to these, I'm genuinely curious.
Edit: I somehow missed the first part of your post that established the context as NOT being able to redeem the balance for USD. Obviously the ability to redeem your balance on demand for cash is pretty much the defining characteristic of a (solvent) bank, as opposed to say your friend Bob owing you money.
1) Until that announcement: impossible for regular people, and maybe possible for big enough customers agreeing to go through many hoops like dealing with a bank in Uganda (from what I've heard, not sure if even that was possible).
2) Of course not.
3) Which federal government are you thinking about? I think Bitfinex is a Hong Kong entity, and Hong Kong is not a federation (it's a Special Administrative Region of the People's Republic of China), so doesn't have a federal government.
> the same is true for any bank or bank-like entity, all the way up the chain to the Federal Reserve
No, it isn't. For one, ATMs. For another, bank deposits are insured. The banks, themselves, are heavily audited. In fact, "no depositor has ever lost a penny of insured deposits since the FDIC was created in 1933" [1]. (Best treasury practice is to (a) open multiple accounts, to keep deposits insured or (b) hold excess cash as Treasuries.)
Any Tether deposits initiated before 14:30:00 UTC on the 27th of November will be credited to the user's fiat wallet balances