[village-idiot]

You're stretching the definition of reserve too far.

Banks are fractionally liquid, but they're actually fully backed by non-cash assets, such as mortgages, business loans, and bonds. The reserve requirements and risk levels are tightly regulated and they pay insurance (FDIC) to protect against the risk of sudden withdrawal demands or market downturns. In practice this has been working for a very long time, with runs on banks and FDIC involvement being quite rare.

Tether is only 74% backed "by cash and cash-like securities", which means that they are insolvent, with their assets column being worth less than their debits column. This is massively worse than any consumer bank; a bank might not be able to cover all their liabilities at once, but Tether can't meet all their liabilities at all.

[mrharrison]

Uh, I think you are the one now stretching. Tether can meet 74% of their liabilities all at once. Where a bank can only meet 3% or 10% of their liabilities all at once. Tether is way more liquid than a bank.

[village-idiot]

Liquid and solvent are different things.

Tether is more liquid, if you trust that the 74% are actually in "cash equivalent securities" and not loaned to themselves (again), but they're absolutely insolvent.