[diamondhandle]

Ultimately Tether is backed by obligations from the participating exchanges to fund the tethers that were generated on their behalf. It is basically a scheme being run on behalf of the large crypto exchanges to enable wash trades (which are illegal in every market EXCEPT crypto because nobody figured out how to regulate crypto properly, as per Gensler’s recent comments).

If you want to kill Tether and Bitcoin, you don’t need to go after Tether directly or wait for some price drop. Subpoena all of the exchanges and ask for their commercial relationship with Tether to be documented, and for them to disclose all of their loan obligations, collateral and so on. But, your friendly politicians aren’t going to do that, because Coinbase and Binance and the others have locked up some very high powered lobbyists at this point. That’s where Madoff went wrong...

One of the craziest things is actually USDC — an attempt to replace Tether with a cleaned up, legitimate-looking version of the same nonsense.

[dbt00]

> Coinbase and Binance and the others have locked up some very high powered lobbyists at this point. That’s where Madoff went wrong...

Madoff was extremely well connected, and numerous reports to the SEC were ignored as a result. His empire came down when he confessed to his sons, who immediately called the FBI.

[maxbond]

> That’s where Madoff went wrong...

FYI Madoff did have high-powered friends, and was never caught despite numerous tip offs. Madoff turned himself in when the GFC hit and his marks wanted their money.

[fastball]

How is USDC nonsense? If you actually have the associated USD as collateral, it is most definitely not nonsense.

[jhanschoo]

A reason to be wary about USDC are that their haven't been audited, just attested https://www.circle.com/en/usdc , and not even recently at that.

Note that attestations are easy to fake: the article mentions the case of Tether

> Failing to complete an audit and settling on an attestation “for transparency”. The morning of the attestation, tether moved $380m from sister company bitfinex into a bank account to pass the verification

[gruez]

>wash trades (which are illegal in every market EXCEPT crypto

Illegal in crypto as well. https://www.cftc.gov/PressRoom/PressReleases/8369-21

[lifty]

USDC doesn’t have backing either?

[makomk]

USDC isn't backed by actual USD in a bank account somewhere either. (Largely because you can't just stick that much money in a bank account, and it wouldn't actually be close to 100% safe even if you could.)

[fastball]

What? They literally hold 1:1 collateral in USD custody accounts.

[lifty]

Don’t they hold things like treasury bills which are practically equivalent to USD?

[1001101]

Coindesk has a breakdown [1]. Treasury bills make up 2.94% of their cash/cash equivalent balances, which in turn make up 75.85% of their balance sheet. It's mostly in commercial paper. As the Coindesk article points out, it's hard to say what the credit rating or liquidity of the commercial paper is.

Compare to the capital ratios of your average bank, though.

[1] https://www.coindesk.com/tether-first-reserve-composition-re...

[lifty]

This mini-thread is about USDC.

[makomk]

From what I can tell, unlike Tether USDC haven't publicly disclosed what proportion of their reserves are backed by treasury bills and what proportion are stuff like commercial paper - just that they're backed with a mixture of both. On the other hand, they do claim that everything backing their token has very good credit ratings and I don't think Tether do.

[kmonsen]

Bank customers money are backed (up to 250k for each account) by the US treasury though which is a pretty significant difference. The US can print itself out of any bank run, at least in the short term.