Is there a mechanism for Tether to collapse on its own or does the collapse have to necessarily come from regulation? If the SEC do nothing about this, can Tether keep printing forever?
If everyone holding tether attempted to redeem their tether coins for USD in rapid succession it would implode. Of course, if tether were telling the truth it would be an operational headache but otherwise a non-issue.
There’s also a certain point where they can no longer “print” coins that are believably backed. If tether is to be believed (and, for the record, I’m of the opinion they shouldn’t be) then they’re already responsible for an absurd portion of the commercial paper market.
The collapse would come from a loss of trust from USDT holders who would then try to dump their positions (basically a bank run) for less than their pegged values.
SEC action could be a cause for such a loss of trust, but you can imagine many others, such as leaks (of damning information) from insiders, other exchanges unlisting USDT, and so on.
Maybe a bank run on Tether for some other reason than the SEC? It would require a lot of people to lose trust in Tether at the same time, which surprisingly still doesn't look likely. But it might happen.
There’s also a certain point where they can no longer “print” coins that are believably backed. If tether is to be believed (and, for the record, I’m of the opinion they shouldn’t be) then they’re already responsible for an absurd portion of the commercial paper market.