Tether To Phase Out Lending of Its Own Coins To Customers (wsj.com) 21
Tether said it is winding down its practice of lending out its own stablecoins to customers by next year, addressing a broad risk to the wider crypto world. From a report: In a blog post published on its website Tuesday, the company said it would reduce secured loans issued and denominated in tether to zero throughout 2023. The growth in Tether's secured-loan program was the subject of a Wall Street Journal article earlier this month. With about $66 billion tether in circulation, tether is the market's largest stablecoin, a digital asset that is supposed to have a fixed value pegged to the U.S. dollar. The appeal of tether is that, unlike bitcoin and other cryptocurrencies that experience volatile price swings, one coin could be sold or redeemed for $1.
Tether isn't a household name, but it is a cornerstone to the crypto ecosystem. Traders often use tether as an easier way to buy crypto than through bank accounts or wire transfers. Stablecoin issuers take pains to demonstrate that they have ample funds available for redemptions. Cash and other safe financial instruments easily convertible into dollars make up the vast majority of the assets Tether lists in quarterly financial reports, but the company's secured-loan program has been growing. Tether can't be certain the loans will be paid back, that it could sell the loans to a buyer for dollars in a pinch or that the collateral it holds will be adequate. That could make it difficult for Tether to cover a large volume of redemptions in a crisis.
Tether isn't a household name, but it is a cornerstone to the crypto ecosystem. Traders often use tether as an easier way to buy crypto than through bank accounts or wire transfers. Stablecoin issuers take pains to demonstrate that they have ample funds available for redemptions. Cash and other safe financial instruments easily convertible into dollars make up the vast majority of the assets Tether lists in quarterly financial reports, but the company's secured-loan program has been growing. Tether can't be certain the loans will be paid back, that it could sell the loans to a buyer for dollars in a pinch or that the collateral it holds will be adequate. That could make it difficult for Tether to cover a large volume of redemptions in a crisis.
How is a ponzi scheme an "ecosystem?" (Score:5, Interesting)
but it is a cornerstone to the crypto ecosystem.
It's a collection of parasites.
What next - the COVID ecosystem? The street gangs ecosystem?
Describing it as an ecosystem gives it far too much credit. Ecosystems tend towards stability without pushes from outside factors. Crypto? Hah!
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Yes. Its a sort of mimic of the environment that exists around real financial assets, such as shares or bonds. Or even derivatives. But the difference is, the assets its all based on are worthless. Its like monopoly money.
The most probable outcome at this point is that we see a couple more major defaults. Binance, for instance, and then the whole thing collapses. It is interesting to read what the Zhao has said. From the FT:
âoeThere is no amount of withdrawals that would put us under pressure,
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"As the camera man slowly approaches, we catch sight of the elusive crypto coin. Sensing danger, it puffs itself up to an enormous size."
Governments are afraid of real coins (Score:1)
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Someone has been playing a game of telephone with the facts for years it seems. Nothing like this 'raid and shut-down' seems to have ever occurred. [archive.org]
Regulation is coming! (Score:2)
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Need to be careful, there are ghouls in the basement.
Goldsmith Bankers (Score:4, Informative)
In crypto's speedrun of banking history, this is 17th century goldsmith banking [wikipedia.org]. You take custody of a reserve asset (gold, US dollars) and issue tradable notes in exchange (gold certs, stablecoins). This makes it easier for your customers to transfer custody of the underlying asset by trading the cert/stablecoin instead.
After a while a while you decide to make extra money by lending out the underlying reserve asset, trusting that not everyone will come to you to redeem at once. A little while after that, you don't even bother to loan out the reserve asset, but instead you just start creating new certs/stablecoins out thin air and lend those out. Pocket as much profit as you can, before sooner or later a run destroys your bank revealing that you can't cover your tradable asset.
These aren't exchanges, they are banks. They have been compared to the wild west, but that's totally unfair. Wildcat banks [wikipedia.org] were far better run and stable than crypto. Yet we did away with those because they kept hurting consumers. Nowadays we only let so-called sophisticated investors take risks like that with hedge funds. And nobody should be under any illusion that those provide stability or the ability to withdraw funds in a crisis.
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Wait, I'm confused. You're talking about crypto, or fiat currency?
Crypto is fiat. It has no commodity value.
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Wait, I'm confused. You're talking about crypto, or fiat currency?
Crypto is fiat. It has no commodity value.
OK, glad we agree. The only difference of course being that govt can't just steal your money by printing additional bitcoins like it can with dollars.
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Right. With bitcoin anybody can do that.
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It is amusing to see people like Ron Paul who are dedicated hard money men (goldbugs) who spend their lives denigrating the world reserve currency - backed by the full faith and credit of the U.S. government and the wealth of the entire national economy - as some sort of scam and also pushing crypto-currency which actually does have all of the faults (and then some) that they attribute to the U.S. dollar.
audit (Score:2)
"Cash and other safe financial instruments easily convertible into dollars make up the vast majority of the assets Tether lists in quarterly financial reports"
There's no guarantee these financial reports aren't completely fabricated.
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"Cash and other safe financial instruments easily convertible into dollars make up the vast majority of the assets Tether lists in quarterly financial reports"
There's no guarantee these financial reports aren't completely fabricated.
Even if it is true, you can bet the other 'safe financial instruments' are other shitcoins and not treasury bonds or the like.
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Which is why there are rules for banks and investment banks. It is only fair after all, in exchange for the government protecting you from rampaging mobs ransacking your business looking for their money, you agree to abide by various regulations including those regarding transparency.
Tether is supposed to be a stable coin back by (Score:2)
... Well, currently nothing that anyone can figure out. While a lot of people use it as a mean of transacting crypto, it's basic tenet of 1:1 to dollar is shaky at best dubious at worst.
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The way to strictly tie it to the USD is to deposit actual USD into a trust. Then you can't print more of the stablecoin without also depositing more USD to balance it. People could still speculate on the stablecoin but that's mostly futile when you only get back a 1-to-1 when you cash it back in for the USD. Of course, such a system is still built on the ephemeral currency known as "trust". And who in their right mind trusts a bunch of bros? "Trust us to manage ourselves properly without any external