I have a great idea for a business. I'll invite people to send me money. For every dollar they send me, I'll send them a receipt saying "Thanks for sending me your dollar. You can have your dollar back whenever you like subject to the following condition: you don't really have any right to have it back. And I promise I'll put it in my bank account and keep it there until I decide not to anymore." And people could use my thank-you notes as money!
Would this be a scam? No it wouldn't. A scam is, by definition, a deception; a scheme based on dishonesty and fraud, and I'm being completely candid about my intentions.
From the Tether FAQ:
How do I know my Tether is secure?
Tether is built on top of the revolutionary and cryptographically secure open blockchain technology and adheres to strict security and global government laws and regulations.
All tethers are pegged at one-to-one with matching fiat currency (e.g., 1 USD₮ = 1 USD) and are backed 100% by actual assets in our reserve account. As a fully transparent company, we publish a real-time record of all value held and transferred in and out of our reserve account.
Tethers can be securely stored, sent and received across the blockchain and are redeemable for cash (the underlying asset) pursuant to Tether Limited’s terms of service.
And here are the terms of service as they relate to the redeemability of Tethers:
3. Purchase and Redemption of Tethers: The Site is an environment for the purchase and redemption of Tethers. Once you have Tethers, you can trade them, keep them, or use them to pay persons that will accept your Tethers. However, Tethers are not money and are not monetary instruments. They are also not stored value or currency.
There is no contractual right or other right or legal claim against us to redeem or exchange your Tethers for money. We do not guarantee any right of redemption or exchange of Tethers by us for money. There is no guarantee against losses when you buy, trade, sell, or redeem Tethers.
So Tethers are redeemable subject to the condition that they're not. No deception here. There is a fully transparent company for you.
Also from the terms of service:
Limitation of Liability & Release: Important: Except as may be provided for in these Terms of Service, we assume no liability or responsibility for and shall have no liability or responsibility for any claim, application, loss, injury, delay, accident, cost, business interruption costs, or any other expenses (including, without limitation, attorneys’ fees or the costs of any claim or suit), nor for any incidental, direct, indirect, general, special, punitive, exemplary, or consequential damages, loss of goodwill or business profits, work stoppage, data loss, computer failure or malfunction, or any and all other commercial losses (collectively, referred to herein as “Losses”) directly or indirectly arising out of or related to:
1. these Terms of Service;
2. the Site, and your use of it;
3. the Services, and your use of any of them;
4. the real or perceived value of any Tethers or of digital tokens, money, or any other property used to purchase Tethers;
5. any failure, delay, malfunction, interruption, or decision by us in operating the Site or providing any Service;
6. any stolen, lost, or unauthorized use of your account information any breach of security or data breach related to your account information; or
7. any offer, representation, suggestion, statement, or claim made about us, the Site, or any Service by any Associate.
You hereby agree to release the Associates from liability for any and all Losses, and you shall indemnify and save and hold the Associates harmless from and against all Losses. The foregoing limitations of liability shall apply whether the alleged liability or Losses are based on contract, negligence, tort, unjust enrichment, strict liability, or any other basis, even if the Associates have been advised of or should have known of the possibility of such losses and damages, and without regard to the success or effectiveness of any other remedies.
This is obviously very well thought out! According to #4, if you "perceive" that Tethers are worth something, and they aren't, you have no recourse. Under #5, whatever it is that Tether does, if they suddenly stop doing it, you have no recourse. And under #7, if someone from Tether told you that Tethers are worth something, and they aren't -- no recourse. Unjust enrichment? No recourse!
If Tether management decides to close up shop tomorrow and leave with the all the money, it wouldn't violate the terms of service. It's all there in black and white - no deception there!
Could the fact that Tethers are trading somewhere close to par have anything to do with the fact that some people "perceive" (see 11.4 above) that Tethers have an intrinsic value or are redeemable? Could it have anything to do with the possibility that some people "perceive" that Tether's reserves are committed to redeeming Tethers or supporting the value of Tethers? If anyone "perceives" that, it's their own fault, not Tether's!
Here's my idea again. I'll invite people to send me money. For every dollar they send me, I'll send them a receipt saying "Thanks for sending me your dollar. You can have your dollar back whenever you like subject to the following condition: you don't really have any right to have it back. And I promise I'll put it in my bank account and keep it there until I decide not to anymore." And people could use my thank-you notes as money!
Maybe not. Nobody would do that. It would be stupid.
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