The other reason people hold tethers because that want stable price to avoid volatility in the crypto market. So a person will sell crypto for tethers for price stability especially before a bear market so its not just used for buying cryptos.
Is tether holding safe government bonds or high risk junk bonds?
What you wrote is obvious, but stable coins also have other very important function.
When you sell cryptocurrencies and exchange them for fiats, in many countries you are obliged to settle each such transaction with the tax office.
Stable coins, despite the fact that they are the equivalent of fiats, are still a cryptocurrency, so transactions made on them do not have to be reported. This must be reported to the tax office only when you exchange from stable coin to fiat.
This is a great help for someone who does a lot of transactions.
Centralised stable coins like tether USDT and USDC and such might be required by the upcoming SEC or FATF new crypto regulations to report all transactions to the tax office. Also KYC/AML regulations might come onto centralized stable coins too.
I heard that tether frozen somebody's usdt wallet, meaning tether is obviously centralized. If a employee in a tether office can do this then the employee can report all transactions to the tax office or face risking more fines.
If that happens then what's the advantages of holding centralized stable coins over fiat currencies then apart from higher yields?
A stable currency is a very important ingredient for the market. In keeping with the best considerations with criteria such as reserve transparency, volatility, velocity, ownership, Tether still accounts for the absolute majority. Also, a lot of impressions in usdc, Busd, Tusd Although I fear there will be a big change in the stable direction of the coins in the near future.
All stable coins currently have a hard lock rate. If the case does not lock, there is a greater chance of compliance.
What is a hard lock rate?
Lets say for example that the auditors/regulators has found that USDT Tether has printed tokens out of thin air that are not backed by the fiat $dollars, from there what will happen to USDT on the basis of this news?:
- Is it possible for a stablecoin to crash to 0?
I think anything can happen
- Will centralised exchanges start delisting USDT in light of this news?
This is very unlikely because USDT is one of the popular coins used and traded by many people, they benefit from major withdrawals so I think this is not. And I think stable coin is one of the important coins to trade in the market. Can't cancel if canceled, it's hard for us to have better similar options.
I agree centralized exchanges make a lot money in stable coin trading pair fees so if centralized exchange is pressured to delist a centralized stable coin or stable coin crashes to 0 then that cex will lose money and go bankrupt and all the trading volume they had will go onto decentralized exchanges.
I don't know about trustworthy because one of the biggest stablecoins we have in the industry is tether and it has a sketchy past which which might drag it into the not trust worthy coins but it still remains to be the biggest and most probably the most popular unless you decide to use tether based on other blockchains like the tron chain. And unfortunately am not so much of a stablecoin person so I have stuck to tether the original stablecoin.
Using tether USDT on Tron is much cheaper fees but what do you mean when you say unless you decide to use tether on tron blockchain?
[moderator's note: consecutive posts merged]
