I'll Contend: There's Absolutely Nothing Shady, Corrupt or Criminal About Tether

[Hydrogen]

There appears to be a question of what purpose stablecoins like tether can be utilized for. What role they fulfill.

 

IMO stablecoins are one of the best options to purchase crypto via fiat.

Stablecoins retain value well. Its feasible to hold them long term until a good buy in opportunity arises. A trader purchasing $1 million dollars in tether today can rest assured it will be worth $1 million dollars 5 or 10 years from now. This makes stablecoins like tether a better intermediary option than altcoins which normally appreciate or depreciate in value over time.

Stablecoins do not suffer from disadvantages of bitcoin ATMs or services like localbitcoins. ATMs can carry 20% price markups. Localbitcoins can carry similar precedents and introduce possibility of scams. The lack of percentage price mark up make stablecoins a more attractive option.

US markets tend to be limited. The few options americans have for purchasing crypto are restricted to a handful of services like coinbase which do not have the best reputation.

There was a month in 2018 where tether reported $800 million dollars in tokens redeemed. This could indicate the tether and stablecoin markets are an avenue of crypto purchase for whales and large institutional investors.

If all of the above is true. Is correlation between tether volume and bitcoin demand, surprising? If indeed tether and stablecoins are one of the best options for purchasing crypto in current existence?

People might wonder what stablecoins or tether is used for. What if its primary role is an intermediary between fiat and crypto for large institutional investors looking to buy in?

[1715583205]

1715583205

[mindrust]

This last pump from 7.5k to 10k probably has nothing to do with tether pumping as far as I can see. Tether marketcap stays same on CMC and bitcoin did a %30. There is still a possibility that it might be the earlier old tethers doing their thing though. So much of them around.

[BitHodler]

As long as Tether the company doesn't allow a proper audit of resources, there is every reason for people to question their business model, especially with how they have admitted to not have that 100% backing.

They also admitted that they used non backed tokens to buy Bitcoin with. I'm not sure about the amounts they bought Bitcoin with, but the act alone is already extremely shady which people rightfully worry about.

[Lucius]

I agree with BitHodler, without transparency Tether is actually in the opinion of many a very suspicious project. If they first say that every Tether is backed with $1, then that this is not true entirely, but that it is backed by some other assets for which they do not want to reveal what it is. So if I have $100 at least I know I have them in my pocket, but with 100 Tether on some exchange, I only have promise that those tokens worth $100.

What if at some point the authorities prove that Tether is mostly printed with no real coverage in dollars? While I do not question the usefulness of a project like this, there are still too many possibilities for manipulation that justifiably cast a shadow over the whole project.

[o_e_l_e_o]

Bitfinex is absolutely corrupt and Tether is a scam.

I would suggest to everyone to have a read of the most latest lawsuit (of several) against Ifinex and Tether: https://www.courtlistener.com/recap/gov.uscourts.nysd.524076/gov.uscourts.nysd.524076.1.0.pdf. If you want a quick skim, just read points 1 through 14, 80 through 91, and 116 through 136.

Essentially, Tether prints USDT out of thin air, sends it to themselves at Bitfinex, uses it to buy bitcoin, and then sells that bitcoin back to users for real dollars. Any time they need to redeem Tether, they can sell the bitcoin they bought for nothing by printing Tether out of thin air, and claim they had that money in reserve all along. That's without even touching on the fact they loaned themselves $850 million by giving fake USDT from Tether to Bitfinex to stop them from being insolvent.

[Broly46]

Tether has been changing their stand within the short time frame of just two years, I’m sorry sir we aren’t so forgiveful for even one lie, when there is a first time, there will sure be the second time, they will continue to lie their way out of every profit they could accumulate, I’m certain that tether will eventually backed by nothing but a promise, remember federal reserve? We never forget we never forgive we are nobody.

[lobat999]

Bitfinex is absolutely corrupt and Tether is a scam.

I would suggest to everyone to have a read of the most latest lawsuit (of several) against Ifinex and Tether: https://www.courtlistener.com/recap/gov.uscourts.nysd.524076/gov.uscourts.nysd.524076.1.0.pdf. If you want a quick skim, just read points 1 through 14, 80 through 91, and 116 through 136.

Essentially, Tether prints USDT out of thin air, sends it to themselves at Bitfinex, uses it to buy bitcoin, and then sells that bitcoin back to users for real dollars. Any time they need to redeem Tether, they can sell the bitcoin they bought for nothing by printing Tether out of thin air, and claim they had that money in reserve all along. That's without even touching on the fact they loaned themselves $850 million by giving fake USDT from Tether to Bitfinex to stop them from being insolvent.

I guess the crypto-community does not easily forget the alleged controversy that Bitfinex illegally and secretly used Tether's fund worth more or less $700 million to cover up its losses which technically defrauded its investors!

Link: Bitfinex Allegedly Covers $850 Million Loss With Tether Funds

[mu_enrico]

I think the relationship between Tether volume and bitcoin price movement is only a theory that cannot be proven. However, the concern about Tether is legit because it's still a centralized entity. The fact that they don't back Tether 1:1 with USD told all the stories about our concern that we cannot audit what's inside their vault.

Moreover, the suspicion about their criminal activities is not baseless, https://cointelegraph.com/news/head-of-crypto-capital-arrested-in-connection-with-money-laundering

[exstasie]

A trader purchasing $1 million dollars in tether today can rest assured it will be worth $1 million dollars 5 or 10 years from now.

I'm not confident in that assessment. Centralized stablecoins are functionally no different than balances held on centralized exchanges. They are exchange-issued fiat IOUs. When you hold USDT on an exchange like Binance, the counterparty risk is actually two-fold: Tether could become insolvent because tokens are unbacked or Binance could become insolvent if their USDT wallet gets compromised.

In fact, we already know Tether is insolvent. Given the numerous exchange hacks, scams, and government shutdowns that have separated exchange customers from their money, I'd say holding USDT is pretty risky.

US markets tend to be limited. The few options americans have for purchasing crypto are restricted to a handful of services like coinbase which do not have the best reputation.

Neither Tether nor Bitfinex serve Americans anyway. There's no peer-to-peer liquidity either.

Is correlation between tether volume and bitcoin demand, surprising?

Of course not. People wiring money to Tether is the same thing as people wiring money to any Bitcoin exchange. It's being used to buy cryptocurrency.

[o_e_l_e_o]

When you hold USDT on an exchange like Binance, the counterparty risk is actually two-fold: Tether could become insolvent because tokens are unbacked or Binance could become insolvent if their USDT wallet gets compromised.

Not to mention the thing they are supposedly "backed by" (even though we all know they aren't actually backed at all), is fiat. Even if your $1 million purchase of Tether is still redeemable for $1 million USD in 10 years time (and that's a big if), you will have lost a significant percentage of your purchasing power thanks to fiat being a sinking ship. So you can add that to the list of risks. If you own Tether on an exchange, then someone else is holding an insolvent currency which is constantly devaluing on your behalf.

Tether is a scam. Everyone would do well to exit it as soon as possible.

[Pearls Before Swine]

People might wonder what stablecoins or tether is used for. What if its primary role is an intermediary between fiat and crypto for large institutional investors looking to buy in?

I still don't understand why institutional investors would have to use them at all.  They don't need an intermediary form of money to purchase stocks, bonds, or anything else.  I really don't see what purpose they serve...at all.

I don't believe there's anything criminal about tether or any other stable coin.  It's just that like ico's, there's very little utility other than the fact that a trader is using cryptocurrency rather than fiat.  Where is the advantage there?  I'm not asking this rhetorically.  I'd really love a good explanation, and I'll continue to watch this thread.

[hatshepsut93]

Stablecoins retain value well. Its feasible to hold them long term until a good buy in opportunity arises. A trader purchasing $1 million dollars in tether today can rest assured it will be worth $1 million dollars 5 or 10 years from now. This makes stablecoins like tether a better intermediary option than altcoins which normally appreciate or depreciate in value over time.

I srsly doubt that a shady company with mounting allegations against it would still exist in 10 years. And you know what will happen when the company would fall? USDT will go to zero instantly, since there will be no one to guarantee it's value. Stablecoins are just payment companies, and we've seen payment companies being taken down in the past due to their legal problems. Crypto and blockchain change absolutely nothing in this regard.

[alyssa85]

Not to mention the thing they are supposedly "backed by" (even though we all know they aren't actually backed at all), is fiat. Even if your $1 million purchase of Tether is still redeemable for $1 million USD in 10 years time (and that's a big if), you will have lost a significant percentage of your purchasing power thanks to fiat being a sinking ship. So you can add that to the list of risks. If you own Tether on an exchange, then someone else is holding an insolvent currency which is constantly devaluing on your behalf.

Tether is a scam. Everyone would do well to exit it as soon as possible.

Exactly. If you wanted something "stable" why not hold real dollars, instead of a pretend dollar coin? Or hold bitcoin which at least protects you against inflation.

[Hydrogen]

Exstasie's post appears to be the one people like the most, it echoed everything others said & so I'll try to respond to this one.  

#1  I'm not confident in that assessment. Centralized stablecoins are functionally no different than balances held on centralized exchanges. They are exchange-issued fiat IOUs. When you hold USDT on an exchange like Binance, the counterparty risk is actually two-fold: Tether could become insolvent because tokens are unbacked or Binance could become insolvent if their USDT wallet gets compromised.

#2  In fact, we already know Tether is insolvent. Given the numerous exchange hacks, scams, and government shutdowns that have separated exchange customers from their money, I'd say holding USDT is pretty risky.

#1  I disagree with tether existing as a variation of a gold standard or IOU. There is no IOU obligation once USDT tokens are redeemed for fiat. The only existing condition is that the exchange rate maintain a 1:1 ratio with the US dollar, which it is tied to. This falls under a category of currency manipulation which every nation on earth engages in.

#2  Imagine that a consumer deposits $100,000 in a bank. Its very common for banks to take $50,000 or more of that deposit and invest in it high risk schemes, which will fail. Leaving banks unable to pay those who deposited money in it. If tether is 74% backed, its far more liquid, stable and safe than the banking industry on average. The US dollar is far less than 74% backed in gold and I never see anyone complain about it.

In comparison to standards of global financial industries, tether is probably more liquid, safe, stable and better managed. All of which raises a question of why tether is criticized and questioned to a far higher standard in comparison to how banks or governments of the worlds do things.

Neither Tether nor Bitfinex serve Americans anyway. There's no peer-to-peer liquidity either.

Valid point. Tether discontinued support for the US market in 2017 after likely being pressured by certain special interest demographics to withdraw support.

Is correlation between tether volume and bitcoin demand, surprising?

Of course not. People wiring money to Tether is the same thing as people wiring money to any Bitcoin exchange. It's being used to buy cryptocurrency.

I know this.  

You know this.  

Experts and professionals appear not to know this, however, as they continue to claim there is something shady, suspicious or criminal about it:

Bitcoin Gains Correlate With Tether Issuance, Researcher Says

https://www.bloomberg.com/news/articles/2019-10-03/bitcoin-gains-correlate-with-tether-issuance-researcher-says

[rose9696]

This last pump from 7.5k to 10k probably has nothing to do with tether pumping as far as I can see. Tether marketcap stays same on CMC and bitcoin did a %30. There is still a possibility that it might be the earlier old tethers doing their thing though. So much of them around.

i dont think so man. When tethering is printed and depicted on exchanges, it is also the moment that bitcoin increased. This is a general rule of traders and should be noted.
Tether and Bitcoin and manipulation are very closely connected. It is just that the SEC does not have enough evidence to accuse those manipulators.

[magneto]

Tether is a good conduit for funnelling from fiat to a more fungible form of token that can be traded across exchanges around the world. There is nobody that is denying that.

What is being questioned is the legitimacy of the reserves that they claim to keep, as well as the fact that they have recently revised as to what "full reserve" means by adding in new assets that can be counted as reserves (essentially allowing them to invest in riskier asset classes with money stored with them).

Inherently there is nothing wrong. There is just a risk that they're running a fractional reserve, that's all.

[o_e_l_e_o]

Imagine that a consumer deposits $100,000 in a bank. Its very common for banks to take $50,000 or more of that deposit and invest in it high risk schemes, which will fail. Leaving banks unable to pay those who deposited money in it.

It's actually pretty common for banks to lend out up to 90% of deposits, and keep only 10% in reserve. Hence the term "fractional reserve". However, let's not use the scam that is fiat banking as a bench mark for judging a good coin. Most coins look good when judged against these low standards.

If tether is 74% backed, its far more liquid, stable and safe than the banking industry on average.

Tether is 74% backed by unknown assets. From their website:

[Our reserves] include traditional currency and cash equivalents and, from time to time, may include other assets and receivables from loans made by Tether to third parties, which may include affiliated entities.

So cash equivalents, which includes the bitcoin they stole bought with USDT they printed out of thin air, as well as interest on the $850 million loan they paid to themselves. They printed $850 million out of thin air, loaned it to themselves, charge themselves interest on that loan, and then says your assets are backed up by the interest they are paying themselves. That is in no way liquid or stable.

Also worth noting that whatever percentage of their assets are backed up by actual USD, that USD is obviously being held in a bank and so is therefore subject to all the same issues with USD which you outlined above. Tether is compounding problem upon problem.

[Hydrogen]

It's actually pretty common for banks to lend out up to 90% of deposits, and keep only 10% in reserve. Hence the term "fractional reserve". However, let's not use the scam that is fiat banking as a bench mark for judging a good coin. Most coins look good when judged against these low standards.

This wasn't common in the united states until 1999 when President Bill Clinton repealed regulation separating commercial banking from investment banking known as glass steagall, which was created in the aftermath of the Great Depression to prevent bankers from gambling on risky investments with the money of depositors.

I would be interested to know why comparisons between crypto and existing financial industries are not valid comparisons in your eyes. At least some of the negative content people read about tether, is published at the direction of banks. Most of the negative things you read or hear about tether likely comes from banks utilizing their influence on the media to push agendas.

What should the standard of comparison be if not tether vs our traditional financial industry?

So cash equivalents, which includes the bitcoin they stole bought with USDT they printed out of thin air, as well as interest on the $850 million loan they paid to themselves. They printed $850 million out of thin air, loaned it to themselves, charge themselves interest on that loan, and then says your assets are backed up by the interest they are paying themselves. That is in no way liquid or stable.

Also worth noting that whatever percentage of their assets are backed up by actual USD, that USD is obviously being held in a bank and so is therefore subject to all the same issues with USD which you outlined above. Tether is compounding problem upon problem.

Tether doesn't hold stablecoins in trust to back their product. What they hold are US dollars and assorted assets. The argument that tether prints money out of thin air to back their platform doesn't make much sense to me, in that regard.

When consumers purchase stablecoins like tether, essentially what they're buying isn't a digital token. Its a solution to a problem they face. For some stablecoins like tether are their optimal solution for purchasing crypto. Necessity being the mother of invention is what gives stablecoins like tether value.

The only real question I see is whether private enterprise should have the freedom and right to create their own solutions to problems utilizing digital assets like tether. Whether markets and consumers should be the one's to decide the value of stablecoins. Or whether some centralized authority which currently consolidates power should have the power to decide whether stablecoins like tether create intrinsic value enough for consumers to utilize them.

[o_e_l_e_o]

I would be interested to know why comparisons between crypto and existing financial industries are not valid comparisons in your eyes.

I didn't say they aren't valid, simply that the fiat banking system is a terrible barometer to uses as a comparison, and if Tether is in any way comparable to fiat, then that's an awful indictment of Tether. The whole point of crypto is to move away from these centralized entities being able to rig the system for their own benefit, with Ifinex/Tether categorically do.

The argument that tether prints money out of thin air to back their platform doesn't make much sense to me, in that regard.

That point isn't really up for debate. The fact that Tether isn't backed up 1-to-1 means they have printed Tether that wasn't backed up i.e. out of nothing.

When consumers purchase stablecoins like tether, essentially what they're buying isn't a digital token. Its a solution to a problem they face.

Sure, I'll accept that Tether serves a purpose, but that doesn't make it any less shady. There are better stable coins out there if you so desire.

[teosanru]

I don't mean to contend tether and neither I am sure that tether is a scam. But if you say that there is. 3.5 Billion reserve of U.S. Dollar stored in some bank (storage in cash being impossible unless one is Pablo Escobar) and no Auditor has been able to confirm such reserve I highly doubt your common wisdom. Even if they have stored such amounts of money from where is the cash continuously being stuffed in the Cryptocurrencies? We are talking about real cash here. Moreover why is the company behind tether is changing auditors continuously almost every year. Also we all like to call XRP a shit coin because it is too centralised and manipulative don't you think tether also accurately fits that criteria? I can not argue the utility it provides but I being a rational user demand some accountability too.
Edit:
An article from coindesk confirmed from numerous sources.

Tether had previously promised a full audit of its dollar holdings and had hired auditing firm Friedman LLP to that end, yet that relationship was dissolved in January 2017 without a full explanation and without any audit forthcoming.

You know how shady it is for a company to dissolve relationship with it's auditor amidst the audit proceedings? It clearly states that certain material misstatement would have been prevelant in the books of Tether Limited which Friedman LLP were trying to report but they were removed before that.