Coffeezilla (on YouTube) has been exposing the Tether scam for almost two years now [1]. Even as a crypto believer (long-term), it’s been fascinating to see this scam survive this long despite being repeatedly exposed.
> Keeping the Tether delusion going is an existential matter for everyone with a stake in crypto.
First, all money is delusion, that's a documented fact (or to put it nicely, currencies rely on user's faith/belief to function).
Second I do agree with you, but I believe it's only part of the story.
I think tether also does actually provide a tangibly useful service to the crypto world, specifically high-speed liquidity to exchanges which is why the scam is allowed to continue.
My bet is that the day a legitimate (as in: transparent, properly audited by both traditional accounting firms and blockchain techniques), incorporated in non-banana-republic jurisdiction, etc ...) competitor comes around, Tether will die in an instant dumpster fire.
> transparent, properly audited by both traditional accounting firms and blockchain techniques), incorporated in non-banana-republic jurisdiction
You can't square that circle because the money laundering controls aren't solvable enough to be in a regular jurisdiction and have psudonymous permissionless blockchain transfers.
Part of it is self-perpetuating. When you see Bitfinex'ed yell about the impending collapse of Tether for half a decade, and it still hasn't collapsed, the doom-sayers become less and less credible.
The crazy thing is, tether skeptics have repeatedly been proven right on the facts. The initially-denied bitfinex/tether relationship was revealed in the paradise papers. The fact that it was not 1:1 cash backed was confirmed by the NYAG investigation.
The thing that they didn’t anticipate is that the market wouldn’t care.
The reason why it isn't collapsing is because of the long term crypto believers. This is a cult and those can last a very long time. The cultists will keep on tithing their pay checks.
They really haven’t had a run on the pyramid to deal with issues. Each broken exchange has been bought by the next bigger one. Most big crypto money has cashed and just holding so I feel they haven’t seen the bankrun to break them where funds need to redeem Tether for real currency.
The tether agreement says they don't have to redeem your tether and if you're a US person you're totally ineligible in any case.
It's not a pyramid because it was always made explicitly clear it was exchangeable for nothing, like if I sold you pieces of paper with my signature on it.
I honestly don't understand how anyone could read the terms of tether and possibly believe they have the right to demand real money for their tether. Tether is up front that it is monopoly money.
until they got sued by the new york attorney general they explicitly said on their website that tethers were backed 1:1 by dollars (which was a lie). that doesn’t sound like they are being up front about being monopoly money.
There's two other comments in this thread that were posted before yours, with links outlining Tether's restrictive ToS. You should probably read them instead of doubling down on a weird half-position.
What is my half position? My position is that it's disingenuous to pretend that Tether has always presented itself as "monopoly money". They are knowingly engaging in fraudulent behavior.
Here. They can redeem with the reserve assets instead of with dollars, and are not liable if the reserve assets decline in value due to illiquidity etc
They also refuse to disclose the nature of their reserves beyond unaudited attestations, and are known to have lied regarding their reserves multiple times before and admitted as such in a settlement.
> Tether reserves the right to redeem Tether Tokens by in-kind redemptions of securities and other assets held in the Reserves. Tether makes no representations or warranties about whether Tether Tokens that may be traded on the Site may be traded on the Site at any point in the future, if at all.
> 14.8. any delay in withdrawal or redemption, or loss of value of Tether Tokens or the Reserves backing such Tether Tokens resulting from failure or insolvency of any bank, depository, custodian, borrower, or payment processor holding or processing the assets backing Tether Tokens, or from the theft of such assets, or from freezes, seizures, or other legal process asserted by a Government; or
In addition to that, here's the section on consequences for prohibited use:
> Any use, whether actual or suspected, as described in this paragraph shall constitute a “Prohibited Use”. If Tether determines that you have engaged in any Prohibited Use, Tether may address such Prohibited Use through an appropriate sanction, in its sole and absolute discretion. Such sanction may include, but is not limited to, making a report to any Government, law enforcement, or other authorities, without providing any notice of you about any such report; confiscation of any Fiat, funds, property, proceeds, or Digital Tokens in any Digital Tokens Wallet that you have on the Site; and, suspending or terminating your access to any Services or Fiat, funds, property, or Digital Tokens from any Digital Tokens Address.
So they can confiscate all of your funds if you engage in prohibited use. What might that entail? In addition to the normal money laundering, committing crimes, etc, they count such dastardly things as:
> 8.8. use the Site or any Services to engage in conduct that is detrimental to Tether or to any other Site user or any other third party;
> 8.14. where you are subject to prohibitions or restrictions as set forth in paragraph 3 [Identifying yourself as being from the US], access the Site or use any Services utilizing any virtual private network, proxy service, or any other third party service, network, or product with the effect of disguising your IP address or location, or access the Site or use any Services using a Digital Tokens Address in or subject to the jurisdiction of any Prohibited Jurisdiction or Government or Government Official thereof; or,
> 8.15. violate, cause a violation of, or conspire or attempt to violate these Terms of Service or applicable Laws.
So if you break their TOS, lie about being from the US, or engage in conduct that's detrimental to Tether, they can just take all of your money and tokens per their TOS.
> I’m going to predict that the crypto markets will suffer much more compared to even FTX
How have the crypto markets suffered from FTX's collapses?
There was a temporary dip at best.
FTX and other exchanges are the very negation of what makes crypto interesting:
- centralized
- not transparent
- customer abandon custody of their money
Everything that something like FTX is (and all the Coinbases and Krakens of the world fall in the same category) is the exact antithesis of what crypto stands for.
Tether is an altogether different beast.
It's indeed very likely a scam, but it seems that it is filling such a huge and legitimate need in the market that has allowed it to survive for so long.
I would bet around $5k/BTC when it falls, as the crypto isn't fundamentally dead but a large portion of the cash value in circulation could turn out to be scam.
Tether is fascinating for sure. Tether is currently the heart of the cryptocurrency space, it provides liquidity and risk management (via a stable coin) "on-chain" without relying in a fiat currency. Tether has more daily volume than Bitcoin. Tether is accepted in mosts places and there is local liquidity available. Tether could fail surely, if it failed then all crypto will go deep down. And it is important to note that the people behind Tether are deep incumbents too, not just random project.
USDC which is more scrutinized is 1/10 of the Tether volume. BUSD 1/4 (not bad!) [1]
Coffeezilla really is miles ahead of the MSM in reporting on this. To such an extent that his video from over a year ago covers the same territory as this article.
[1]: https://youtu.be/-whuXHSL1Pg