Thread by @dkcrypto13

Okay, another thread on #tether.

When they announced their pie chart to the #crypto world, everyone (incl me) was like "Okay, they are backed, great - let's move on".

The thing is - I don't think we can move on actually...

I have written before (cutt.ly/pbZKGiC) the main issue is not that #tether is backed with something these days, but what that backing is and whether that means $USDT should trade as a stablecoin pegged 1-1 to the USD.

Their publication actually means they should not...

Let's look at their breakdown of assets and believe it without a second thought.

You can see that the #tether reserves consist of a grand total of 3.87% in actual cash. All else are instruments that any company might use to park their cash in, however there are some problems...

Firstly, this shows that about 50% of all $USDT is backed by "Commercial Paper". Commericial paper is an unsecured, unbacked note from a company that says "I will pay you sum X on Day Y".

Usually, commercial paper is a cash equivalent, because only the most trusted companies...

... can issue it AND find a market (ie demand) for it. As it is unsecured & short term you have to trust the company that issues it to pay you. So if, say, #binance were to issue such paper, it is unlikely they'd find a market (because they are intransparent).

With #tether...

...buying commercial paper from unnamed sources, they are making the market. Potentially they are even able to go to #binance and say "here is 100m $USDT, please give me a note that says you'll pay me USD". As binance (who comingle $USDT with all other USD) would almost....

... certainly be complicit in any wrongdoing by now, that is not an outrageous assumption. You could even think of #tether having bought $BTC, parked them at #binance and then gotten a note from binance that says they will pay them the value of the BTC. Commerical paper!...

So without #tether actually saying what commercial paper (this is not a clearly defined term as Corporate Bonds or similar) backs 50% of their reserves, it is hard to say they haven't tricked us. This is also in no way unfair. It goes back to the simple situation as before:

If #tether had done nothing shady they'd produce an audit for 2017 and everything is done. If they are not tricking regulators now, then why not simply say "this is commercial paper from General Motors" and we all call it a day. Well - because that kind of transparency might hurt

The second problem is the bigger one in my view. So let's assume the above is all fine and #tether is truy 100% backed by what they are stating and even the commercial paper is from some public giant company.

Then you still have the issue that $USDT is used as a stablecoin.

Why is that a problem? Well, because while some bank's balance sheets may not look super different on first glance, $USDT is not supposed to represent equity in an (unlicensed) bank. It is supposed to be pegged 1:1 to the USD.

All #tether have done over the past years is...

... gaslight all of us. They are doing it now as well, selling T shirts that say "Fully backed" and "Unrivaled transparency". This process is well documented and works extremely well. As long as we all trade 1 $USDT as 1 USD it works and it does not matter what it is backed with.

Now look at another stablecoin. Look at $USDC. They publish a monthly auditor attestation that they hold US Dollar in custody accounts.

This is actually how a stablecoin should look. You do not back a stablecoin with a mix of assets you think are a good equivalent for cash...

...you back it with CASH.

$USDT represent IOUs by the company #tether (in essence, commercial paper 😂) where they say "we will give you 1 USD for it". Whether they go and speculate on something an lose all the money and then go bankrupt is a different story. Your assets are...

...fully at risk in the instruments #tether uses to back their $USDT. It could be that their 50% commercial paper is Apple, but it is just as possible it is binance.

In essence, $USDT is an unsecured debt security and should trade at free float to the USD. It's not a stablecoin

TL;DR (1/3):

IMO #tether reserve split will satisfy #NYAG because it shows reserves in the categories agreed.

However, we now got proof from #tether themselves that $USDT are backed by numerous assets #tether chooses to hold and it is not a stablecoin....

(2/3)
... So when the value of these assets (which could be notes by #binance, backed with $BTC) goes down Funds are not SAFU.

#Tether managed to gaslight us into thinking their IOU debt security is a stablecoin. They sold unregistered securities & all of #crypto runs on them.

(3/3)
The thing is, for this to all fall apart, we'd need to wake up collectively as #crypto and I think that is very unlikely given most OGs support the gaslighting effort. As long as it works, 1 $USDT = 1 USD.

All of the above is, as always, my opinion and not advice.