Thread by @BambroughKevin

After reviewing this document from the Presidents Working Group on financial markets discussing StableCoins future regulatory framework, I’ve got some opinions on how this all will probably play out. #cryptocrash #crytpo #sec #cftc #fomc $mstr home.treasury.gov/system/files/1…

Firstly regulation is coming even though the crypto believers don’t want to accept that it will.

https://twitter.com/openmarkets/status/1422620415411855365?s=21

@GaryGensler has clearly (ominously for the crypto world) stated that throughout history there have been attempts for private banks and currencies to operate outside of public regulations and all have failed. Basically saying crypto and exchanges will be regulated or destroyed

This is a great podcast by the BBC on one of the huge crypto scams and gives great insight into how some of these coins develop a pure cult following where members block out information from outside their cult. Kinda like how @LawrenceLepard blocked me

bbc.co.uk/programmes/p07…

I mentioned the ‘money laundering’ problem that the crypto world has and he instantly blocked me saying it’s FUD and nothing useful information could come from me and I believe he doesn’t want his large following reading about the real problems with crypto.

When you read and digest the PWG Stablecoin doc at the top of this thread it’s clear that the CTFC, SEC as well as every similar regulatory in others countries are now rapidly moving towards regulating crypto exchanges and stable coins.

A believe the focus is on stablecoins because the development of Tethers USTC coin dramatically change the ecosystem by fraudulently pretending to be backed 1 to 1 with usd.

Stablecoins are make claims as to there underlying value and therefore can be frauds

To protect people from criminals and frauds there must and will be regulations. They will be treated like banks, audited and required to have insurance (as per the paper)

I’m sure the SEC, FOMC and the office of the president have all be made well aware that Tether is a fraud

They realize there is a systemic risk to the financial markets. The implosion of the crypto markets will have a huge $3T negative wealth effect. A significant percentage of citizens own and absolutely love there crypto coins. For many it’s a cult.

They believe that crypto to sound money and that it will replace the public financial system in time and that the crypto coins they horde will make them fantastically rich. (Listen to bbc doc above). It’s a total cult for some. Many others just knowingly play the greater fool.

Crypto is also significantly supported by young men. They disproportionately own crypto 2-1 vs young women. And they are also typically an anti banking and government regulation demographic.

Some have suggested that this is a real political concern to the administration

The political concern is likely that if the sec and courts are blamed for destroying crypto wealth there’s going to be a big backlash and it may well flip the next election in the USA. I agree with this premise. Plus there’s likely concern about a shock to the system and

If the crypto world implodes quickly it will effect stocks, the economy and also flip the next election. So, with this in all in mind I think they are and will continue to move slowly and carefully.

The hearings they are having is really a formality imho to starting giving notice to the public. Raise awareness as to the frauds and the fact that regulation is coming.

I expect the hope is that the crypto market will destroy some of the fraud coins on its own.

The more sophisticated crypto investors may well read the writing on the wall and being pulling cash out do the ecosystem, drain it, and that will implode it. Best case scenario for the current administration imho. The market sees the fraud and reacts to it in its own.

The narrative will be ‘why wasn’t there protection and oversight.. why didn’t regulators warn us. Etc.

I believe this is the preferred path and that it will likely be achieved by focusing on the biggest problem and most obvious fraud. Tether Holdings.

It’s going to become more obvious to market participants that the FBI, SEC and CFTC are gonna move on Tether and it’s already being kicked off crypto exchanges and banned in other countries.

coingeek.com/tether-banned-…

Imho Tether is finished. It’s going to be banned everywhere, destroyed and be exposed as a massive fraud very soon.

There will likely be at least one crypto exchange taken down shortly there afterwards, but probably several. There will be class action lawsuits galore.

You can open an account pretty easy with Kraken and get started trading crypto!
Here’s a screen grab of what they say about Tether. I seriously doubt this language will give them much protection from lawsuits when tether goes poof.

I’m not saying that I know which exchanges have done swaps with Tether but I think any that have will be destroyed in time.

One of the things in the PWG doc at the top of this thread says is that regulation will required disclosure any relationships between coins and exchanges

It goes so far to suggest it won’t be permitted and I agree that it shouldn’t be.

What has likely happened is some or perhaps many major crypto exchanges have engaged in swaps with Tether Holdings. At least one has admitted to it apparently.

This is so key to understanding how fucked the crypto ecosystem likely is. Tether can create a billion USTC and swap it with a crypto exchange for ‘an IOU’ in the form of ‘Comercial paper’. Trying to make this easy to understand for everyone…

This swap is the exchange saying to tether I will pay you $1 billion dollars, plus interest in exchange for 1 billion in tether coins.

Would love to see one of these docks and we will soon enough. Likely it’s some sort of interest only arrangement.

Little down the exchange had the ability to return USTC back tether and cancel the arrangement at anytime.

This arrangement though is great for both while the game works. New client money comes in, the exchange takes the cash and gives them USTC

In theory all would be fine if everyone kept the cash in tbills and was able to repay it back to people if/when they want out of tether.

But there’s zero chance that’s what’s happened. The reality is there’s likely a minuscule amount of cash available in the ecosystem

The crypto world things they have $3T in collective wealth but in fact the ecosystem likely has just a couple percent of that imaginary $3T in actual traditional money . My bet is it’s 1% or less $30b.

What we are about to see is a classic industry wide run on the bank.

It’s not necessarily that Bitcoin is going to shown to be going down on exchanges. They will do there best to continue creating tethers and buying up Bitcoin and other cryptos to try to keep the illusion alive.

Likely the real sign of the break will come when…

The market players start reporting that an exchange is not allowing withdrawals.

It will be one exchange first and then there will be contagion. Everyone will begin being concerned that they won’t be able to get there money out of there digital wallets back into the real world

Imho. This is about to happen very very fast. Requests to move money out of crytpo wallets back to people’s traditional bank accounts will overwhelm the exchanges and the fraud / ponzi nature of the entire ecosystem will be revealed.

How can I be wrong? Well there is no way I’m wrong on Tether Holdings. It’s clear as day and you can bet that’s playing out. It’s known. Many countries like Canada are taking action. That’s part is 100% certain to me…

The only question is time. How soon will outflows be greater than inflows? Can the greater fool continue for a year or two. Can the industry survive the tether blow up as many crytpo loves like to claim? Short answer no.

The Achilles heal of the crypto ecosystem is the swap arrangements that exchanges have done with Tether and the huge sums of money (USTC is fake money, basically counterfeit USD) that have been created out of thin air and sold to the public.

The collective losses on tethers will be in in the tens of billions if not $50-55b or more.

There is about to be mass outrage and distrust. Remember with the swap arrangements it will undoubtedly be shown that little to no ‘principal’ cash was transferred to tether by exchanges

Meaning that investors money that they used to pay for tethers USTC should all be with the exchanges that engaged in the Tether manufacturing process via swaps.

This is so important to understand. It’s why I will be proven right the ecosystem will not shake off the usdt loss

Bottom line here is that sold Tethers to customers that they created will be forced to pay back all the funds they got selling those tethers. If you think the exchanges that did this have all those funds and will pay it back well.. I can’t help you. They will be bankrupted

The unaudited, unregulated exchanges have undoubtedly ‘invested’ the bulk of the capital that came in via selling tethers into there infrastructure, perhaps coins that are blowing up (attempts at market making) and also paid a lot of money out in bonuses.

Some will have bought office buildings.. all sorts of assets. But they aren’t liquid.

The scary thing for the broader economy is to consider where all that money has flowed to. All those billions that came into the industry! The taps about to be turned off.

How many employees? What’s the advertising budget of the industry? How many buildings will be put up for sale? Etc. This could get really ugly fast.

Then there’s the stock market contagion and likely significant drops in related stocks and stocks that…

Stocks that a largely owned by people suffering crypto losses will drop as they sell what they can..

Stocks in funds that have large crypto losses will be sold as investors redeem.

This concern is what caused me to dig into the Tether mess.

Trust me.. I’d rather keep the party going but this is ugly shit going down. Best to be prepared.

One thing we can bet on is the taper talk will be over. The Fed and the administration will be working over time to try to simulate that economy.

The $3T imaginary wealth could quickly plummet by 80-90% wiping out $2-2.6T. Huge negative wealth effect. I look forward to reading others thoughts on who this will play out.

FYI. I’m done playing with my attackers

Note: people who reply to this chain with off topic attacks on me or just try to deflect with bullshit about how crappy the resource sector is or how corrupt the banks are will be blocked. I know both sectors well and the good and the bad in them. Tired of dealing with bs

I’d love to continue to engage with knowledgeable people that can suggest ways to protect ourselves against a Tether blow up. Those that have reasoned opinions as to the timing.

Those that have knowledge as to which crypto exchanges are most at risk.

Would love to hear from industry people that know about these tether swaps and how their exchanges had handled the proceeds of the funds they collected selling tethers to there clients.

Would love to see other estimates as to the amount of liquid traditional currency is likely currently available to the crypto ecosystem to fund ‘redemptions’ from exchanges. This is biggest question… how quickly will exchanges be forced to admit they can’t cash out people?

Pardon me… I few times in this thread I wrote USTC. I always meant Tethers USDT.

Again. Wish I could correct. But I already spend way too much time typing up my thoughts as it is. Hope it’s appreciated and I help some people protect themselves.

Btw. I meant to include that the focus is on stable coins because they make claims about having backing and therefore will be heavily regulated.

They typical crypto coins including Bitcoin have no backing and are pure fiat bullshit. I expect for the most part…

Market forces will take care of Bitcoin and the other 15000+ token coins out there. The line, ‘biggest risk to crypto is crypto’ is a good one. It’s a joke and once Tether blows up it will be revealed how poor the liquidity actually is and how hard it will be to convert Bitcoin

Or any crypto currency back to traditional government currency. Which will always need to be done unless you all move to El Salvador. Only there you can pay your taxes with Crypto. Everyone else you’ll need to raise local currency. This will never change.

It’s a very naive dream to believe governments will allow crytpo currency to replace their currencies.