Tether/Stablecoins are the hot air inside the Bitcoin bubble...their regulation will burst it

[tecate]

This can be a little more nuanced do you agree? It is true for you and I as bitcoin holders providing we store in our own wallets. However conventional government / regulators can prevent new market participants entering (binance UK recent ban) or for those keeping coins in exchange wallets don't have full ownership (MT.Gox hack).

Mentioned in the context of claims made that bitcoin is not decentralised. On that basis, no need for further nuance. The aspects you mention are other items - and worthy of discussion in their own right. However, they don't mean that bitcoin is not a decentralised network.

Like it or not for Bitcoins adoption to continue it does need to maintain a good relationship with traditional financial market participants i.e. regulators.

If you're saying that bitcoin arrived in the world simply as an idea - then code - and nothing more - born into a world where all we have is an established fiat based monetary system - with total network effect (not even network effect - applied by force) - then for sure, we're on the same page. I've been saying as much for the past 4 years.
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This is a conversation on Tether and given it is a Top 10 player in thr global Commercial Paper they should be making the same disclosures as Banks. What reason do they have for not? Any supporter of Bitcoin knows that it operates on a public Blockchain...that's part of how we achieve consensus. Having a major player in the eco system not being fully transparent doesn't sit well with me. How have you got yourself comfortable with their Disclosures?

More transparency rather than less in this instance is all good - I'm completely in favour. I'm not here to represent tether - I couldn't care less about them. However, people should be aware of all facets to this ongoing saga - there are no clean hands and theres been ill-intent from all sides. I gave the example of them being slammed out of the banking system on multiple occasions.
We can only speculate (seeing as no side can produce complete evidence) but my 2 satoshis is that given it didn't come up with regulatory compliance as its no.1 objective - and given the rough time they'd been given in order to try and bank and keep the business going - they're bound to have had to cut corners in the first number of years to stay operational. Most of these regulatory agencies can go back as many years as they want - and so, maybe they'll take them out based on something that happened a number of years ago already (which is what that Bloomberg article is based upon). However, they may have started rough n ready but I think its highly unlikely they would have been putting a regulatory foot wrong the last while if they can help it. They now have a sizable business to look after - why put that at risk?

I agree if Tether turns out to be a fraud that it won't be the end of Bitcoin. However it will likely have a severe impact on the price and given that for a lot of people Bitcoins success is based on the price increasing rather than adoption.

It depends on the time horizon of the individual. I expect there to be plenty of drama (we have that anyway even without any proper evidence of wrongdoing). However, I don't see it being anything other than noise which would play out over the short-medium term. Tether doesn't magically get to take away the characteristics of bitcoin if it sinks/is taken out of the equation, etc. On a short time horizon, I'm sure it will seem like the end of the world. With a longer outlook, bitcoin will be stronger for the experience. The industry is much broader.

I don't remember people saying that My.Gox would be the end of Bitcoin, that was really the early days of Bitcoin. But if that is what they said back then given Bitcoin is largely unchanged why would it have been a valid argument then and not today or vice versa?

Have a look at that milestone event in bitcoin's history. Bitcoin was over-reliant on Mt.Gox at the time. The market suffered for quite a while afterwards - but life goes on. The difference in this case is that there are other stablecoins in existence - one of which has been growing at a faster rate than tether. The difference is that these other stablecoins were started when banking wasn't pursuing a strategy of shutting them out to the same extent as what Tether encountered.

 

[DublinHead54]

If tether fails I bet you'll basically see articles almost word for word like this one except with Tether in place of Mt Gox:

Bitcoin Sees the Grim Reaper

Mt. Gox trapping customers’ money could be the last straw for the virtual currency.

nymag.com

I held coins through that, I was of course unaffected directly since I self-custody. In the ecosystem/price it was short term chaos, but long-term irrelevance for those who had not kept coins on Gox.

That article isn't about Mt.Gox failing.

 

[DublinHead54]

More transparency rather than less in this instance is all good - I'm completely in favour. I'm not here to represent tether - I couldn't care less about them. However, people should be aware of all facets to this ongoing saga - there are no clean hands and theres been ill-intent from all sides. I gave the example of them being slammed out of the banking system on multiple occasions.
We can only speculate (seeing as no side can produce complete evidence) but my 2 satoshis is that given it didn't come up with regulatory compliance as its no.1 objective - and given the rough time they'd been given in order to try and bank and keep the business going - they're bound to have had to cut corners in the first number of years to stay operational. Most of these regulatory agencies can go back as many years as they want - and so, maybe they'll take them out based on something that happened a number of years ago already (which is what that Bloomberg article is based upon). However, they may have started rough n ready but I think its highly unlikely they would have been putting a regulatory foot wrong the last while if they can help it. They now have a sizable business to look after - why put that at risk?

Regulatory Compliance isn't a hurdle set to deter business, it is designed to protect market participants and individuals. It is very clear that due to regulation financial markets are much safer now in a post financial crisis, case in point that during the pandemic we did not see banks go under and all had good capital levels to continue operations under stress. I don't believe that Tether was 'shut-out' of the banking system just because it was a cryptocurrency related entity, rather it was unable to meet the KYC / due diligence of those entities it wanted to bank with. Yes there has been a lot of 'FUD' around this and it gains mainstream media attention when banking rights are revoked, but banking rights are revoked from hundreds of entities everyday.

I agree that they didn't start Tether with regulatory compliance as its no.1 goal, but at the same time, questions have to be asked about their teams experience to run a top 10 Commercial Paper entity and the lack of transparency. What I find concerning is that most crypto companies once out of the startup phase have recognized the need to hire experienced people. If you look at Circle (USDC) that is what they have done, whereas Tether is still run by the founders of which one is a former plastic surgeon acting as the CFO. From what I can find on linkedin and news wise they haven't gone out and poached experienced hires from other industries, that is major red flag.

We can speculate, but there are red flags there and there is no reason why Tether can't provide full disclosure.

It depends on the time horizon of the individual. I expect there to be plenty of drama (we have that anyway even without any proper evidence of wrongdoing). However, I don't see it being anything other than noise which would play out over the short-medium term. Tether doesn't magically get to take away the characteristics of bitcoin if it sinks/is taken out of the equation, etc. On a short time horizon, I'm sure it will seem like the end of the world. With a longer outlook, bitcoin will be stronger for the experience. The industry is much broader.

When you say bitcoin will be stronger for the experience, are you referring to the price ending up higher? Is your view that when Bitcoin moves along the adoption curve its price will increase so that in the long term that price will end up at multiple greater than today?

 

[tecate]

That article isn't about Mt.Gox failing.

It describes difficulties that the company was encountering 6 months before its final demise. For the point he's making - it amounts to the same thing. In a tether downfall scenario, there will no doubt be similar doom n' gloom - but bitcoin will continue in its development nonetheless.

Regulatory Compliance isn't a hurdle set to deter business, it is designed to protect market participants and individuals. It is very clear that due to regulation financial markets are much safer now in a post financial crisis, case in point that during the pandemic we did not see banks go under and all had good capital levels to continue operations under stress. I don't believe that Tether was 'shut-out' of the banking system just because it was a cryptocurrency related entity, rather it was unable to meet the KYC / due diligence of those entities it wanted to bank with. Yes there has been a lot of 'FUD' around this and it gains mainstream media attention when banking rights are revoked, but banking rights are revoked from hundreds of entities everyday.

I agree that they didn't start Tether with regulatory compliance as its no.1 goal, but at the same time, questions have to be asked about their teams experience to run a top 10 Commercial Paper entity and the lack of transparency. What I find concerning is that most crypto companies once out of the startup phase have recognized the need to hire experienced people. If you look at Circle (USDC) that is what they have done, whereas Tether is still run by the founders of which one is a former plastic surgeon acting as the CFO. From what I can find on linkedin and news wise they haven't gone out and poached experienced hires from other industries, that is major red flag.

We can speculate, but there are red flags there and there is no reason why Tether can't provide full disclosure.

You're entitled to your opinion and I'm sure that there are instances where crypto companies have been shut out for a number of rationale. No doubt this has varied from a genuine belief that there's a non-compliance issue, or banks having decided its crypto and so its simply easier to not even begin to entertain it. Lastly, there are cases of big banking wanting to suppress crypto also (over and above kyc/aml concerns). You only have to look at the myriad of complaints, court actions and findings by various bodies worldwide that have surfaced in recent years on this basis.

USDC was started in a very different environment to Tether. It would have had precisely the same difficulties had it tried to establish itself in 2014 as opposed to late 2018.

When you say bitcoin will be stronger for the experience, are you referring to the price ending up higher? Is your view that when Bitcoin moves along the adoption curve its price will increase so that in the long term that price will end up at multiple greater than today?

I wasn't referring to the price. I'm referring to the protocol and its eco-system adapting to various difficulties down through the years and ending up more robust and resilient as an outcome.
As regards the price, as bitcoin moves along the S curve, its logical that there will be an ever increasing pressure on price given that it is a fixed supply digital currency/asset.

 

[DublinHead54]

USDC was started in a very different environment to Tether. It would have had precisely the same difficulties had it tried to establish itself in 2014 as opposed to late 2018.

What is different in the environment? Tether and USDC face the same issues today and on the face of it USDC appears to be more transparent and reputable and probably why it is seeing growth. There has nothing prevented Tether from implementing the same corporate governance in 2014 as USDC has today, surely if anything this would have been welcomed by regulators and market participants. As a counter, coinbase was founded in 2012 in this different environment and it has managed to win over regulators.

I am not arguing that Tether is a fraud, I am saying that there are clear red flags that are concerning, I am disagreeing that the red flags can be fobbed off as 'FUD' or some form of orchestrated anti-crypto rhetoric.

Tether is currently very important to the Bitcoin network, and as such those participating in the ecosystem should be asking for much more transparency from Tether to avoid any short term price issues. It should be recognized that most people think of the success of Bitcoin with long term price appreciation, and this is a threat to price appreciation in the short term which impacts the timeline for long term price appreciation. This alone should be enough for people to recognize the risk.

 

[tecate]

What is different in the environment?

Year on year, establishment finance has become more open-minded to crypto. 2014 was incredibly early - there was damn all enlightenment around back then. Take the evolution of JP Morgan relative to crypto as an example. In 2017, its CEO is saying bitcoin is a fraud, a year later he's saying that he will sack any employee that trades crypto on a personal basis and today they are facilitating crypto in the portfolios of their wealthy clients. Its opening out albeit that its two steps forward, one step back. We have the likes of HSBC ( infamous in its facilitation of cartel money laundering in the past) writing to clients saying that they won't permit them to trade MSTR stock on the basis that the company holds a lot of btc - suggesting that they're taking that measure in the interests of their customers.

USDC appears to be more transparent and reputable and probably why it is seeing growth.

I agree.

There has nothing prevented Tether from implementing the same corporate governance in 2014 as USDC has today

I disagree. Circle were around back in 2014 but they didn't start a stablecoin business back then.

As a counter, coinbase was founded in 2012 in this different environment and it has managed to win over regulators.

Apples and oranges - the nature of the business is completely different.

I am disagreeing that the red flags can be fobbed off as 'FUD' or some form of orchestrated anti-crypto rhetoric.

Then you're misunderstanding the point that I've been making. Tether are not on my Christmas card list. I don't give a fiddlers about them. However, the motivations of many who make big fat claims about Tether also need to be questioned. That is not 'rhetoric'. If people have evidence, then bring it forward. They're not doing that - they're just casting aspersions.

Tether is currently very important to the Bitcoin network, and as such those participating in the ecosystem should be asking for much more transparency from Tether

Anyone credible in the crypto space has been calling for precisely that. Reporting isn't anywhere near where it needs to be but it is getting better - so at least there's that.

...to avoid any short term price issues. It should be recognized that most people think of the success of Bitcoin with long term price appreciation, and this is a threat to price appreciation in the short term which impacts the timeline for long term price appreciation. This alone should be enough for people to recognize the risk.

An upward price trajectory may be a secondary effect of ongoing adoption - but to my mind, continued adoption is what's most important in terms of what will determine the success or otherwise of bitcoin.

 

[DublinHead54]

started in a very different environment to Tether. It would have had precisely the same difficulties had it tried to establish itself in 2014 as opposed to late 2018.

Year on year, establishment finance has become more open-minded to crypto. 2014 was incredibly early - there was damn all enlightenment around back then. Take the evolution of JP Morgan relative to crypto as an example. In 2017, its CEO is saying bitcoin is a fraud, a year later he's saying that he will sack any employee that trades crypto on a personal basis and today they are facilitating crypto in the portfolios of their wealthy clients. Its opening out albeit that its two steps forward, one step back. We have the likes of HSBC ( infamous in its facilitation of cartel money laundering in the past) writing to clients saying that they won't permit them to trade MSTR stock on the basis that the company holds a lot of btc - suggesting that they're taking that measure in the interests of their customers.

I disagree. Circle were around back in 2014 but they didn't start a stablecoin business back then.

Apples and oranges - the nature of the business is completely different.

If a Stablecoin business and a Crypto Exchange are 'apple and oranges' then you can't compare a stablecoin business and JP Morgan either. Regarding the quotes above, there is nothing stopping Tether despite being created 'in a different environment' from putting in place the same corporate governance as Coinbase or Circle, which are both companies that were created in that 'different environment'. The adoption of Crypto by JP Morgan is an entirely different topic to disclosures and corporate governance of Tether, they are apple and oranges.

I'm arguing for Tether to be as transparent as the likes of Blackrock, and there is nothing that should stop them and it would end any redflags straight away. They could do it tomorrow if they wanted. Are you arguing against this?

 

[tecate]

If a Stablecoin business and a Crypto Exchange are 'apple and oranges' then you can't compare a stablecoin business and JP Morgan either. Regarding the quotes above, there is nothing stopping Tether despite being created 'in a different environment' from putting in place the same corporate governance as Coinbase or Circle, which are both companies that were created in that 'different environment'. The adoption of Crypto by JP Morgan is an entirely different topic to disclosures and corporate governance of Tether, they are apple and oranges.

Except that I didn't 'compare' a stablecoin business to JP Morgan. I provided the JP Morgan info as an example of how attitudes have changed when you continued to maintain that market conditions were the same in 2014 as they were in late 2018. Circle existed as a company in 2014 but they didn't start their stablecoin business until late 2018. Such a stablecoin business cannot be carried on without cooperation from the banking industry.

I'm arguing for Tether to be as transparent as the likes of Blackrock, and there is nothing that should stop them and it would end any redflags straight away.

As I said in my last post, anyone credible in the crypto space is asking for more transparency - not less.

They could do it tomorrow if they wanted. Are you arguing against this?

As regards what's at play, it's a matter of speculation and nothing more. Neither of us are privvy to the inner workings of Tether.

 

[DublinHead54]

Except that I didn't 'compare' a stablecoin business to JP Morgan. I provided the JP Morgan info as an example of how attitudes have changed when you continued to maintain that market conditions were the same in 2014 as they were in late 2018. Circle existed as a company in 2014 but they didn't start their stablecoin business until late 2018. Such a stablecoin business cannot be carried on without cooperation from the banking industry.

Attitudes towards crypto are changing, but what relevance does that have on why Tether can't have the same corporate governance as other Crypto companies? I am not maintaining that market conditions are the same, nor did I ever say that. I've said there is nothing different in the market that would prevent Tether from having the same corporate governance as other companies. How does a change of opinion on Crypto by Jamie Dimon show that it does?

 

[tecate]

Attitudes towards crypto are changing, but what relevance does that have on why Tether can't have the same corporate governance as other Crypto companies? I am not maintaining that market conditions are the same, nor did I ever say that. I've said there is nothing different in the market that would prevent Tether from having the same corporate governance as other companies. How does a change of opinion on Crypto by Jamie Dimon show that it does?

I made the point that the market conditions under which Tether commenced their stablecoin business in 2014 differed greatly from the underlying conditions relative to the commencement of USDC in late 2018.

 

[tecate]

Tether's latest attestation report has been published. By comparison with its last disclosure 3 months ago, treasury bills held have gone from 3% to 24%. The company has also provided ratings for commercial paper held.
Critics say a full audit is still lacking - and some claim that it could easily have funds in place on the day of attestation - but not before/afterwards.

This thing will keep going on - although I'd imagine that the company will keep improving its level of reporting. It has a sizeable business to protect. It's still possible that some regulatory body or other goes after them based on them having strayed in the past.

Meanwhile, it seems that Circle wants to become a bank. Another stablecoin provider - Paxos - has been pursuing a banking trust license.

With or without tether, stablecoins will continue.

 

[DublinHead54]

Tether's latest attestation report has been published. By comparison with its last disclosure 3 months ago, treasury bills held have gone from 3% to 24%.

What is your view on the US of Treasury Bills?

This links a sizable chunk of the crypto market directly with the Fed. The Fed that you and @WolfeTone have criticized repeatedly in discussion on this forum.

 

[tecate]

This links a sizable chunk of the crypto market directly with the Fed. The Fed that you and @WolfeTone have criticized repeatedly in discussion on this forum.

I'm quite happy to listen to any counter argument re. any criticisms that I may have expressed re. the Fed (albeit that I'd suggest that such a discussion would be off topic on this thread). The crypto sector has arisen amidst the backdrop of a conventional fiat-based monetary system. Of course there will be an interface between the two. Many crypto networks may be parallel networks but they don't exist in a vacuum. For its part, Tether is specifically designed to be a conduit between those systems.

Getting back on topic, critics bemoaned the nature of Tethers USDT backing. Therefore, its difficult to imagine how that constituency would do anything other than welcome the increase in T-Bill holdings as per the latest attestation report.

 

[WolfeTone]

What is your view on the US of Treasury Bills?

They are bordering close to toilet paper now. It's why one BTC buys you 40,000 $.

I'm reading a thread on social media about spiralling rents and house prices. The general gist between 2 contributors is that rents and house prices are out of control and beyond any reasonable valuation.
It took about 10 exchanges for the two contributors to realise they are in different countries. One in Canada and one in Ireland.
I'm guessing you can add US and UK to that also, in capital cities at least.

This is all being driven by money printing. Stock markets reaching new highs, bond yields in the negative.

But because it is being orchestrated by central banks the followers are sheepishly tagging along in the belief that their central bank overseers know what they are doing.

Does anyone have confidence in this central bank command economy anymore?

 

[letitroll]

@WolfeTone

US Treasuries are toilet paper I got a good chuckle out of that.

Lets take a step back and think about BTC/Tether with facts - Tether is the main cross quoted instrument & liquidity counter-party for BTC (some indicate 75% of all BTC transactions are settled in USDT)

Tether/USDT is two or three guys with a laptop in the Virgin Islands 'printing/minting' Tether coins digitally and releasing them into the crytpo closed loop universe......feeding liquidity and manufactured digital dollars as they please with bizarre conflicted relationships with various exchanges & cypto brokers where they've admitted to providing loans to these same affliates using customer deposits in the past. Lets be real here....these are all the same people.....in the real world they would be deemed related parties..tether/bitfinex/binance/bithumb

Tether itself is probably levered at best 33 to 1 but more likely 100:1 against actual dollars...........but if loans are to affiliate exchanges/brokers and those affiliates default, indeed any counterparty defaults the leverage ratio could go to many many times that very quickly.

The accounting firm, Moore Cayman (you ever hear of them?No you havent) providing the 'attestation' (NOT an audit) on tether accounts/assets has no international bonafides at all. ZERO. In fact they have FOUR employees listed on linkedin https://www.linkedin.com/company/moorecayman/ .....four employees! audting a firm with $63bn of assets!, 3% of which is cash, the rest which is supposedly spread across the worlds commercial paper markets, numerous loans to affiliates & 1000's of counterparties for which a credit risk exists. Moore Cayman is the cop on the beat watching out for everyone to ensure redeemabilty for real $'s but really at the end of the chain its BTC holders.

If US Treasuries & their implicit promise are toilet paper........what word would you use for the twinned BTC/USDT complex given the above @WolfeTone ? You do see a problem though above, right @WolfeTone ?

 

[WolfeTone]

providing the 'attestation' (NOT an audit)

Who audits the Federal Reserve?

to ensure redeemabilty for real $'s but really at the end of the chain its BTC holders.

Yes, you keep pushing this line. I'm starting to think it is only you that has this insight and for some reason you are only willing to share it with posters on AAM and nowhere else.
Because if you did, if it was shared widely across financial markets, don't you think that it would effect the bitcoin price negatively by now? I think you promised some months back,

If i was holding BTC - I’d be dumping……its gonna be a bloodbath

But then again, it's not as if you are offering definitive insight is it? Its all speculative masquerading as 'facts'

some indicate 75% of all BTC transactions are settled in USDT

I'm sure 'some' do. How are you Roubini?

Tether itself is probably levered at best 33 to 1

Probably, maybe, might be, might not be...

but more likely 100:1

Really?

...what word would you use for the twinned BTC/USDT complex given the above

FUD.

 

[letitroll]

Ok no answer - I understand - cognitive dissonance is a bitch

 

[WolfeTone]

what word would you use for the twinned BTC/USDT complex given the above

Answer:

FUD

Ok no answer

??

 

[Duke of Marmalade]

They are bordering close to toilet paper now.

China, for example, holds $1.2trn in US Treasury Bills. I guess they do have a big demand for toilet paper. They hold no bitcoin reflecting the fact that it has no utility value whatsoever.

 

[WolfeTone]

China, for example, holds $1.2trn in US Treasury Bills.

They must be thrilled at Bidens $6trn stimulus, accountable from out of nothing but thin air.

They hold no bitcoin reflecting the fact that they consider it has no utility value whatsoever.

I corrected that for you.
I think it has proven itself as good hedge against fiat currency in the current centralised command banking economy.