> This essay makes some confident claims about the future and I wish to have cryptographic proof that I did not edit those claims between now and when they inevitably come to pass.
The only unconditional claim I saw was that Tether will lie again. Am I missing something?
This one is a bit more interesting:
> Tether originally promised to back the reserves with cash in a bank account. This was a lie. It was a well-chosen lie, because the value of cash does not routinely fluctuate. Backing a fixed liability with volatile assets and a wafer-thin equity cushion would have the predictable result of causing the liabilities to become unbacked in many stressful situations for any of the backing assets.
What's interesting is that I'm not sure many banks would want to hold the cash, regardless of the source.
When a bank receives cash deposits it has to do something with it. The money doesn't sit as bank notes in a vault.
The bank has a problem. The cash becomes its own liability. The depositor can withdraw the cash at any time and the bank needs to fulfill that obligation. And a lot of cash means a lot of obligation. So the bank desperately wants to turn the cash liability it faces with a deposit into an asset (i.e., somebody else's debt).
How do do that?
Banks are highly regulated on this point, especially post-GFC. There aren't a lot of options. What they'd like to do is issue loans to high-quality borrowers at profitable rates. But if the quality of borrow is going down the tubes (it is) and interest rates are at historic lows (they were), they would rather not do that.
Treasuries are an option. But the demand for short-term treasuries has been so intense that yields have been driven down to absurd levels relative to other instruments.
All of which is to say that the very idea of a US dollar-backed "stable" coin may not be possible for any entity other than the US Federal reserve or the Treasury.
And this defeats the entire purpose for Tether holders. They can already park cash at a bank. They hold tether to be out of the US banking system jurisdiction.
The only unconditional claim I saw was that Tether will lie again. Am I missing something?
This one is a bit more interesting:
> Tether originally promised to back the reserves with cash in a bank account. This was a lie. It was a well-chosen lie, because the value of cash does not routinely fluctuate. Backing a fixed liability with volatile assets and a wafer-thin equity cushion would have the predictable result of causing the liabilities to become unbacked in many stressful situations for any of the backing assets.
What's interesting is that I'm not sure many banks would want to hold the cash, regardless of the source.
When a bank receives cash deposits it has to do something with it. The money doesn't sit as bank notes in a vault.
The bank has a problem. The cash becomes its own liability. The depositor can withdraw the cash at any time and the bank needs to fulfill that obligation. And a lot of cash means a lot of obligation. So the bank desperately wants to turn the cash liability it faces with a deposit into an asset (i.e., somebody else's debt).
How do do that?
Banks are highly regulated on this point, especially post-GFC. There aren't a lot of options. What they'd like to do is issue loans to high-quality borrowers at profitable rates. But if the quality of borrow is going down the tubes (it is) and interest rates are at historic lows (they were), they would rather not do that.
Treasuries are an option. But the demand for short-term treasuries has been so intense that yields have been driven down to absurd levels relative to other instruments.
All of which is to say that the very idea of a US dollar-backed "stable" coin may not be possible for any entity other than the US Federal reserve or the Treasury.
And this defeats the entire purpose for Tether holders. They can already park cash at a bank. They hold tether to be out of the US banking system jurisdiction.