Yesterday was the day when "100% cash-backed" was revealed to in fact be... 2.9% cash-backed. And yet Tether has still kept onto its $1 peg. Je vois la vie en kayfabe. https://www.ft.com/content/529eb4e6-796a-4e81-8064-5967bbe3b4d9 … via @financialtimes
If you assume they aren't straight-up lying (which I mean, they might be!) it really doesn't look that bad. Basically looks like a money market fund -- except the interest goes to Tether rather than the USDT holdershttps://twitter.com/macrocephalopod/status/1393116627856658432?s=20 …
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Right, but a totally unregulated one. And indeed, that is quite the assumption I think anyway... why not get a proper auditor in?
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Sure, I agree you want more disclosure! And I expect that some of the companies backing the commercial paper are not exactly what you would call blue chip. But it seems plausible to me that they are fully backed (for now) and the mix of assets is not *that* surprising.
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It's always more interesting what's left unsaid. If this was a proper CP program, they would have provided some sort of breakdown; by leaving 'CP' as a catch-all label, you can pretty much guess they are hiding plenty of mystery meat inside that category.
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if CP is in fact not CP as we know it, someone is going to jail
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Sweet, return-free risk.
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I'm trying to think of another thing that takes deposits and makes loans/buys loan assets.... I just wish that business model had an easy to remember name....
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it's already very bad the way you describe it: 1. it's not marketed as a money market fund 2. because the interest goes to tether, it gets all the profits and its customers get all the risk, which gives tether absolutely no incentive to do any risk management
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But that always has been the case. A buyer of tether isn’t investing for a 30 basis point money market return. They want USDT settle crypto trades and make 100% returns
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It really depends: 1. Have they accurately conveyed how they are backing Tether to the market? 2. Are they managing liquidity prudently to prevent fails 3. Are they limiting credit risk appropriately There isn’t enough visibility to understand 2 and 3 and I’ve not parsed #1.
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