This is about Tether, which claims to have about $1.8 billion on deposit to satisfy claims against their eponymous cryptocurrency asset. I'll make a potentially controversial claim: it literally doesn't matter whether they *have* the money. https://twitter.com/Bitfinexed/status/954931013142089729 …
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The threat model that the community has, sensibly, is "A substantial portion of the $1.8 billion exists only as an accounting entry, but it isn't backed by hard currency anywhere, and therefore cannot be surrendered at will." This is a sensible threat model. Here's another:
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Large money laundering operations find it difficult to interface with the formal financial system. It is possible that a large money laundering operation has a billion dollars in deposits. It might as well be paper confetti.
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"Why is it confetti?" Because you can't use it for the normal purposes you anticipate using money for, like e.g. transferring it out, and sooner or later the regulator for the Bank of Confetti will say "Oh hah that confetti is totally ours."
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Proof of confetti does not generate the proof that people hope to get, which is that their assets will be redeemable for non-confetti money at some point in the future. For hilarious microstructure reasons there is still a liquid market in USD-denominated confetti futures.
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But sooner or later, confetti will be valued at the spot price for confetti.
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