Why would you exchange tether for crypto or IOUs that are super risky and have no cash flow instead of risk free dollars that you get to keep the interest? First one sounds like suicide while the second is a very lucrative business.
Because it costs them nothing to "create" 1M USDT and exchange it for nothing. So, they create 1M USDT out of thin air, and "sell" it to some crypto exchange that wants to claim it can redeem 1M$, in exchange for some other crypto or IOUs or whatever. The exchange is happy because it can now sell 1M more USDT. Tether is happy because they got something that is nominally worth 1M$ at no cost to them.
Of course, someone somewhere in the future will be left holding the bag. But if they can keep it going, and if they do manage to sell some USDT for real money (which they certainly did), then they can still make a load of profit.
Because no banks will work with them and the US gov’t is constantly trying to track them down - and has a stranglehold on USD banking in the world. Read the NYAG report, it’s pretty crazy.
> Launched in 2014, Tether (USDT) came to extraordinary success with a current market capitalization exceeding 67 billion USD.
> This stablecoin fixes the issues inherent in the previous three. It relies not upon volatile reserves or the idea of persistent arbitrage trading, but on hard reserves of fiat currency. For every Tether coin in existence, there is one US dollar in a vault backing its existence.
> In this way, the stablecoin handles a complete theoretical rout with ease. Tether continues to serve the burgeoning digital asset space while garnering the implicit affection of regulators.
That's not as concerning as a bank that lent money to FTX, though, right? If you take a loan from someone that goes bankrupt, you pay them back through whatever process is established by the bankruptcy court. If you loan money to someone that goes bankrupt, you're most likely sitting on a loss.
Deltec's response is that they're awaiting instructions on how to repay the loan:
It’s quite concerning because it seemed to be off the books/hidden originally, SBF is one of the few who claims he’s been able to issue or redeem tether, it’s ‘Tethers bank’, and SBF is implicated in one of the largest crypto frauds in history.
