A goodboi denied his Wendy's
Yea I get it, tether was always a bitfinex scam but what about other stablecoins like DAI?If a stablecoin is not properly backed (and now we know that at least USDT wasn't backed 1-to-1 in 2017-2018, see their settlement agreement. And they haven't provided complete audit since then), it'll create digital "bank run" when people will get scared and decide to cash out. At first, exchanges/token issuers will impose redemption limits in hope of waiting out liquidity crisis. If the panic continues, desperate people will start buying crypto with stablecoins, so they can later sell that crypto for USD. As a result, crypto priced in stablecoin will skyrocket, while the price nominated in USD will plummet. This will drive the market further into the ground as the trust in "1-to-1 peg" is lost. At this point, exchanges/issuers will face a choice: to become insolvent and hold their customers' bags filled with useless stablecoins they can't redeem, or enter damage control mode, freeze customers' wallets and buy tickets to an undisclosed island in Caribbean. Given the fact most of them are already located on said islands, what makes you think they will choose the first option?
This is the worst case scenario, of course. Some stablecoins may survive the crash, you should be looking for those that comply with US regulations.
Attorney General James Ends Virtual Currency Trading Platform Bitfinex’s Illegal Activities in New YorkClick to read more.ag.ny.gov
Tether and Bitfinex had a settlement with NY AG. They shall pay $18.5 mil in fines, can't do business in NY and shall provide regular financial reports.
Naturally, they started bragging on Twatter:
The agreement itself is an interesting reading. I'm not a lawyer, but that's what I was able to extract from that:
1) The AG office looked into events that took place from 2017 to 2019.
2) From June to September 2017, 446 mil of USDT were backed by $61 million.
3) After growing concern, Bitfinex and Tether requested an audit in June 2017.
4) Conveniently, missing $382 million were transferred to newly made Tether bank account from Bitfinex so auditors can verify it.
5) Tether shat out "transparency update" with convincing numbers obtained from auditors.
6) Audit was never completed after that.
Summary: Tether had issued misleading report, omitting the fact USDT was not fully backed by USD from June to September 2017.
Also, in 2018 Tether was lending money to Bitfinex without disclosing or collateralizing the debt, because Bitfinex fucked up and got $900 mil seized on third-party accounts. Later, Tether ninja-edited its ToS to accommodate the changes in Reserves policy.
So, despite Tether's claims on Twitter, they DID break the law and they're not off the hook yet. First, they have to provide regular reports to NY AG office for the next 2 years. Given that Tether is allergic to auditors, I doubt they will ever send anything. Second, nothing prevents federal agencies from investigating Tether, using this case as a jump-start. But this settlement gives Tether a much needed time either for exit scam or for getting their shit together .
Overall, happening is cancelled, heads aren't gonna roll just yet.