> So it's possible Tether is keeping the identity of its bank secret to avoid attracting scrutiny from local regulators
The whole purpose of Tether is to trade USD after Bitfinex lost USD banking relationships.
No naturally, if banking relationships were public, they would be at risk.
More likely, these aren't traditional bank accounts at all. These are probably dollars pledged by corporations and hedge funds but held in bank accounts of those corporations and hedge funds, not in Bitfinex's name.
> The whole purpose of Tether is to trade USD after Bitfinex lost USD banking relationships
This is willful money laundering. If true, everyone who ever beneficially owned USDT would be subject to federal money laundering charges. AML law doesn't care about intent or knowledge, just actions.
> if banking relationships were public, they would be at risk
Any bank which holds electronic U.S. dollars reports, directly or indirectly, to American regulators. Large deposits owned by foreign institutions with possible connections to Americans trigger FATCA filings. American financial regulators are somewhat forgiving when it comes to mistakes; less so when those "mistakes" are willful. If a bank is hiding its direct or indirect relationship to Bitfinex, they are betting the bank on Bitfinex. At that point, laundering drug money is probably a better reward for the risk being taken. (Disclaimer: None of this is legal advice. Do not launder money.)
> These are probably dollars pledged by corporations and hedge funds but held in bank accounts of those corporations and hedge funds, not in Bitfinex's name
This is plausible, trivial to demonstrate (repo and overnight wholesale financing aren't novel concepts), and a different risk model if true (for the lenders as well as Tether). It would also fly in the face of the Tether spokesperson's claim that Tether has a "relatively simple balance sheet."
I'm the last one to defend Tether because it looks as shady as hell, but ...
> This is willful money laundering
Money laundering is the concealment of the origins of illegally obtained money. If the money was legally obtained then it can't be money laundering.
Just creating an alternate way to move clean money isn't prima facie a crime.
> If a bank is hiding its direct or indirect relationship to Bitfinex, they are betting the bank on Bitfinex
Banks probably don't even know about Bitfinex.
If Fuckwit Capital Partners has $100m on deposit with Wells Fargo and pledges 10% of it to buy Ethereum, those dollars stay in FCP's account and the bank has no idea that the funds are pledged.
Upon receipt of the promissory note from FCP, 10m new Tethers get created with the Ethereum as collateral.
> claim that Tether has a "relatively simple balance sheet."
The balance sheet could be very simple, but devilishly difficult to audit.
ASSETS
Accounts Receivable from Investors, $2.4 billion
LIABILITIES
Tethers Payable to Traders, $2.4 billion
If Friedman LLP wanted to prove all the pledged USD to back up the receivables, that could be an expensive and invasive audit of counterparties who don't want their banks get wind of their cryptocurrency activities.
I've been thinking about this for a few months, and then even longer than that going back to Bitfinex's 2016 incident. The only definite conclusion I've come to is that something is going on that they are trying to hide. May be it is solvency based, may be it is regulatory.
At the least I can describe with certainty that Tether is the exact opposite of Bitcoin: centralized, opaque, and trust-based. Ironic.
The whole purpose of Tether is to trade USD after Bitfinex lost USD banking relationships.
No naturally, if banking relationships were public, they would be at risk.
More likely, these aren't traditional bank accounts at all. These are probably dollars pledged by corporations and hedge funds but held in bank accounts of those corporations and hedge funds, not in Bitfinex's name.