Snoop continued, “I didn’t come here for this shit! I just came to watch the goddamn movie!” He added, “Fuck me, I’m scared to go to the movies. They’re throwing me in the middle of shit that I don’t have an answer for.”

Sounds like a “You” problem, Snoop.

Actual dollars can’t be traded as easily on crypto exchanges, it’s as simple as that. USDT (Tether) is traded just like any other token riding on top of a blockchain. If you wanted to hold USDT and didn’t trust the exchange, you can withdraw it to a wallet you control, just like any other token. (Most crypto nerds don’t hold USDT, though, they use it to trade between tokens which they then store in their wallets.)

If an exchange tries to keep it’s own dollar-denominated accounts, then their customers need to trust them to not run off with those deposits. It would also subject that exchange to some amount of US oversight, particularly if they also want to participate in the US banking system and let customers deposit and withdraw via ACH.

Good! Now consider the fact that you could be wrong, and not everyone involved in crypto is a fraud.

But what if they aren’t being a fraud? It turns out they can be frauds, or not, and your opinion on whether they are frauds doesn’t matter.

This man is now qualified to be Trump’s Surgeon General

That’s the thing about crypto, though: they don’t need your permission (or anyone else’s) to do crypto things.

You’re not wrong, but you’re missing a few things here. The initial promise of crypto was to enable peer-to-peer transactions that do not require trust in any third party. But as the cryptocurrency sphere developed, it became very useful to have a crypto-ized fiat currency reference that exchanges could trade just like normal crypto. So, these Tether folks came along and said “We are releasing a special smart contracts, where each token is backed 1:1 with dollars”. Do I trust them? Hell no. But I do have to acknowledge there there have been events over the years that stressed their ability to keep that 1:1 peg, and it hasn’t failed yet. So, while their assets are not sufficiently certified by a reputable third party, they have developed a reputation over time that they seem to know what they are doing. (And so much of the Crypto economy relies on Tether that if we’re to ever implode, the entire $4 trillion Crypto market cap could evaporate. Still, it hasn’t happened yet).

Not all stablecoins are so lucky. TerraUSD was an “algorithmic stablecoin”, which aimed to maintain a $1 price using arbitrage wih other crypto assets. That famously fell apart. Should that have been “allowed” to happen in hfe first place? Maybe not, but a key feature of crypto is that it is distributed and the Terra folks didn’t need to ask anyone’s permission before doing it.

If we’re going to have these things to begin with, it would make sense to introduce some regulations to make sure that these things are really fully backed and redeemable. But these regulations can’t be too punitive or arbitrary: otherwise, the capital will flee to countries that aren’t as punitive, where they can do business in a truly permissionless fashion. The Biden administration seemed hell bent on regulating crypto out of existence, which is a big reason why the crypto world threw a shitload of money at Trump.

This article misses two key technical points about stablecoins that are extremely important to determining whether or not any particular offering is useful or just a fancy scam.

First, what platform will the stablecoin tokens be contracted on? Since these things need to be pegged to real currency, I don’t think they can really be their own blockchain, but rather will ride on top of existing blockchains as smart contracts. Tether, the most widely used stablecoin, rides on smart contracts on many different public blockchains. Large public blockchains have governance which is widely distributed and are much harder for any one entity (even a government) to manipulate. I am afraid, though, that some stablecoin issuers might elect to distribute their tokens on smaller, less distributed blockchains (or, worse yet, privately run blockchains) which have the potential to be directly controlled by one entity, meaning they can probably roll back transactions they don’t like.

Second, how are the assets backed? Tether is famously opaque in this regard. USDT, intended to represent the US Dollar, supposedly has over $160 billion in market cap. With so much money under management presumably we would know where it all is, but Tether’s financial reports have been lacking. While they do release reports, they are seen by many as not complete. Still, whenever there is a “rush” of large investors looking to redeem their USDT for actual US Dollars, Tether can meet those redemptions. But understand that so much of the crypto ecosystem currently relies on USDT that if they ever fail to meet redemptions and Teher loses its peg, the entire crypto market will crash, and crash hard.

The whole point of a stablecoin is to always be worth exactly whatever its currency is pegged to. It pays zero interest, by design. Assuming Tether has all 160 Billion in USD invested in conservate investments yielding just 3%, they make nearly 5 billion dollars just holding the money in reserve. That is a ridiculous amount of money for maintaining a bunch of smart contracts on public blockchains. Where is it all going? If government regulations can add some transparency to that, it would be awesome – but Tether can work from anywhere in the world, so too much regulation will just drive it out of the regulating country altogether.

That depends. Does she have the magic ® after her name? That single letter seems to shield dicks from the consequences of their actions…