Once again, this demonstrates a complete misunderstanding of fractional reserve banking. Fractional reserve banking is how new money enters the financial system. When you borrow money for, say, a mortgage, new money is created - alongside a liability on the banks books. [edit: This liability is what gives fiat value - money is always 100% backed by the demand for that money].
As you pay off your loan, the new money that was created is destroyed.
This is how the money supply is actively managed, it's not some tinfoil hat conspiracy haha.
There is also a 1/2 trillion dollar fund (FDIC) and a further 1/2 trillion dollar line of credit at the Fed to ensure depositor funds are secure.
The federal reserve, created via act of congress, exists to manage the money supply - to maintain a low, fixed rate of inflation and maximum employment. These two features are correlated, by the way, as you can see in the Philips curve.
Now, Tether on the other hand is just printing fake money to pump up the market to benefit themselves and a small cabal of crypto holders who recognized early on the liquidity did not exist to support their desired level of wealth.
They lie about it regularly - in fact their announcement of this settlement included a bald faced lie.
> Tether: "As to the Tether reserves, there is no finding that tether tokens were not fully backed at all times—simply that the reserves were not all in cash and all in a bank account titled in Tether’s name, at all times."
> CFTC: "In fact Tether reserves were not “fully-backed” the majority of the time."
This is the central bank of crypto, 85% of all trading volume is against USDT, and they have shown themselves to be the least trustworthy entity in the world. Just a new Liberty Reserve.
We are talking about totally different things, and I have absolutely no issue with fractional reserve banking and have no conspiracy laden issue or understanding of it.
What you mentioned happens. And requires a charter from governments to occur.
What I mentioned happens too. And simply relies on the tolerance of the market.
One is about banks.
Another is about the amount of unsecured leverage that all individuals and entities can operate with, and whether their counterparties need disclosure or not.
“Fractional reserve” in this context, is more about the ratio of collateral, used colloquially for quicker understanding. “Loan to value” could be helpful for other people to understand. “margin requirements” for other people.
I am only referencing the reality that individuals, businesses, and almost any kind of entity, can have a lower value of assets redeemeable for any liability they issue or accrue. It can be a “fraction” or their “reserves”.
Many financial infractions operate in a different reality that has no analogy to non-financial criminal law.
You are focusing far too much on the marketing that uses the terms currency. Any individual or corporation is capable of creating a product said to be redeemable for something in their treasury. This has nothing to do with the parallels to the federal reserve when corporation calls its product a stablecoin or dollar-like. All settlements with Tether's companies have been exclusively related to the reality that the corporation's product was not in fact redeemable for the thing they said it was. That is the only issue, every authority that matters has said that was the only issue. Both crypto twitter as well as blockchain skeptic's opinion doesn't matter here. Their armchair legal analysis don't matter. Their comparisons to the state-monopoly on currency issuance doesn't matter. The corporation having marketing and legal agreements that accurately describe what their product can be redeemed for, if anything at all, simply has to be congruent with reality. That's the totality of the sanction from the CFTC, and the same with the NYAG at one state level. But I will give you one bone, and that's the reality that the DOJ can of course come with a parallel criminal prosecution for the same activity. So if that will validate your thoughts on anything, just wait for that if it ever comes. I'm not worried about "being right", only saying what this settlement is saying.
As you pay off your loan, the new money that was created is destroyed.
This is how the money supply is actively managed, it's not some tinfoil hat conspiracy haha.
There is also a 1/2 trillion dollar fund (FDIC) and a further 1/2 trillion dollar line of credit at the Fed to ensure depositor funds are secure.
The federal reserve, created via act of congress, exists to manage the money supply - to maintain a low, fixed rate of inflation and maximum employment. These two features are correlated, by the way, as you can see in the Philips curve.
Now, Tether on the other hand is just printing fake money to pump up the market to benefit themselves and a small cabal of crypto holders who recognized early on the liquidity did not exist to support their desired level of wealth.
They lie about it regularly - in fact their announcement of this settlement included a bald faced lie.
> Tether: "As to the Tether reserves, there is no finding that tether tokens were not fully backed at all times—simply that the reserves were not all in cash and all in a bank account titled in Tether’s name, at all times."
> CFTC: "In fact Tether reserves were not “fully-backed” the majority of the time."
This is the central bank of crypto, 85% of all trading volume is against USDT, and they have shown themselves to be the least trustworthy entity in the world. Just a new Liberty Reserve.