What’s behind the Tether/Bitfinex affair, Part #1

  1. For the user, the question no longer stands. If he/she owns 50 thousand USDT instead of 50 thousand USD, he/she has a cryptocurrency like the others, which falls within the gray area of regulation.
  2. The exchange can operate without the Know Your Customer and Anti Money Laundering (KYC/AML) policies dictated by governments, because it is not in any way storing dollars on behalf of users.
  3. The dollars cannot be moved around the world crossing national laws and borders, while USDTs can be sent everywhere with a click. Tether is a cryptocurrency and its public register is written on the Bitcoin blockchain
  • The emission and destruction of tokens is completely centralized in the hands of Tether limited.
  • Owning Tether dollars entitles the user to an equivalent amount in dollars held in reserve by Tether Limited.
  • Dollars are held in reserve on the banks supported by Tether Limited. So if you aren’t a customer identified by Tether and haven’t passed the KYC/AML checks, you can’t receive the funds in your bank account. It’s clear that this isn’t due to a Tether limit, but to government regulation.
  • Even if you are a verified customer of Tether Limited, you may not be able to receive dollars on your account due to additional national restrictions. This is the case of US citizens who haven’t been able to make withdrawals from Bitfinex. Not because of Tether, but the US bureaucracy: the main Taiwanese banks on which Tether Limited operates have been blocked by the corresponding US banks (i.e. Wells Fargo).



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