Whenever people compare Tether to fractional reserve banking it ignores important details.
Some important differences:
- Your bank tells you it's fractional reserve, Tether tells you they're full-reserve (deception for financial gain is fraud)
- Bank accounts are protected from bank insolvency by FDIC insurance
- Bank risk appetite is modulated by the rates they pay for that FDIC insurance
- The Fed acts as a lender of last resort, guaranteeing the liquidity of your deposits, in order to prevent a bank run
The Fed has the muscle to keep fractional reserve banking propped up. Tether may be lying about being full-reserve, and don't have the muscle to stop a tether run, which could get ugly.
Comments
Whenever people compare Tether to fractional reserve banking it ignores important details.
Some important differences:
- Your bank tells you it's fractional reserve, Tether tells you they're full-reserve (deception for financial gain is fraud)
- Bank accounts are protected from bank insolvency by FDIC insurance
- Bank risk appetite is modulated by the rates they pay for that FDIC insurance
- The Fed acts as a lender of last resort, guaranteeing the liquidity of your deposits, in order to prevent a bank run
The Fed has the muscle to keep fractional reserve banking propped up. Tether may be lying about being full-reserve, and don't have the muscle to stop a tether run, which could get ugly.