> I think what you meant to imply is that it’s not backed 1:1. This isn’t only an issue with Tether. This is the case with any fractional reserve banking system.
There is a minor difference, though. On a typical fractional reserve bank the deposits are backed by assets worth more than what is the worth of the deposits.[1] Not only that, there are other liabilities that take the possible losses before the deposits are being hit.
On a typical stablecoin, there is a reason to suspect that the coins are backed by assets worth less than the market cap of the stablecoin.
The difference may seem subtle, but it is a difference of a legitimate business and a despicable scam.
[1] In case you are interested, you can go and check the balance sheet of any bank you want. The part where the value of excess assets to back the liabilites of the bank (deposits etc) is listed under "Equity"
There is a minor difference, though. On a typical fractional reserve bank the deposits are backed by assets worth more than what is the worth of the deposits.[1] Not only that, there are other liabilities that take the possible losses before the deposits are being hit.
On a typical stablecoin, there is a reason to suspect that the coins are backed by assets worth less than the market cap of the stablecoin.
The difference may seem subtle, but it is a difference of a legitimate business and a despicable scam.
[1] In case you are interested, you can go and check the balance sheet of any bank you want. The part where the value of excess assets to back the liabilites of the bank (deposits etc) is listed under "Equity"