It was hard to believe that people had sent $69 billion in real U.S. dollars to a company that seemed to be practically quilted out of red flags. But every day, on cryptocurrency exchanges, traders buy and sell Tether coins as if they’re just as good as dollars. Some days, more than $100 billion in Tether changes hands. It seemed the people with the most at stake in the crypto markets trusted Tether, and I wanted to know why. Luckily, in June, 12,000 of them were gathering in Miami for what was billed as the biggest crypto conference ever.
At the Mana Wynwood Convention Center, I found the usual cringey crypto signifiers. Models walked the floor body-painted with Bitcoin’s logo. A podcast host screamed, “F--- Elon.” A dumpster full of Venezuelan bolivars was labeled “cash is trash.” The place was full of people who held Tether. Sam Bankman-Fried, a 29-year-old billionaire who was in town to rename Miami’s basketball arena after his cryptocurrency exchange, FTX, told me he’d bought billions of Tethers, using them to facilitate trading other coins. “If you’re a crypto company, banks are nervous to work with you,” he said.
His explanation doesn’t make much sense if you still think of Bitcoin as a peer-to-peer currency, an ingenious way to transfer value without an intermediary. But most people aren’t using cryptocurrencies to buy stuff. They’re trading them on exchanges and betting on their value, hoping to make a real money score by picking the next Dogecoin, which spiked 4,191% this year after Elon Musk started tweeting about it, or Solana, up 9,801% in 2021 for seemingly no reason at all.
Think of crypto exchanges as giant casinos. Many of them, especially outside the U.S., can’t handle dollars because banks won’t open accounts for them, wary of inadvertently facilitating money laundering. So instead, when customers want to place a bet, they need to buy some Tethers first. It’s as if all the poker rooms in Monte Carlo and the mahjong parlors in Macau sent gamblers to one central cashier to buy chips.
The biggest traders on these exchanges told me they routinely bought and sold hundreds of millions of Tethers and viewed it as an industry standard. Even so, many had their own conspiracy theories about the currency. It’s controlled by the Chinese mafia; the CIA uses it to move money; the government has allowed it to get huge so it can track the criminals who use it. It wasn’t that they trusted Tether, I realized. It was that they needed Tether to trade and were making too much money using it to dig too deeply. “It could be way shakier, and I wouldn’t care,” said Dan Matuszewski, co-founder of CMS Holdings LLC, a cryptocurrency investment firm.
The story of tether, what it has invested its reserves in, and how integral it is to the entire crypto universe is intriguing as well as being filled with intrigue. It also helps to highlight just what the term unregulated assets means, when one is accustomed to the norms of dealing in the financial markets.Click HERE to subscribe to Fuller Treacy Money Back to top