As the cryptocurrency market matures and regulators break down on schemes that preserve anonymity and privacy, Tether (USDT) stands out as a bastion of cypherpunk resistance. In a world where Gemini advertises the “Revolutions need rules” tagline while pushing for their own stablecoin GUSD (the Gemini Dollar), and Coinbase tags along with Circle to promote USDC, there is very little room to avoid KYC/AML. As a matter of fact, trading on a regulated exchange which does not employ “intelligence” de-anonymizing services is also a rare occurrence.
Tether (USDT) often gets depicted as the shady villain in the space, and one which contributes to the price manipulation of various assets. The original stablecoin is paired with every major cryptocurrency on the market, and there’s a reason why TRON founder Justin Sun was bragging about the Tether partnership even during moments when the dollar-backed currency was struggling in terms of both PR and market valuation.
If anything, USDT is a bridge which invites crypto whales to start trading with various assets. According to the reading of somebody like Justin Sun, more availability translates in more market unpredictability and greater chances for various coins to pump in unforeseen moments. In a nutshell, Tether (USDT) is one of the key factors which guarantee free trade – whose side effects may include volatility and wild markets.
Tether (USDT) is cypherpunk
Regulators and exchanges seeking to be as compliant as possible will often point out to the 2014 OG stablecoin as a bad actor. However, it embodies the spirit of crypto better than anything else in this category. In his 1994 opus “The Cyphernomicon: Cypherpunks FAQ and more”, the late Tim May has outlined a great divide between compliance and privacy. More precisely, he implied that free speech, privacy, private property, and autonomy are much more important as fundamental human rights than operations to catch a few criminals.
As the exception to the norm, criminals should not be a justification to employ Orwellian practices. There are far more efficient ways of tracking suspicious behavior, which do not involve mass surveillance and make use of targeted techniques that are based on precedents and clear information.
The role of Tether (USDT) in this scheme is that of juggling with the provisions of multiple jurisdictions in order to remain compliant enough to be listed on most exchanges. You only need to provide KYC/AML information when you’re buying the stablecoin directly from the official website, or when you’re converting USDT to USD – but in both situations there is a $100.000 threshold which is inaccessible to most users.
Conversely, you can simply buy Tether on a decentralized exchange where you only sign up with an e-mail address. It’s a great approach to preserve anonymity, it’s still the best instrument to engage in trading by taking advantage of market volatility, and individuals seeking to avoid triggering a tax event can still make use of USDT for this purpose.
Just bear in mind that Tether (USDT) is not cypherpunk per se – it’s more of a meddling with the laws of various jurisdictions than an innovation in cryptography and privacy. It’s the boat that gets you across river Styx, as you transcend from the anarchistic hell to the other regulated, compliant, yet Orwellian side of the inferno. No matter where you stand, your soul is bound to suffer a fair share of torment.
The shady aspects of Tether (USDT)
It’s no secret that Tether avoids the harsh crypto regulations of the United States of America, where KYC/AML data collection is mandatory in order to be able to open a bank account. But in this pursuit, the company must work with payment processors such as Crypto Capital, whose practices are not very transparent.
As a matter of fact, CC is known to have problems with authorities from Portugal, Poland, and the United States of America (as reported in a previous Crypto Insider article). These situations may often result in frozen funds and prolonged investigations which act as bona fide roadblocks in the way of efficient money exchanges. If you work with banks, you must remain transparent and compliant. If you want to follow the cypherpunk route while also relying on the practices of the regulated financial world, then you must make use of this compromise.
There is absolutely nothing about Tether (USDT) that guarantees seamless operations and proper liquidity for an extended period of time. Throughout time, there have been multiple investigations regarding the amounts of US dollars that truly back the crypto asset, and the results were never really conclusive in one direction. On the official website you can find a report for 2018, where it’s claimed that every USDT token has been backed by a corresponding amount of USD.
Nevertheless, according to a recent affidavit by Tether lawyer Stuart Hoegner, only 74% of USDT is covered by fiat. This means that the company is now using the “fractional reserve” approach that banks have been employing for decades. The only issue is the uncertainty on who backs the funds and whether or not there will be some kind bailout in a situation of crisis. If the answer is “no”, then you should always manage the risk according to your needs and interests.
Should you trade with USDT?
Before proceeding to trade your cryptocurrencies for Tether (USDT), you have to ask yourself some fundamental questions. First of all, it’s a matter of time: for how long will you be holding USDT? With the ongoing lawsuit in the state of New York, difficulties in accessing proper payment processors, and constant scrutiny, it’s hard to foresee if the stablecoin will still be around in a few years. Therefore, Tether should be a mean of exchange between crypto assets, not a store of value. If your plan is to speculate the moment when Bitcoin drops in price so you can buy it at lower rates, then it’s probably a bad idea to hold onto USDT for too long.
Secondly, you must check the legislative framework in your jurisdiction and see if crypto to crypto trades on regulated exchanges trigger tax events. You definitely don’t want to end up like the California teenager who ended up accumulating a lot of debt to the IRS after making multiple trades on Coinbase without ever cashing out. Therefore, it would make sense to use OTC or decentralized exchanges in your strategy. And in this regard, Tether (USDT) can be a useful mean, since it’s listed in many places, has high volumes and is still in demand.
Just remember to be cautious and embrace financial sovereignty with due responsibility. You can never predict the future in crypto, the environment still resembles the Wild West, so you shouldn’t put too much trust in one third party. After all, Bitfinex and Tether are nothing more than intermediaries which operate as businesses. Correspondingly, they can be shut down at any point if the right evidence and legal means exist.
If you care about your privacy and refuse the idea of an overly-regulated market, then USDT is a useful mean to this end. But if you prefer safety, predictability and regulation, you’re definitely better off using USDC and GUSD. However, full compliance was never really the purpose of Bitcoin and its cypherpunk predecessors, so maybe it’s better to keep a balance between the two worlds. They both exist with very clear purposes, deliver services to different types of customers, and complete the picture of this fascinating crypto space. The battle that Tim May has outlined in “The Cyphernomicon” is still ongoing, and maybe that it’s better to not have a definitive victor.
- Source: First Appeared Here
- Published Time: 2019-05-02 17:00:23
The views and opinions expressed in the article Why Tether (USDT) is necessary in crypto do not reflect that of 48coins, nor of its originally published source. Article does not constitute financial advice. Kindly proceed with caution and always do your own research..
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