Tether is now the 17th largest holder of US debt

Macroeconomic impact & US Treasuries

• Some argue that if large Tether redemptions forced Treasury sales, yields could spike in a crisis; others counter that the US Treasury market is “by far” deep enough that even large Tether flows would not move rates much.
• There’s comparison to hedge-fund-driven Treasury disruptions and concern that nontraditional big holders (like Tether or hedge funds) might become “too big to fail.”
• Others note that Tether is now a major, price‑insensitive buyer of US debt, offsetting reduced Chinese holdings and potentially stabilizing demand.

How Tether / stablecoins function & why people hold them

• Descriptions of the peg mechanism: when USDT trades >$1, arbitrageurs deposit dollars, Tether mints tokens, buys Treasuries, and arbitrage pushes the price back to $1.
• Many users apparently don’t “exit” to fiat; stablecoins sit like brokerage cash balances, used for trading, payments, and yield‑seeking (lending against crypto collateral, liquidity provision).
• Key demand drivers: difficulty accessing USD in many countries, distrust of local banks/currencies, and the ability to earn ~5% via crypto lending platforms.

Business model & incentives

• Repeated characterization of stablecoins as an amazing business: people hand over dollars for a zero‑yield token; issuer invests in T‑bills/money markets and keeps the interest.
• Several discuss Tether’s high leverage: ~$160B assets vs. ~$155B liabilities, so a small equity base earning very high returns on shareholder capital.
• Debate over whether they should take more risk (equities) vs. staying in short‑term safe assets to honor instant redemptions.

Transparency, attestations & regulation

• Attestations by BDO (quarterly) are cited as evidence that Treasuries are real and held via Cantor Fitzgerald.
• Skeptics stress: no full audit despite years of promises; attestations are limited‑scope and easier to game. Past auditor drama and use of BDO Italy raise eyebrows.
• Some argue stablecoins are now a regulated industry and Tether has strong incentives to comply; others note Tether is currently non‑compliant, so law alone doesn’t allay concerns.

Bubble / Ponzi and systemic‑risk concerns

• Critics call Tether “quilted out of red flags,” point to prior fraud settlements, opaque structure, and the possibility that claimed reserves are overstated or even ponzi‑like.
• Defenders point to billions in profits, large redemptions handled in 2022, and the sheer scale of Treasury holdings as evidence it’s backed by something.
• Some predict an eventual spectacular collapse; others label this “trutherism” stuck in 2015 and say the industry has “grown up.”

Global dollarization & politics

• Pro‑stablecoin commenters argue USD stablecoins are a lifeline for citizens in countries with corrupt or collapsing currencies (Nigeria, Venezuela, Lebanon, Turkey), giving de‑facto property rights via internet access.
• Critics respond that tying populations to US monetary policy has its own risks, especially if US politics or inflation go off the rails, and that these countries may need better local currencies instead.
• One speculative line: US government might covertly backstop Tether (e.g., buy at a discount in a run) to protect crypto markets and enable “budget‑neutral” accumulation of Bitcoin per a recent executive order.

Failure modes & open questions

• Key vulnerabilities mentioned:
  • A loss of confidence if the peg breaks or an audit reveals shortfalls.
  • Liquidity risk if redemptions outpace the ability to sell assets smoothly (despite Treasury market depth).
  • Blockchain throughput limits during a panic (“crypto bank run”).
• Some worry about “dark matter” holdings — a huge, initially invisible actor in the Treasury market — as the sort of thing that tends to amplify crises.
• Others see stablecoins as a structural part of a new global financial system, likely to keep growing and further entwining with US public debt.