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The yield is all they care about, no? And not having a run on the reserves. Their liabilities are denominated in the same USD and USD-like treasuries as their assets, so as long as the redeem demand doesn't outstrip their yield rate and reserves, they're still making rather large profits.
Stablecoins in general are also a large source of demand for the US dollar and its treasures/interest products, so the US gov't has a cynical reason to just allow Tether and participate via USDC/Circle. Even if the competitors to Circle exist, they all still need to buy and hold the US dollar which is a contributor to the whole "Dollar Milkshake" theory from Brent Johnson
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I agree there is some risk with their profits being so concentrated today, just not sure how to quantify that risk
It’s a tricky balance to navigate though, if Tether becomes a really significant buyer of US debt, how do you stop them from buying debt without sending yields through the roof?