This development probably slipped by you, given the historically unprecedented slew of awful news we’re subjected to these days. But, on May 16th, just days after the untimely demise of the Terra network, the New York Supreme Court rejected a petition from another stablecoin, Tether (USDT), to block the public from seeing the composition of their reserves. 

This is significant because USDT’s market cap is between 4-8 times larger than Luna’s — Tether currently trades as the third largest cryptocurrency by market volume and the largest stablecoin by a strong margin. The major difference between Tether and Terra are the ways in which their value is pegged to the dollar. Terra bought and sold volatile assets algorithmically to stay stable, which, yeah, feels pretty inevitable how it ended when you write it out like that. Tether, on the other hand, is secured the good old fashioned way: stacks of gold bars, crates of bands, a brief case filled with glowing orange light, or whatever Coen-esque MacGuffin you prefer.

Point is, Tether is supposed to have a lot of tangible value in a vault somewhere. How else could their entirely intangible asset command an $80B market cap? Well, like Terra before it, it could be propped up by sticks and stones in a deep pile of low pH bullshit. However, unlike Terra, a Tether crash would trigger not only a steep market downturn but an industry wide financial catastrophe that would surely usher in prohibitive regulations and uniformed legislation from our gerontocracy.

Now, the main thing I find funny about this whole situation is how centralized the management of the literal reserves are for a technology-based initiative built on the idea of decentralizing financial control. Maybe I’m just an asshole with a predilection for blockchainfreude though. What’s not funny is what happens if Tether is indeed hodling less cash than they claim, and what happens if this information goes public. Because the implications would go far beyond a few degens losing their life’s savings.  

If the blockchain industry goes under — which, in the wake of such a crash, it surely would — the impact would be global. Massive blockchain adoption, particularly in the play-to-earn gaming sector, provides a viable living to people in developing countries like the Phillipines and Indiana. (Editor’s Note: I assume El Prof meant ‘India’, but, considering the micro-Pence-sized problem faced by citizens of the poor state, I’ve decided to preserve the text as it was originally written.) Do those use cases bring genuine value to the international economic ecosystem? No. But they do bring food to tables. And, aside from the human cost, the adoption of innovative protocols like Solana by Indian software engineers makes the likelihood of a downturn frightening for the sheer promise that’d be washed out of the space in its wake.

Since May 7th, when the whole UST fiasco untethered the crypto markets, Tether itself also depegged. Now, nearly 20 days later, USDT remains depegged. Sure, it’s only hovering a fraction of a cent below the USD. But its inability to regain its footing casts a dark shadow on its supposed stability. And the founders’ unwillingness to bring the reality to light is even more worrying.

Now, with this impending forced regulatory transparency, it seems as though those in the know are repositioning to bet on its death. Unfortunately, we personally are as far from the know as one could possibly be. So, while Rome burns, please excuse us as we continue to sip our (Irish) coffee and speculate wildly.