I've sold Tether for both USD and CAD without any issue or significant delay. What are the difficulties the author is referencing? (Asking genuinely, not arguing.)
But in principle you should be able to go to the “tether mint”, give them your tethers, and they redeem them 1:1 to USD. Apparently this is not very straightforward to do.
This podcast episode covers the topic well: https://anchor.fm/cas-piancey/episodes/Tether-A-Stable-Discu...
This theory is backed up more by the fact the tether price history matches with a script in someone's basement that occasionally crashes and it takes a few hours to repair, during which the price wanders before being clamped 1:1 again.
That's functionally identical to going to the mint directly, and means the mint doesn't require any customer service etc.
And of course, you have to not exceed their liquidity buffer because they themselves admit to only being 3% backed.
Thus far, I don't believe anyone has actually shown any proof that they have actually carried out a redemption of USDT tokens via Tether. Most people who claim to simply traded it.
Like Madoff's fund.
That's not how Tether works.
Tether is supposedly invested in "commercial paper", but that has to be fake. If they were really buying commercial paper, they'd be in the top 10 commercial paper buyers. The trading desks that trade short term commercial paper would see billions of dollars of transactions from Tether. Traders report they're not seeing that.
There's still an assumption that the real estate can be liquidated 1:1 for the loan value, though.
I think the difference is not so much the collateral, but the insurance.
If the risk of default is too high, banks usually won't give out loans without some form of insurance.
The allegations against Tether are that it is not backed by anything at all, not even illiquid assets. It has so far refused to provide any audited proof that it does and other means of trying to find out (such as reporting by trading desks in a sibling comment) also indicates that there does not seem to be enough money in the pot to redeem all the tokens for their fiat counterparts.
Which is why deposit insurance exists, regulated and mandated by governments. Bank regulators also impose audited capital requirements, reducing the risk that an illiquidity problem (a bank run) becomes an insolvency problem.
Tether has no such guarantees. Since it holds cash and cash-equivalents at far less than a 1:1 ratio compared to its liabilities (issued Tether), participating in the Tether ecosystem is placing an implicit bet that Tether's collateral will remain sound. If it doesn't -- for example if its commercial paper loses value -- then a run on Tether can indeed cause insolvency.
>In practice they’re quite difficult to convert to real money.
In practice they're quite easy to convert to real money, they're often the most liquid pairs available and extremely easy to convert close to 1:1 for another USD stablecoin as well, if that's your bag.
I have no idea how easy it is in practice to redeem 1 USDT for 1 USD, but it's very easy to convert even a marginally large sum of USDT to "real money" (fiat).
Where it can get difficult is withdraw limits on centralised exchanges, or overly cautious (hoop jumping) KYC processes. This is regardless of whether you're using USD, CAD or any other currency.