Delve into the murky waters of stablecoins as Zeke Faux reveals Tether's dubious history and the implications of the forthcoming GENIUS Act. The discussion highlights Tether's struggles with transparency and trust, drawing intriguing parallels to major players in crypto. Explore the challenges of financial privacy versus accountability in a landscape rife with scams. The narrative weaves personal anecdotes that bring to life the complexities and ethical dilemmas of cryptocurrency, while underscoring the urgent need for regulation in this rapidly evolving sector.
The Genius Act aims to regulate stablecoin issuers by ensuring they maintain safe assets and conduct regular audits to enhance transparency.
Tether has faced substantial scrutiny for its lack of audits and reliance on questionable assets, contrasting sharply with compliant stablecoin USDC.
The alarming rise of cryptocurrency scams, particularly 'pig butchering,' underscores the urgent need for effective consumer protection in the crypto space.
Deep dives
Bipartisan Stablecoin Legislation
Recent discussions are underway regarding a bipartisan stablecoin bill known as the Genius Act, which aims to regulate stablecoins in the US. The main focus of this legislation is to ensure that stablecoin issuers hold safe assets and undergo regular audits. Popular stablecoins like Tether and USDC are mentioned, highlighting their differing compliance with potential regulations, particularly Tether's longstanding failure to provide substantial audits despite claiming compliance. This legislative effort signifies growing recognition of the importance of regulation in the cryptocurrency space, particularly concerning the economic implications tied to stablecoins.
Concerns Over Tether's Operations
Tether has faced significant scrutiny over its operational transparency and trustworthiness, with claims that it lacks the necessary audits to verify its financial reserves. The podcast discusses Tether's long history of avoiding rigorous auditing processes, which raises doubts about its 1:1 backing to actual dollars. Meanwhile, competitive stablecoin USDC has had no issues with compliance while Tether has been accused of relying on questionable assets such as Chinese commercial paper. This ongoing skepticism about Tether's practices has led to comparisons to historical financial frauds, sparking concerns about the broader implications for the crypto market.
Impact of Crypto Scams on Victims
The episode explores the surge of scams associated with cryptocurrencies, including the alarming phenomenon of 'pig butchering' scams that exploit users through seemingly genuine interactions. Victims, often lured by promises of investment opportunities, end up losing significant amounts of money to scammers using Tether as a transaction medium. This type of scam not only highlights vulnerabilities within the cryptocurrency ecosystem but also impacts individuals who may not fit the typical profile of a fraud victim, even affecting banking professionals. Such discussions illuminate the need for more stringent measures to protect consumers within the rapidly evolving crypto landscape.
The Role of Regulation in Cryptocurrency
The conversation reflects on the evolving attitudes toward cryptocurrency regulation, especially after high-profile fraud cases like FTX, which prompted regulatory scrutiny from lawmakers. The episode emphasizes that while regulators aim to prevent bad actors from controlling stablecoin issuers, ensuring compliance in the decentralized cryptocurrency space presents challenges. Interestingly, the discussion contrasts the sentiment of the crypto community — which often views regulation as obstructive — with its necessity to protect consumers and maintain trust in financial systems. The podcast suggests that future cooperation between regulatory bodies and the crypto industry could lead to a more secure and stable environment for digital currencies.
Tether's Uncertain Future
The podcast delves into Tether's controversial status in the crypto world, reflecting on how its past actions and lack of transparency have led to claims of being a significant fraud. Despite facing numerous scandals and questions regarding its solvency, Tether has managed to emerge as a dominant player in the stablecoin market, even reporting massive profits. The episode raises concerns about Tether's potential impact on the financial market if significant regulatory actions are taken, and discusses the complexities surrounding offshore finance and potential ties to other questionable financial practices. As discussions about Tether's legitimacy continue, its future remains uncertain in the light of increasing regulatory pressures and industry skepticism.
In this episode, Patrick McKenzie (@patio11) is joined by Zeke Faux, investigative reporter at Bloomberg and author of Number Go Up, to discuss stablecoins and crypto fraud. They dive into Tether's controversial history, the senate’s emerging GENIUS act, and how crypto enables various types of financial crime. The conversation explores how Tether went from a “quilted collection of red flags” to becoming crypto's dominant stablecoin, its noteworthy relationship with Sam Bankman-Fried's FTX, and its current political maneuvering. They also discuss the societal value of financial regulation versus laissez-faire approaches to consumer protection. –
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Timestamps: (00:00) Intro (00:45) The GENIUS act of 2025 (02:28) Tether's audit controversy (05:49) The origins and impact of Tether (08:17) Investigative reporting and red flags (12:58) Tether's shady business practices (19:23) Tether meets SBF (21:40) Sponsor: Check (22:51) New anecdotes in the Number Go Up paperback (28:53) The role of stable coins in crime (38:20) The importance of AML and KYC rules (44:21) Financial privacy (45:18) Sam Bankman-Fried's conference in the Bahamas (47:14) Loot NFTs (49:34) Axie Infinity: a case study (52:30) Crypto's real-world consequences (58:15) Regulation and financial safety (01:05:40) Stablecoin bill and ownership limits (01:06:50) Political realignment and crypto (01:14:40) Citizen journalists and the crypto-skeptic community (01:20:36) The abilities and limitations of institutional journalists (01:26:00) Wrap
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