That’s not correct; Tether does nominally allow redeeming for USD, although only in bulk, and the service has opened and closed over time and generally been a mess AFAIK.

What parent claims used to be true:

> There is no contractual right or other right or legal claim against us to redeem or exchange your Tethers for money. We do not guarantee any right of redemption or exchange of Tethers by us for money. There is no guarantee against losses when you buy, trade, sell, or redeem Tethers.

https://web.archive.org/web/20171224172135/https://tether.to...

Currently:

> Tether reserves the right to delay the redemption or withdrawal of Tether Tokens if such delay is necessitated by the illiquidity or unavailability or loss of any Reserves held by Tether to back the Tether Tokens, and Tether reserves the right to redeem Tether Tokens by in-kind redemptions of securities and other assets held in the Reserves.

> Any individual who is a U.S. Person and any entity that is a U.S. Person is prohibited from using the Site or any Services, including but not limited to using a Digital Tokens Wallet on the Site

[and we know that there is a limit on the Reserves]. I'd be _extremely_ wary about claiming they can be redeemed.

https://tether.to/legal/

Wow. The US ban seems... unbelievable considering it’s USD based. Surely this breaks some sort of commercial law that the government can swoop in on?

Why does it seem unbelievable? The US is a pathological jurisdiction that frequently tries to indict people with no direct connection to it and extradite them. Avoiding it seems pretty reasonable to me, I'd consider doing the same.

Whether doing so breaks US commercial law seems by-the-by given that they are very pointedly not operating within US jurisdiction.

Fine. Sometimes they do, but legally are not obligated to do so. So it’s a moot point. They’re protected from runs because they don’t have to cash out. Their current terms of service state:

> Tether reserves the right to delay the redemption or withdrawal of Tether Tokens if such delay is necessitated by the illiquidity or unavailability or loss of any Reserves held by Tether to back the Tether Tokens, and Tether reserves the right to redeem Tether Tokens by in-kind redemptions of securities and other assets held in the Reserves. Tether makes no representations or warranties about whether Tether Tokens that may be traded on the Site may be traded on the Site at any point in the future, if at all.

Not sure whether it's moot. Even though they're not legally required to provide cash, Tether's accomplishment of establishing and then maintaining a $1 market value is presumably assisted at least to some extent by their offer to provide it. To what extent precisely remains to be seen. The longstanding doubts about Tether's reserves didn't impair its market value; the more recent revelations may not either, but that's not certain yet (in particular, if the market is being manipulated, the muted short-term response may not last).

But yes, they are protected from runs.

Edit: Also, that text wasn't always there; in 2015 they claimed Tether was "redeemable for cash at any time" [1] and didn't have any similar disclaimer in their terms, as far as I can tell [2]. In addition, even with the disclaimer, if someone sued Tether for breach of contract (because they breached their promise to hold 1:1 reserves), fraud (because at certain points they made false claims that they did hold them), etc., they might be able to recover some USD in the form of restitution.

[1] https://web.archive.org/web/20150320090830/https://tether.to...

[2] https://web.archive.org/web/20150921163244/https://tether.to...