> While Tether may not be a bank, their users aren't just users: they're holders of Tether credit
Contractually, they are not considered creditors. Furthermore, liability for any loss is explicitly put on the user. (Whether the contract is valid can be litigated though.)
> isn't Tether legally required to sell or transfer assets to service the redemption
Sadly not… From the contract: “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.”
In fact, US citizens are already disallowed from redeeming tokens, and have been for years.
That said, at the time of a redemption, isn't Tether legally required to sell or transfer assets to service the redemption (as long as they are able, subject to the timelines and qualifiers promised in their agreements)?
Which is where I'm saying that if Tether holds $0.03 USD + 5 short term notes for every 1 USDT, they are obligated to turn over (or sell) those 5 notes (and $0.03) when a redemption is requested.
While Tether may not be a bank, their users aren't just users: they're holders of Tether credit, subject to the terms that govern it.