Last month, Tether published a pie chart of its reserves, as part of an effort to get the NY Attorney General off their backs. (The other part was an $18.5 million fine.)

So Tether has paid its protection money and is free to continue printing stablecoins, as long as those stablecoins are fully backed by dollar reserves.

But there’s a catch: The “dollar reserves” can’t be actual dollars.

Banks don’t want Tether’s dollars because Tether’s customers are probably degenerates like me. Accepting Tether as a banking client would invite unwanted regulatory attention, Operation-Chokepoint-style. Even if Tether’s customers were in fact wholesome billionaires like Elon Musk, there’s too much “reputational risk”, according to JPMorgan. And that’s why Tether previously stashed its money with a Panamanian payment processor, where it was promptly stolen.

Apparently the new workaround is to turn the dollars into credit, like commercial paper and corporate bonds. But wait! A corporate bond isn’t a bearer asset — it still needs to be held by a bank or brokerage. That doesn’t do anything to reduce the risk of money laundering, it just adds an extra step.

Maybe the problem isn’t AML/KYC risk, but the fact that banks don’t want dollars. They’re not a public storage facility, they don’t want to store your fiat toilet paper. In theory, deposits can be turned into interest-bearing loans, but that already happened many times over and everyone who wants cash already borrowed it for cheap. (No, not you – I meant the Cantillon insiders.)

Maybe we’ll see more of this going forward, where it’s not enough to park your money and lose 2% to inflation each year. Your money must actively participate in the inflationary process by creating more credit.

Tether is now one of the world’s largest holders of commercial paper, or short term corporate debt. It’s practically a bank. Maybe Tether should use its dollars to buy bitcoin.