Number Go Up: Inside Crypto's Wild Rise and Staggering Fall

by Zeke Faux

Some of the critics compared Tether to the banks that sprung up in the 1800s on the American frontier, which failed all the time. The U.S. government didn’t issue paper money back then, only gold and silver coins, because its early leaders were fearful of inflation—“an infinity of successive felonious larcenies,” according to President John Adams. This led to a currency shortage. But there was a workaround: States allowed banks to print their own notes, redeemable for U.S. coins on demand. Few banks kept enough hard currency on hand to redeem all the banknotes. Instead, they simply printed as much paper money as they wanted, and used it to buy real assets, like property. As long as the notes stayed in circulation instead of being redeemed, the scheme could continue. These institutions came to be called “wildcats,” supposedly because they discouraged anyone from bringing paper money in to exchange for coins by locating their branches in remote areas where wild animals roamed. These wildcatters would borrow reserves for the day when examiners were coming to visit. Carriages bearing gold would literally rush to beat examiners to branches, or piles of coins would be handed in through the back door during an inspection. One bank in Michigan filled boxes with nails and glass, then covered them with a thin layer of silver coins to fool examiners, who weren’t fooled. “What a temptation was this for the unscrupulous speculator, the adventurer, dreaming only of wealth, and ready to ...