Do Zero-Reserve Loans Make Tether Better Off Backed by Bitfinex Stock?

With the Federal Reserve now allowing US banks to issue loans with zero reserve, is Tether better off backed by Bitfinex shares than dollars backed by nothing?

Confidence in the leading stablecoin seems to have returned, despite Tether and Bitfinex still being embroiled in two ongoing court proceedings - one of which relates to an $850 million cash loan made by Tether to Bitfinex, secured against Bitfinex stock.

Investors didn't like the fact that their Tether was no longer backed one-to-one with dollars.

With United States banks now allowed to issue loans with zero reserve, were the shares actually a better option?

In April 2019 the Office of the New York Attorney General announced an ongoing investigation into Tether and Bitfinex.

It was alleged that Tether had given Bitfinex an $850 million cash loan to plug a hole in its finances.

In return, Bitfinex put up its own stock as collateral against the loan.

Legislation agreed by The U.S. Federal Reserve back in March now allows banks to issue loans with a zero reserve ratio.

So with an endless amount of dollars backed by nothing becoming available, is it possible that the Bitfinex stock could actually turn out to be the stronger asset?

With the Attorney General's case and a class-action suit alleging market manipulation still in progress for both Tether and Bitfinex, it's probably a little bit early to say.