That doesn't mean USD wasn't up to the task, that means Tether is used to evade regulation and oversight. Exchanges could've held US treasuries in institutional accounts if the fiat was actually there, but you can't easily fake holding UST or similar instruments.

From Matt Levine's Money Stuff article yesterday (Tether heading):

> Here is the website [1] for the JPMorgan Prime Money Market Fund. If you click on the tab labeled “portfolio,” you can see what the fund owns. The first item alphabetically is $50 million face amount of asset-backed commercial paper issued by Alpine Securitization Corp. and maturing on Oct. 12. Its CUSIP — its official security identifier — is 02089XMG9. There are certificates of deposit at big banks, repurchase agreements, even a little bit of non-financial commercial paper. The fund lends some money to LVMH Moet Hennessy Louis Vuitton and Toyota Motor Finance (Netherlands) BV. You can see exactly how much (both face amount and market value), and when it matures, and the CUSIP for each holding.

> JPMorgan is not on the bleeding edge of transparency here or anything; this is just how money market funds work. You disclose your holdings.

> Here is an incredible interview [2] that the chief technology officer and general counsel of Tether did yesterday with CNBC’s Deirdre Bosa. Tether is a stablecoin that we have talked about around here because it was sued by the New York attorney general for lying about its reserves, and because it subsequently disclosed its reserves in a format that satisfied basically no one. Tether now says that its reserves consist mostly of commercial paper, which apparently makes it one of the largest commercial paper holders in the world. There is a fun game among financial journalists and other interested observers who try to find anyone who has actually traded commercial paper with Tether, or any of its actual holdings. The game is hard! As far as I know, no one has ever won it, or even scored a point; I have never seen anyone publicly identify a security that Tether holds or a counterparty that has traded commercial paper with it.

> Bosa, who had two Tether executives on her show, sensibly asked them about it several times, but you can’t win the game that easily! “We don’t disclose our commercial partners, so that is quite important,” says CTO Paolo Ardoino at around the 5-minute mark. “Given our portfolio composition in commercial paper, we believe that it is quite important to respect the privacy of the banking partners that we work with.” That’s not a thing! That’s not a thing at all! Every money-market fund just lists all of its holdings, by size and issuer and CUSIP! Tether has broken new ground in the concept of commercial-paper privacy rights! But, why?

> Everything in this interview melted my brain. Another favorite came at around the 13-minute mark, when GC Stuart Hoegner says “we maintain cash, for example, that is many multiples above our single biggest redemption thus far, as well as above our biggest 24-hour period of redemptions,” which is … not … that … much? (Banks, for instance, are generally required to have “high-quality liquid assets” sufficient for “a 30 calendar day liquidity stress scenario.”) There is more here, including a promise that audited financials are “only months away.” I do not watch a lot of 32-minute business-television interviews but I found this one riveting.

[1] https://am.jpmorgan.com/us/en/asset-management/adv/products/...

[2] https://www.youtube.com/watch?v=ZBEqyiO35cQ