> It sounds like the only way to do this is to create your own bank which directly integrates with the federal reserve

...but isn't the whole point of Tether to stay as far away from the traditional banking system as they can?

This of course includes avoiding - as much as possible - all the KYC/AML legislation that traditional banks are obliged to follow?

There is tension between being as far away from the banking system as possible and having the ability to cash out your USDT to USD.

The only way I can think of a stablecoin being totally independent of banks is to store their reserves as bank notes, and when someone wants to cash out USDT to USD they have to go pick up the bank notes. This glosses over the obvious challenges of storing billions of dollars in bank notes and distributing those notes during a cash out. The bank notes are also worth less than face value because you have to physically store and secure them.

Not at all, the whole point of Tether is to create a clean link to the US financial system — a tether to it.

> the whole point of Tether is to create a clean link to the US financial system

If one's business is "providing a clean link to the US financial system", why would one choose to avoid financial services regulation?[0]

If one is clean, or at least trying to look clean, why would one choose an accountant based in the Cayman Islands?[1] This bit in particular is beyond parody.

[0] https://www.coindesk.com/policy/2021/01/26/what-tether-means... [1] https://www.coindesk.com/markets/2022/01/26/tethers-new-acco...

The banks used by crypto companies tend to be outside the US and have large crypto positions.