Same here but if you go to the Withdrawal or Deposit page for USD or USDT it says you need to be verified. What I don't know is how long that has been the case. Both that archive and bfx_drew's comments to me indicate they were talking about it being possible to deposit BTC and withdraw USD or USDT. So my guess is that they tightened it up and added the KYC verification for that very reason. To protect themselves from possible legal actions.

This is really just a story about the evolution of regulations and the exchanges having to change the way they do business to keep themselves within them.


As for this bit: "Surely all USD they hold in bank accounts must have been deposited as USD."

What I mean is that someone must have deposited the USD to Tether. After that, they may well have been traded to someone on or off an exchange for BTC but that person is not the source of Tethers funds.

Edit: Reading it again that bfx_drew comment doesn't make any sense. To issue Tether there must be someone 'writing a cheque' for it. Not necessarily direct to Tether, they could deposit USD on an exchange and then the exchange buys from Tether.