From your example the only thing that happened is that now you hold x euros and Kraken holds x amount of USDT.

Unless Kraken goes to Tether org and asks "hey I got these USDTs, please give me the USD" no redemption has occurred.

That some people can in effect transact USDT for fiat via other mechanisms (like your example above) says nothing about Tether org backing or reserves.

Until you go to Tether org with your USDT's and ask them for USD you won't know if they have the reserves.

I mean, does the company hold (increasingly?) large USDT positions on their balance sheet (and would therefore be the ones in the hole if Tether loses the peg), or is the company able to get actual dollars out of Tether inc. in exchange for those tokens?

> Unfortunately, Tether has decided to stop serving U.S. individual and corporate customers altogether. As of January 1, 2018, no issuance or redeeming services will be available to these users. Exceptions to these provisions may be made by Tether, in its sole discretion, for entities that are: Established or organized outside of the United States or its territorial or insular possessions; and, Eligible Contract Participants pursuant to U.S. law.

> An Eligible Contract Participant includes a corporation that has total assets exceeding $10,000,000 and is incorporated in a jurisdiction outside of the United States or its territories or insular possessions. This will be the principal basis upon which we will continue to do business with selected U.S. persons.

Basically, it looks like they only provide on and off ramps for large clients outside the US. Given their history, I am betting they might not want to reveal where they store their assets, and don't want to deal with US regulators (but not sure this is working).