Being only 90% backed by cash isn't the problem. A lot of people could afford to lose 10%, if the money was evenly distributed. Tether would still be a scam in that situation, but it wouldn't destroy the crypto ecosystem.
The risk is that there could be a bank run. People panic and drive down the price trying to get rid of their tether. Now crypto as a whole has lost a lot of the liquidity used to buy/sell crypto. This causes a further panic across other crypto assets.
The risk is that there could be a bank run. People panic and drive down the price trying to get rid of their tether. Now crypto as a whole has lost a lot of the liquidity used to buy/sell crypto. This causes a further panic across other crypto assets.