Tether, the multi-billion dollar stablecoin is and has been under scrutiny regarding whether each Tether (USDT) has $1.00 USD in reserves for some time. Now, on December 18, Bloomberg reported that Tether may in fact be legitimate with billions of dollars in backing.
According to the report, Bloomberg reviewed bank statements spanning 4 separate months, each detailing the cash amounts held by Tether Ltd. accounts.
An account statement from Tether’s Puerto Rico’s Noble Bank Ltd. on January 31, 2018 showed $2.2 billion was in Tethers account and on the same date, 2.195 billion Tethers existed, according to data compiled from CoinMarketCap. Also, bank statements from September and October 2017 matched up with the number of Tethers in circulation on the corresponding dates.
According to Bloomberg, they shared these statements with regulators and while they do not provide a complete overview of Tether’s finances; they offer legitimate claims and details not made public before.
Uncertainty Surrounding Tether’s Legitimacy Remains
While Tether proved they held proportionate funds to the number of Tether issued on specific dates, doubt about Tether’s legitimacy is still rampant among members in the cryptocurrency industry.
This is understandable as the bank statements reviewed by Bloomberg and regulators don’t show where the funds originated from or where they are now. Also, the dates were cherry picked by someone with access to the company’s records and were not random.
Therefore, Tether Ltd. could have easily shuffled things around to make themselves appear legitimate.
Tether has never been transparent with their finances and have never undergone a professional audit from an authorized third party.
This includes Tether’s ties with Bitfinex when the exchange became the only way to buy or sell Tether last year. Regarding this situation, Stuart Hoegner, the general counsel for Tether and Bitfinex, refused to provide details on the cash balances of both these entities during the CFTC investigation.
Therefore, many questions about Tether’s legitimacy remain as the company has not been very compliant or transparent with regulators.
Massive Implications if Tether Proven Illegitimate
Tether has a value of roughly $1.9 billion making it the sixth largest cryptocurrency by market cap. Also, Blockspur, a blockchain data analysis firm estimates that Tether usage in at least 30% of all Bitcoin transactions on exchanges.
Exchanges also use Tether as a quasi-bank because many of them cannot obtain relationships with established banks. Therefore, exchanges rely heavily on Tether to move and manage value created in the cryptocurrency market.
Taking all the above statements into account, if something proved Tether to be fraudulent by not being backed by USD, the fallout of Tether’s demise would negatively affect the entire cryptocurrency ecosystem.
The Rise of Stablecoins
Since the tribulations and accusations surrounding Tether and their legitimacy, an invasion of new stablecoins have hit the market. The new stablecoins offer traders a more transparent alternative to Tether and are taking market share.
Therefore, Tether finally has competition in the stablecoin arena and investors have safer choices to hedge against the volatile cryptocurrency market and against the uncertainty of Tether (USDT).
What do you think about Tether? Do you believe USDT has always been and is currently backed 1:1 to the US dollar? Let us know what you think in the comment section below.