If you’ve been involved into crypto space since last few months, you may know already that there’s a trend of stablecoins going on right now. A lot of stablecoins have already been launched, and some are in the pipeline. We’ve got TrueUSD (TUSD), Gemini dollar (GUSD), USD Coin offered by Circle (USDC) and many others. A yen-pegged stablecoin is also being developed in Japan, and Venezuela’s Petro was also projected to be a stablecoin linked with the value of country’s oil reserves. However, despite the large number of these coins if there’s one coin which has dominated the crypto space since ever, it’s Tether (popularly known as USDT). Its dominance is so much that it’s used as a vehicle to facilitate crypto trading on many of the exchanges worldwide, which includes our Indian exchanges too.
But now it looks like we can’t rely on Tether for too long, otherwise, things are going to blow up some day. Why? Well, because the cat is now out of the bag. Tether has confirmed itself that its tokens are not fully-backed by US dollars, something which has been the subject of debate and suspicion for a long time.
That’s right. While critics of Tether have long argued that its claim of every token being backed 1:1 by US dollars is unreliable, the company had till now been trying to cover itself up. There has always been a demand in the community to get the reserves of Tether audited by professional 3rd party auditors, but that demand was never met by the company. In November last year company for the first time revealed its banking partner and confirmed that it has got more than $1.8 billion in its account, but still it didn’t agree to the demand of external audit. And now finally it looks like the fears of its critics were not unfounded.
Over the course of last year an interesting word-game has unfolded on the official website of Tether regarding its “100% backed” claim. Have a look at the original claim:
Then after some time when lots of people pointed out that Tether has not gone through a 3rd party audit, take a look at how the “audits” word was replaced with verifications:
Then people questioned the “verifications” term too, so Tether decided to completely remove that line.
And now finally when suspicion of the community still didn’t cool down, have a look at where things have come:
So the 100% of Tether’s so-called reserves doesn’t consist actual US-dollar holdings only. They also include cash equivalents, and other assets like loans extended to 3rd parties. What are those cash equivalents, nobody knows. In short, Tether has turned into an unregulated banking institution. Regulated banks are at least backed by their Central Banks and insurance – Tether has none of these things. God knows who will bail it out when its reserves go empty!
We would advise you to tread with caution if you’ve a substantial amount of Tether in your holdings. The market of Tether has not yet spooked, but we can’t be sure about the future.