Most recently, the United States started closing up on stablecoin operations with a major focal point on Tether. This had led to the Tether operator being fined for lacking transparency in stating its reserves.
Stablecoins like Tether (USDT) are digital currencies identified with some centralized regulated currencies or precious metals, like gold or silver. Stablecoins are primarily used by different businesses to operate in cryptocurrency investments and send cash which is devoid of the crypto volatility feature characterized by Bitcoin.
But even at this fascinating business closure for Tether, being a stablecoin, it is mostly unregulated, meaning that there is no guarantee for consumers that the crypto company issuing the currency has appropriate reserves.
However, the question to be asked here is if Tether is tethered to anything.
Tether (USDT) has the highest value of all stablecoins in the world, having a market cap of $73 billion and ranked 4th amongst over 2,000 cryptocurrencies.
In its bid to reaffirm its credibility and reassure its traders of its trustworthiness, USDT has laid claim to the fact that its cash reserves equal the stablecoins value is issued. But the United States refuted Tether’s claim that is considered to be false.
This purported allegation comes following the conclusion of findings made by the US Commodity Futures Trading Commission (CFTC) between 2016 and 2018, which revealed that 27.6% of the value of issued stablecoins in that currency reserves is held by Tether. This discovery made the commission file suit and settle charges with USDT accusing the crypto company of making “untrue or misleading statements and omissions of material fact.”
In converse to the crypto company’s statement, the United States government said the company’s reserves are solely dependent on certain intermediaries and unregulated features to own funds from the reserves, including shared reserves with Bitfinex, a cryptocurrency exchange with an ambiguous relationship to Tether.
It could be recalled that Bitfinex was the first crypto exchange to introduce tether into the cryptocurrency ecosystem in 2015. It was one of the thriving Bitcoin exchanges at that time, but there was a crypto investment explosion following customers’ demand for Tether as a tier of Bitcoin trading, therefore making Bitfinex the largest crypto exchange by volume.
Meanwhile, the lack of transparency and accountability bedeviling Bitfinex and a merge of strong new competitors like Binance toppled Bitfinex as the largest crypto exchange, but even at that, USDT moved on to become the most traded stablecoin today.
Is Tether Safe To Be Used?
Used to trade cryptocurrency worth trillions of dollars, there has been a few reported issues of difficulty in traders getting their money back into USD after Tether has been used. Perhaps, there might be an exodus of traders and investors from Tether in the event this glitch persists. Also, let refresh our minds that USDT has a taunted history of falsehood, which is a potential risk to delve into it.
