Too good to be true?
That’s what some are wondering after Tether, the makers of the dollar-pegged crypto asset, USDT, made an announcement Wednesday insisting that its tokens – valued at $2.6 billion – are fully-backed by real cash (according to one law firm, at least).
For months, Tether has fought accusations that it is falsely issuing tokens without actually having the dollar reserves to back them. The company had even initially partnered with an audit firm to undergo a full inspection. That working relationship, however, was dissolved back in early January.
Some background on Tether: Unlike bitcoin or ethereum, which does not have traditional assets affirming its value, USDT can boast a relatively secure store of value being pegged to the dollar. As such, investors view tether as less of an investment and more of a tool to move funds from one cryptocurrency exchange to another.
Sounds ingenious, right?
The problem is that if allegations over tether not having the funds to back their tokens are indeed true, there’s less money than is currently being depicted in the cryptocurrency markets and in fact more reason to believe cryptocurrency prices are inflated.
So, bringing this story back around to the latest announcement, the general consensus is that no, the claim still can’t be proven.
As explained by @Bitfinexed, a well-known critic of the company, the issue with the review is that it isn’t really an audit.
This is important to note because audits are generally held to a greater degree of accountability and integrity than legal reviews, which is what many are saying needs to be done for claims of tether’s reliability to be even remotely affirmed.
Just because a document shows a certain bank balance amount on a certain date doesn’t mean the funds are unencumbered/free and clear.
An audit, which Tether refuses to provide, and which companies large and small undertake on a regular basis, would answer that question. pic.twitter.com/53y4cRmVAC
— Preston Byrne (@prestonjbyrne) June 20, 2018
Nonetheless, amidst the chatter, there are still those who see this legal review as one more reason to keep on using Tether’s token.
Still, there are those who see even this announcement as one that is ill-intended, labeling it just another way USDT is boosting (or manipulating) the price of cryptocurrencies in general.
Warning: proceed with caution
The concern over price manipulation is especially timely given a study published this week alleging that tether was an active instrument used by investors to boost the price of bitcoin in times of market downturns.
Not to mention that tether is a cryptocurrency closely linked to cryptocurrency exchange Bitfinex, which, like tether, has a history riddled with hacks, lost funds and a resistance to greater transparency.
The worry over the increased impact of tether and, by consequence, Bitfinex, has caused outcry on social media by notable voices such as the creator of litecoin Charlie Lee, and professor at NYU Stern School of Business, Nouriel Roubini.
Tether seems well aware of the concerns voiced on social media and recent reports.
The company wrote in a blog post on their official webpage that their efforts in “transparency” are far from over and that they will continue with “steps aimed at opening up Tether to the general public and clearing away any uncertainty that may exist.”
Tether image via Shutterstock