stablecoin any cryptocurrency designed to have a relatively stable price, typically through being pegged to a commodity or currency or having its supply regulated by an algorithm. - Oxford Dictionary
Tether USDT is a StableCoin with a stated value of one US dollar per USDT, as initially claimed by their webpage,
Tether Limited, USDT's centralized authority, has the ability to print tether and thus claims to be able to print something equivalent to US dollars, but as the Company battled with numerous scandals over the years, concerns about the legitimacy of their business have grown.
To add fuel to the concerns Tether LTD changed their 100% Backed policy to,
Tether LTD is controlled by Bitfinex Exchange, as you maybe familiar with Bitfinex was caught in a lawsuit by the New York Attorney General accusing them for using Tether's assets to cover missing funds estimated over $850Million.
According to the New York Attorney General, “Tether’s claims that its virtual currency was fully backed by U.S. dollars at all times was a lie.” After discovering that iFinex, the operator of Bitfinex and Tether, lied about Tether's support and the flow of hundreds of millions of dollars between the two companies in order to conceal the truth about Bitfinex's hefty losses.
The investigation ended in a $18.5Million settlement and banning Tether from conducting business in New York State. Here is the full NYAG report
Tether is not a central bank, bank, or regulated in any way. It has not been audited, has been punished by financial regulators for financial mismanagement, and has admitted that its StableCoin is not backed by the US dollar in the majority of cases, although Phil Potter claims that Tether is open to be audited but auditors won't collaborate with them, but this wan't true, because Tether terminated their contract with audit firm Friedman LLP, citing “Friedman was undertaking excruciatingly detailed procedures for the relatively simple balance sheet of Tether"
in a blog by Bitfinex'ed a prominent critic of Tether claimed that Tether had been printing tokens out of thin air to drive up the price of bitcoin on the exchange.
Recently CoinDesk requested a FOIL on NYAG disclosure documents detailing Tether's reserve breakdown and immediately Tether asked court to block NYAG from releasing the documents, this is not the first time that these documents were blocked from investigative/media outlets, recently Cofeezilla a YouTuber who investigates crypto scandals also published a video saying that his FOIL request was denied too in a video titled "Tether is hiding something……”
To support their claim Tether wrote in the petition “Competition is fierce, with upstart exchanges constantly entering the market and challenging the incumbent,” the petition said. “Bitfinex and Tether differentiate themselves from their competitors using at least three secret and competitively sensitive types of data that are at issue in this proceeding: (1) financial strategies, (2) compliance measures and documentation and (3) customer data.””“Competition is fierce, with upstart exchanges constantly entering the market and challenging the incumbent,” the petition said. “Bitfinex and Tether differentiate themselves from their competitors using at least three secret and competitively sensitive types of data that are at issue in this proceeding: (1) financial strategies, (2) compliance measures and documentation and (3) customer data.”
Is Tether A Ponzi Scheme?
Despite Tether Limited claims to be a StableCoin supplier, all Tether in circulation isn't backed by USD. Furthermore, it is an unregulated, opaque institution that has already been penalized by financial regulators.
As of writing this article the MarketCap of Tether is $68,571,927,852, according to Coinmarketcap.com
So, if USDT isn't backed by reserves as we believe, then the billions held by exchanges across the ecosystem are worth nothing at all—which puts the crypto markets in an unprecedented liquidity crisis.
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