The hot topic of conversation at the moment in the Cryptosphere is no other than Tether. If you don’t know what Tether is then let me quickly explain.
Tether is a cryptocurrency pegged to the US Dollar, so in theory 1 Dollar = 1 Tether. The ticker for Tether is appropriately USDT. The company behind the token make the following statements about the token:
- Every tether is always backed 1-to-1, by traditional currency held in our reserves. So 1 USD₮ is always equivalent to 1 USD.
- Our reserve holdings are published daily and subject to frequent professional audits. All tethers in circulation always match our reserves.
- Tether’s blockchain-enabled technology delivers world-class security while meeting international compliance standards and regulations.
All sounds pretty rosy, huh? Well it would be if it wasn’t for those pesky kids!
None of these statements have been upheld to date, firstly their own terms and conditions state clearly that they are not legally required to give you dollars back for your tether, in fact they go as far as to say that Tether tokens hold no value and are NOT A CURRENCY. The next problem is that so far no professional audit has been completed, therefore we have no evidence to prove that they do indeed have reserves to match the circulating Tethers. Finally, they have already been hacked multiple times with Millions of tether being stolen from the companies Tether reserves, which doesn’t really seem like ‘world-class security’ , does it?
To top it all off Tether is run by the same people behind leading Cryptocurrency exchange Bitfinex, this of course can allow for some very dangerous possibilities in market manipulation.
Bitfinex’s Giancarlo Devasini and Philip Potter has been named in the Paradise Papers – an enormous data leak identifying over 120,000 companies and individuals who have employed the services of offshore service providers operating in ‘tax havens’. The leaked documents contain evidence that Giancarlo Devasini and Philip Potter established Tether in the British Virgin Islands already back in 2014. – Bitcoin.com
U.S. Regulators Subpoena Crypto Exchange Bitfinex, Tether
In the past few hours we have also heard how Bitfinex and Tether have both been Subpoenaed by US Regulators:
The U.S. Commodity Futures Trading Commission sent subpoenas on Dec. 6 to virtual-currency venue Bitfinex and Tether, a company that issues a widely traded coin and claims it’s pegged to the dollar, according to a person familiar with the matter, who asked not to be identified discussing private information. The firms share the same chief executive officer. – Bloomberg
There is far more circulating on the Tether Conspiracy if you would like to delve down the rabbit hole further, however we will leave it at that as most is speculative and the truth is, none of it really matters that much.
But Does Any Of This Really Matter?
If you listen to Tethers skeptics you may end up believing that Tether has the potential to bring the whole Cryptospace crashing down, however when you consider that the Total Market capital of Tether is just $2,225,022,206, Bitconnect had a higher market capital at it’s peak and we’ve already seen what happens when all this capital is decimated – not a great deal.
Yes this whole Tether / Bitfinex debacle is worrisome, however it is not the huge threat to the space that many would have you believe. If indeed these tethers are not backed by anything other than words and a fancy website then we will have a lot of people that may lose a lot of money, not dissimilar to what we saw with Bitconnect just a few weeks ago. But it’s overall affect on Bitcoin and other Crypto assets is minimal, the biggest problem I see from all of this is a big red card from the regulative authorities.
But either way, regulation is just around the corner for Cryptocurrency.
At the time of writing we are seeing a big sell off within the Cryptospace, this is a result of the previously mentioned news of Bitfinex and Tether being Subpoenaed, but it is purely an emotional reaction from the news in an already slightly bearish market.
The only advice we would offer is firstly, take your funds out of Bitfinex if you haven’t already done so and do not hold Tether tokens (if anyone actually does for any great lengths of time?)