Tether (USDT) Set to Reveal ‘Historic’ Development in About 3 Weeks, According to a Tweet from the Company’s CTO
Tether (USDT), a stablecoin pegged to the US dollar, could be on the verge of a significant reversal if the latest statement from the company’s CTO is to be believed.
Tether has long been considered the soft underbelly of the crypto sphere
Tether has been mired in a conglomeration of controversies over the past few years. Nevertheless, it is currently the third largest cryptocurrency by market capitalization, according to a chart of CoinMarketCap. Tether tokens, developed by crypto exchange BitFinex and trading under the symbol USDT, were initially backed by an equivalent number of US dollars. This meant that each USDT would always equal 1 USD.
However, in February 2019, Tether changed this Politics (retrieved from archive.org) to one where Tether coins are now “100%” backed by its “reserves”. For reference, these reserves include foreign currency, cash equivalents (such as US Treasury bills), and other assets and receivables from loans made by the company to third parties. Controversially, Tether also maintains exposure to relatively opaque Chinese commercial (CP) papers. Because of this deliberate vagueness surrounding Tether’s reserves, the company has remained a somewhat perennial recipient of scathing reviews. In fact, there were rumors that the company had also invested in Evergrande, the struggling Chinese real estate giant that recently defaulted on its offshore bonds.
As if the deliberate obfuscation around its reserves wasn’t enough, Tether is also a case study in poor corporate governance. For example, a 2019 investigation by the New York Attorney General concluded that the company hid “an $850 million loss of mixed customer and corporate funds”. In the following settlement agreementwhich prohibited the company from doing business in New York, it was revealed that Tether coins in circulation remained virtually unsecured for certain periods.
Then, in August 2021, Tether released a statement of reservations as of June 30, 2021. According to the document, of its total assets of $62.773 billion, only $6.282 billion, or about 10% of Tether’s total assets, were in the form of cash and bank deposits, while nearly 50% of the total assets consisted of commercial paper. Of course, this revelation did little to assuage the concerns of Tether critics.
On October 15, 2021, the CFTC ordered Tether and BitFinex to pay fines totaling $42.5 million for repeatedly falsely claiming that the stablecoin was entirely backed by US dollars. As evidence, the CFTC cited the period from June to September 2017 when the circulating supply of 442 million Tether coins at the time was never backed by deposits of more than $61.5 million. Rather than address this controversy head-on, Tether opted to pay the fine in order to settle with the CFTC.
Finally, Tether has also been accused of manipulating the price of Bitcoin. As a reminder, in 2018, two researchers had identified certain business models on Bitfinex to postulate that Tether coins were being used to artificially inflate the price of Bitcoin. Readers should note that both Bitfinex and Tether have vehemently denied these allegations.
With the primer on Tether controversies out of the way, let’s discuss the topic of today’s article.
The Stablecoin is now set to announce a major development
According to a tweet from Tether’s CTO, Paolo Ardoino, the company is about to announce a “historic” development:
Yesterday was a historic moment for #attached
In ~3 weeks, you will understand why 🍫
(Yes yes, announcement-reception)
—Paolo Ardoino (@paoloardoino) February 11, 2022
While the nature of this development is still unclear, speculation abounds. For example, did Tether finally conduct a comprehensive third-party audit that would go a long way in restoring the credibility of the Stablecoin project? Or is this impending announcement about a potentially game-changing partnership? I guess we’ll find out soon enough.
Readers will recall that the prolific short seller Hindenburg Research offered a $1 million bounty to anyone able to provide “information leading to previously undisclosed details about the backing of the stablecoin cryptocurrency.” “Tether”. A conclusive and independent third-party audit would put an end to these fishing attempts once and for all.
Readers should note that stablecoins such as Tether serve an important function in the crypto market. Since their values are not meant to move from their stated pegs, stablecoins often act as a medium of exchange, allowing crypto investors to easily convert one cryptocurrency to another. Tether also allows its holders to exploit arbitrage opportunities by facilitating the buying and selling of cryptocurrencies on various exchanges in multiple jurisdictions. For example, Tether plays an important role in normalizing Bitcoin prices in high-premium countries by attracting flows from low-premium countries. If the stablecoin is now able to convincingly push past its less than stellar past, it will help improve the health of the entire crypto ecosystem.