Fun

Tether Says Its Stablecoin Is ‘Fully Backed’ Again

News Feed - 2019-11-08 07:11:18

USDT tokens are now fully backed by Tether’s reserves, the stablecoin issuer said Thursday.


Tether published a response to what it described as “a flawed paper” written by John Griffin, a professor of finance at the University of Texas at Austin, and Amin Shams, an instructor the Ohio State University which claimed a single address on the Bitfinex exchange was responsible for manipulating the bitcoin market in late 2017, sparking the bull market. The paper was an update to a version first published in the summer of 2018.


Tether pushed back on this claim, saying in Thursday’s statement that “the revised paper is a watered-down and embarrassing walk-back” of the first version.


Perhaps more intriguing, however, was the claim that “All Tether tokens are fully backed by reserves.”


Whether or not USDT is fully-backed has long been a point of contention. The company has promised an audit of its stablecoin reserves (though it has not delivered one, and has since dissolved its relationship with its auditor), produced a third-party report saying it likely had more funds than outstanding tokens, and had a bank write a letter vouching for its holdings. (The latter two reports both acted as snapshots, only assuring the crypto community that on specific days, Tether’s obligations did not exceed its assets.)


Tether’s backing is even the subject of an inquiry by the New York State Attorney General’s office.


Nevertheless, Tether maintained that its tokens were fully backed until April 2019, when general counsel Stuart Hoegner wrote in an affidavit that USDT was backed by “cash and cash equivalents … representing approximately 74 percent of the current outstanding tethers.”


At the time, Tether held $2.1 billion in assets, with 2.8 billion USDT tokens issued on the Omni blockchain. According to a block explorer, this number has fallen since then to 1.775 billion. However, a further 2 billion USDT is in circulation as an ERC-20 token.


Tether’s “Transparency” page says the company currently holds more than $4.6 billion in total assets, including $4.56 billion in U.S. dollars, $44 million in euros and $3.3 million in Chinese renminbi (amounts are converted).


In an email to CoinDesk, Hoegner said the outstanding tokens are currently backed by reserves, adding: “According to the website and our terms of service, our reserves include traditional currency and cash equivalents and, from time to time, may include other assets and receivables from loans made by Tether to third parties. The 74% figure refers to particular assets at that point in time, not the aggregate reserves.”


He declined to detail the breakdown between Tether’s actual cash holdings and the cash equivalents, saying “we generally do not share the asset mix.” ‘Lack of understanding’


As for the actual paper that Griffin and Shams hope to see published in the Journal of Finance, Tether’s statement Thursday said “the authors demonstrate a fundamental lack of understanding of the cryptocurrency marketplace and the demand that drives Tether token purchases.”


The paper itself said its analysis “for the single largest player on Bitfinex” found that “the 1 percent, 5 percent and 10 percent of hours with the highest lagged flow of Tether by this one player are associated with 55 percent, 67.2 percent and 79.2 percent of bitcoin’s price increase over our March 1, 2017 to March 31, 2018 sample period.”


The paper went on to say: “This pattern is not present for the flows to any other Tether exchanges, and simulations show that these patterns are highly unlikely to be due to chance; this one large player or entity either exhibited clairvoyant market timing or exerted an extremely large price impact on Bitcoin that is not observed in the aggregate flows from other smaller traders.”


However, the paper suffers from having incomplete data, including insufficient data on capital flow or transaction timing, Tether said Thursday. As a result, the paper cannot “establish a valid sequence of events” for the claimed manipulation.


“Furthermore, the authors now admit that the patterns of trading they observed could be consistent with the market purchase of Tethers, as opposed to the issuance of unbacked Tethers. Importantly, the authors do not possess or reference any data disputing that Tether has sufficient reserves to back up Tether token issuances in circulation,” the statement said.


While the paper notes that “some in the blogosphere and press” have expressed doubts on whether Tether is fully backed, it adds that “the cryptocurrency exchanges largely reject such concerns.” However, it later says its model and results “are generally consistent with Tether being printed unbacked and pushed out onto the market.”


The paper has received skepticism and pushback from the crypto industry, with Tether skeptic Bennett Tomlin calling it “inconclusive.”


Tether logo image via Shutterstock

News Feed

Finder’s Experts Predict Ethereum Falling to $675 — Long-Term ETH Predictions Lowered Considerably
Finder"s Experts Predict Ethereum Falling to $675 — Long-Term ETH Predictions Lowered Considerably A panel of “industry experts” has predicted that ethereum will bo
Litecoin Network Adopts Ordinal Inscriptions, Following Bitcoin’s Lead
Litecoin Network Adopts Ordinal Inscriptions, Following Bitcoin"s Lead Following a growing trend of Ordinal inscriptions on the Bitcoin blockchain, the technology has been ported t
‘Buy the dip’ mentions on social platforms surge as Bitcoin stumbles
Brayden Lindrea5 hours ago‘Buy the dip’ mentions on social platforms surge as Bitcoin stumblesMentions of “buy the dip” on Reddit, X, 4chan and Bitcoin Talk doubled over the last two days as Bitcoin fell to lows
MUNCH Hits Record-Breaking 1000 ETH Charity Donation Milestone
MUNCH Hits Record-Breaking 1000 ETH Charity Donation Milestone press release PRESS RELEASE. Charity donation project MUNCH announces the ground-breaking milestone of donating over 1
EU Agreement Reached on Anti-money Laundering Rules for Cryptocurrencies
EU Agreement Reached on Anti-money Laundering Rules for Cryptocurrencies European institutions have reached an interim consensus on a set of EU regulations that will burden crypto
Standard Chartered Report Structurally Values Ethereum at ‘$26K to $35K’
Standard Chartered Report Structurally Values Ethereum at "$26K to $35K" A report published by the British bank Standard Chartered indicates the company’s analysts are bulli
World’s Largest Crypto ATM Company Bitcoin Depot to Go Public via SPAC Deal
World"s Largest Crypto ATM Company Bitcoin Depot to Go Public via SPAC Deal The largest cryptocurrency automated teller machine (ATM) operator, Bitcoin Depot, has revealed it has p
Simple Ledger Protocol Universe Is Thriving: Lottery, Mint, ATMs, Over 8,500 SLP Tokens Created
Simple Ledger Protocol Universe Is Thriving: Lottery, Mint, ATMs, Over 8,500 SLP Tokens CreatedIt’s been close to twelve months since we reported on the vast Simple Ledger Pro
How US job market slump could boost Bitcoin prices
Zoltan Vardai10 hours agoHow US job market slump could boost Bitcoin pricesBitcoin could rise due to a weaker job market, but Bitcoin ETFs are on track to their third consecutive week of net negative outflows.5257 Total
Spanish Exchange 2gether Blocks Operations, Affecting 100,000 Users
Spanish Exchange 2gether Blocks Operations, Affecting 100,000 Users 2gether, one of the oldest cryptocurrency exchanges in Spain, has suddenly blocked its operations, leaving its u
LBank Exchange Will List Byepix (EPIX) on November 10, 2022
LBank Exchange Will List Byepix (EPIX) on November 10, 2022 press release PRESS RELEASE. INTERNET CITY, DUBAI, Nov. 7, 2022 – LBank Exchange, a global digital asset trading p
Reports Claim Russia Defaulted on Foreign Debt for the First Time in a Century, Kremlin Disagrees and Says It Paid
Reports Claim Russia Defaulted on Foreign Debt for the First Time in a Century, Kremlin Disagrees and Says It Paid According to reports, the Russian Federation has defaulted on its