Tether (USDT): Who gives me honesty?

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2021-05-16 02:17:43

History of Tether

Established in July 2014, Tether (USDT) Originally called Realcoin, a stablecoin, pegged to USD – aka stablecoins. Since its inception, USDT has had a fixed exchange rate with USD of 1:1.

That is, how much USDT is on the market, corresponding to how much USD backing this currency. This is a controversial element throughout the history of Tether, which will be explained later in the article.

Born in 2014, Tether is considered one of the earliest stablecoins created, initially built on top of Omni – a protocol layer of Bitcoin. When Ethereum was born and gradually proved its position, the Tether company also chose to issue USDT on this chain in the format of USDT-ERC20. In the following years, Tether appeared on TRON (USDT-TRC20), EOS, Liquid and Bitcoin Cash (SLP), Solana, respectively.

USDT allocation chart across blockchains. Source: Kyros Ventures

Tether was created to solve two burning problems of the cryptocurrency market:

  • Price volatility is too high
  • Ability to convert between fiat and crypto pháp

According to public information, the Hong Kong-based company Tether is solely responsible for the “printing” and redemption of USDT tokens as well as securing US Dollar reserves. Notably, Tether’s parent company is iFinex also the company that operates the Bitfinex exchange. Since then, the community has questioned the relationship between Tether and Bitfinex, although both sides have repeatedly asserted that they operate independently of each other.

Doubts from the early days of debut…

Does Tether Secure Enough USD Reserves?

Since its inception, Tether has been the subject of endless controversy due to Tether’s failure to provide publicly audited financial statements to demonstrate that it has sufficient USD reserves to back the issued USDT.

Until November 2018, when Tether announced a new banking partner, the account balance was still “perfect as usual”. However, this partner is just an obscure bank in the Bahamas – not reputable enough to ensure transparency for this stablecoin.

“Concise and concise” confirmation of Tether’s bank account balance at Deltec Bank & Trust in November 2018

Even in May 2019, the “shocking” revelation of the Tether lawyer: Only 74% of the total supply of USDT is backed by cash. This number contrasts with previous commitments made by Tether management, which stated that all USDT tokens are cash-backed. This news caused a huge explosion in the cryptocurrency market, which relies heavily on this stablecoin.

Tether Manipulating Bitcoin Price?

Statistics: China’s Tether trading volume in 2019 leads the world, showing the importance of USDT dominating the entire crypto market globally. By October 2019, Tether – the giant behind 99% of Bitcoin trading volume in China.

Not only that, the times Tether “prints” more USDT has a strong impact on the Bitcoin price. Even many people in the community create bots that specialize in monitoring USDT printing to warn of price movements in the market.

These doubts do not escape the eyes of management officials. In November 2018, the US Department of Justice investigated Tether and Bitfinex for suspected market manipulation. Although it did not come to a definite conclusion, this incident made the community start to doubt USDT.

By October 2019, Tether continued to be sued for market manipulation. Specifically, the Roche Freedman group accused the iFinex company of defrauding investors, manipulating the market and concealing illegal funds. Roche accused Tether and Bitfinex of creating “the biggest bubble in history.”

“Because the market believes the lie that 1 USDT = 1 USD, Bitfinex and Tether have enough power to manipulate the market on an unprecedented scale to profit from price volatility cycles.”

As of 2017-2019, there is almost no stablecoin that can replace Tether. In 2019, in the stablecoin ecosystem including GUSD, TUSD, USDC, PAX, the USDT market share accounted for a huge number of 83%.

USDT market share in stablecoin pie 2019

In CHK Blog Post: Will Bitcoin Stand As Tether Collapses? explains many scenarios if USDT collapses, then the crypto market will not have a happy ending. It is no exaggeration to say that USDT alone “captures” the entire market.

What is the relationship between Tether and Bitfinex?

2019 was an extremely bleak year for the market. Not only was the crypto winter long, but by April of that year, a shock swept across all fronts: The New York government accused Bitfinex of using Tether money to “cover losses” of $850 million. The lost funds are believed to have prevented Bitfinex customers from withdrawing funds from the exchange at the end of 2018.

The New York Attorney General’s office accused Bitfinex of losing $850 million in user funds, and then borrowed money from Tether (because these two companies have the same parent company, iFinex) to make up for the loss. this deficit.

Shortly after, Tether and Bitfinex quickly refuted the above information with their statements, asserting that the New York government’s theory contains “many false statements”, and said that it will soon be restored. That $850 million.

While Tether was ordered by the New York Supreme Court not to lend more money to Bitfinex, the scandalous duo decided to appeal to the end.

…The journey of redemption

After a period of “struggle” with regulators, Bitfinex paid $100 million in a $700 million loan from Tether in July 2019. Through the IEO of the exchange coin LEO, Bitfinex gradually gathered enough money and paid off the remaining debt to Tether in February of this year – after nearly 2 years of “scandal” occurred.

Not long after, Bitfinex and Tether settled the case with the New York government, agreeing to pay a “smooth fee” of 18.5 million USD to “settle down” with US officials. This information does not prove that the duo is 100% “innocent”, but shows that the New York government did not find too strong evidence to charge Tether. From there, the two sides chose a peaceful resolution to end the legal battle.

After being freed from the legal “shackles”, Tether confirmed to be fully insured – The stablecoin king like a tiger grows wings.

On March 30, 2021, Tether provided an audit of the company’s reserve funds, along with an assurance report from the accounting firm Moore Cayman. The report states that Tether’s reserves for stablecoin USDT exceed the amount required to redeem the crypto asset as total liabilities are $35.2 billion, while total consolidated assets amount to 35.3 billion USD.

Thus, after nearly 7 years of being born, USDT finally publishes financial statements – proving that USD reserves are sufficient to back stablecoins. However, there are still some questionable voices in the community, because Moore Cayman is not part of the Big4 (4 leading prestigious auditing firms in the world) – the quality of the audit is still uncertain.

“However, this is clearly a big step forward for Tether on USDT’s quest to undo the injustice.”

Coinbase Miracle

The story of Tether would not have had too many mutations if Coinbase Pro hadn’t suddenly announced the listing of USDT in April of this year. Specifically, Coinbase Pro will add USDT based on ERC-20, despite USDT on the Tron blockchain surpassing Ethereum, hitting the $24 billion mark. Even on May 4, 2021, USDT was officially traded on Coinbase.

The move comes just over a week after Coinbase went live on the Nasdaq stock exchange. Many big companies quickly bought COIN after Coinbase launched less than 24 hours.

“The fact that Coinbase is listed on the US stock exchange proves that Coinbase has ensured enough legality to operate in the US market. With strict crypto regulation, Coinbase is now considered one of the most reputable exchanges in the market.”

Therefore, the fact that such a reputable exchange lists USDT proves that Tether has a level of transparency that meets Coinbase’s standards. While not 100% secure, Tether can now boast of being one of the rare stablecoins trusted by Coinbase.

This miracle has almost completely “cleared” Tether – showing that even Coinbase has listed USDT, the community has no reason to doubt the transparency of this stablecoin anymore.

“Tether history has turned to a new page, one that is stronger than ever.”


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