{"id":380338,"date":"2019-04-30T21:00:41","date_gmt":"2019-04-30T21:00:41","guid":{"rendered":"https:\/\/wncen.com\/?p=380338"},"modified":"2019-04-30T20:23:09","modified_gmt":"2019-04-30T20:23:09","slug":"crypto-community-reacts-to-tether-admitting-usdt-not-fully-backed","status":"publish","type":"post","link":"https:\/\/wncen.com\/news\/crypto-community-reacts-to-tether-admitting-usdt-not-fully-backed\/","title":{"rendered":"Crypto Community Reacts to Tether Admitting USDT Not Fully Backed"},"content":{"rendered":"

According to the company behind it, stablecoin USDT<\/a> is not fully backed by fiat currency deposits. It was revealed today that the controversial crypto asset firm Tether only holds around 74 percent of the total value of USDT\u2019s current circulating supply.<\/p>\n

Tether and the crypto exchange Bitfinex are currently defending allegations<\/a> from the New York Attorney General’s office that the latter borrowed $600 million from Tether to stay afloat after the trading venue reportedly lost $850 million. The dramatic shortcomings are thought to be the result of Crypto Capital, a Panama-based payments processor that Bitfinex used, having assets frozen in various nations around the world.<\/p>\n

USDT Not Backed 100%, But Did Anyone Think That it Was?<\/h2>\n

An affidavit filed by Stuart Hoeger, the general counsel at both Tether and Bitfinex, has today claimed that the stablecoin crypto asset USDT is only backed by around $2.1 billion. This falls short of the $2.8 billion worth of USDT currently in circulation. The document states:<\/p>\n

\u201cAs of the date [April 30] I am signing this affidavit, Tether has cash and cash equivalents (short term securities) on hand totaling approximately $2.1 billion, representing approximately 74 percent of the current outstanding tethers.\u201d<\/p><\/blockquote>\n

He also details that a credit agreement between Tether and Bitfinex did indeed exist and was in place \u201cfor the protection of the virtual currency market.”<\/p>\n

According to a memorandum by Tether’s defence lawyer, Zoe Phillip of Morgan Lewis, there is no need for each USDT token to even be backed by a dollar:<\/p>\n

\u201cAccording to the Attorney General, the line of credit needed to be frozen because it improperly impairs the reserves Tether would use for redemptions. The Attorney General appears to believe that Tether must hold $1 in cash fiat currency for every dollar of tether. These allegations are wrong on multiple levels.\u201d<\/p><\/blockquote>\n

Hoegner’s affidavit<\/a> seems to support this by highlighting that the stance of the company had officially changed with regards the 100 percent backing of USDT in recent months<\/a>. Given that this was widely reported at the time, it seems a wonder firstly that anyone was even continuing to use USDT when numerous other stablecoins now exist and secondly, why the news of the New York Attorney General’s allegations against the two companies should drop the price in the way it did last week<\/a>.<\/p>\n

Crypto Community Reacts to Tether and Bitfinex Legal Troubles<\/h2>\n

The CEO of social trading platform eToro, Yoni Assia, took to Twitter to opine about the revelation’s likely impact on crypto prices. He mused on the likelihood of a potential Bitcoin price pump if the news causes people exit USDT en<\/em> masse<\/em>. Ultimately, however, he admits that the shady goings on between Tether and Bitfinex will be negative for crypto. Although, he is sparse on specific details.<\/p>\n

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Are the news supposed to pump or dump BTC ? Its bad news, but if $2B USDT get exchanged to BTC it actually increases its price… what a predicament .
Tether Lawyer Admits Stablecoin Now 74% Backed by Cash and Equivalents https:\/\/t.co\/f9Rw75FNCO<\/a> via @CoinDesk<\/a><\/p>\n

— Yoni Assia (@yoniassia) April 30, 2019<\/a><\/p><\/blockquote>\n