Controversy Mounts Over Tether’s Dollar-Backed Tether Coins
The US Commodity Futures Trading Commission has issued subpoenas to Bitfinex and Tether as allegations arise over Tether’s claim that its coins are backed by its dollar reserves.
In an updated report on Bloomberg, the subpoenas were sent last December 2017. Bitfinex and Tether have the same CEO.
When asked to respond, both companies said the following statement to the press:
“We routinely receive legal process from law enforcement agents and regulators conducting investigations. It is our policy not to comment on any such requests.”
The Tether Controversy
The revelation of a subpoena might fuel more criticism to the controversy surrounding Tether and how it operates its cryptocurrency.
On being a “stablecoin”
Tether’s USDT token is a cryptocurrency said to be backed by the US dollar. Every tether in circulation is matched by a dollar in the company’s reserve bunker. Because of that, it became known among crypto enthusiasts as the “stablecoin” because it does not fluctuate in value (it is not volatile) like what we see in the daily price swings of bitcoin against the US dollar.
Critics, however, are arguing and wondering if Tether really has the dollar reserves it claims. As Wired noted in its article:
“If the company has a dollar for every tether, that means in theory any holder can sell tethers back to the company for an equal number of dollars at any time. This belief keeps the value of a tether pegged to a dollar.”
However, written on its terms of service in the past are the following statement, which Bitpinas got from an article in the Coin Telegraph:
Tethers are not money and are not monetary instruments. They are also not stored value or currency. There is no contractual right or other right or legal claim against us to redeem or exchange your Tethers for money.
Naturally, when news of it spread, Tether’s terms of service has been updated and does not reflect that statement anymore.
Critics have been demanding Tether to prove its dollar reserves via an external audit, which the company has not done so far.
Because the perceived value of Tether is that of the dollar, exchanging it for bitcoin helps drives the price of bitcoin up, Bloomberg reports. If the subpoena forces the company to show its balance sheets, the result will only take 3 different routes. The market might be unaffected or it will help drive the price of Tether up if the financial statement confirms Tether’s dollar reserves. The result is different should it prove that it does not have such reserves.
Here at Bitpinas.com, since we are unsure as to how Tether creates its tokens, and whether they really have the dollar reserve it claims, we will not write an article on how to buy it from the Philippines even though there are options to do so.