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(often called by its symbol USDT) is a cryptocurrency that is hosted on the Ethereum blockchain with tokens issued by Tether Limited, which in turn is controlled by the owners of Bitfinex. Tether is called a stablecoin because it was originally designed to always be worth US $ 1.00, maintaining $ 1.00 in reserves for each tether issued.
While, according to its 2021 settlement with the New York Attorney General Letitia James, "Tether represents to users that any holder of tethers can redeem them from Tether the company at the rate of one tether for one US dollar," Tether Limited as of 2017 stated that owners of tethers have no contractual right, other legal claims, or guarantee that tethers will or can be redeemed or exchanged for dollars. On 30 April 2019 Tether Limited's lawyer claimed that each tether was backed by $ 0.74 in cash and cash equivalents. In May 2021, Tether published a report showing that only 2.9% of Tether was backed by cash, with over 65% backed by commercial paper.
In February 2021, Tether settled their legal dispute with the New York Attorney General's Office. Bitfinex and Tether did not admit any wrongdoing but paid an $ 18.5 million fine. The OAG's findings in the 17 February 2021 settlement stated, "[f] rom its inception in 2014 until late February 2019, Tether represented that every outstanding tether was 'backed' by, and thus should be valued at, one US dollar," but on 14 March 2019 changed the backing to include loans to affiliate companies (ie iFinex). The settlement ended a public lawsuit alleging Bitfinex had used Tether's funds to cover up $ 850 million missing since mid-2018 and the OAG found that iFinex - the operator of Bitfinex and Tether - had made false statements about the backing of the Tether and about the movement of hundreds of millions of dollars between the two companies to conceal Bitfinex's losses. However, iFinex and Tether did not admit or deny the OAG's findings in the settlement. According to AG James, "Tether's claims that its virtual currency was fully backed by U.S. dollars at all times was a lie".
Tether Limited and the Tether cryptocurrency are controversial because of the company's alleged role in manipulating the price of Bitcoin, an unclear relationship with the Bitfinex exchange, and the company's failure to provide a promised audit showing adequate reserves backing the Tether token.
In 2019, Tether surpassed Bitcoin in trading volume with the highest daily and monthly trading volume of any cryptocurrency on the market.
Alleged price manipulation
Research by John M. Griffin and Amin Shams in 2018 suggests that trading associated with increases in the amount of tether and associated trading at the Bitfinex exchange account for about half of the price increase in bitcoin in late 2017.
Reporters from Bloomberg, checking out accusations that tether pricing was manipulated on the Kraken exchange, found evidence that these prices were also manipulated. Red flags included small orders moving the price as much as larger orders, and "oddly specific order sizes — many going out to five decimal points, with some repeating frequently." These oddly sized orders might have been used to signal wash trades in automated trading programs, according to New York University Professor Rosa Abrantes-Metz and former Federal Reserve bank examiner Mark Williams.
According to Tether's website tether can be newly issued, by purchase for dollars, or redeemed by exchanges and qualified corporate customers excluding U.S.-based customers. Journalist Jon Evans states that he has not been able to find publicly verifiable examples of a purchase of newly issued tether or a redemption in the year ending August 2018.
JL van der Velde, CEO of both Bitfinex and Tether, denied the claims of price manipulation: "Bitfinex nor Tether is, or has ever, engaged in any sort of market or price manipulation. Tether issuances cannot be used to prop up the price of bitcoin or any other coin / token on Bitfinex. "
Subpoenas from the U.S. Commodity Futures Trading Commission were sent to Tether and Bitfinex on 6 December 2017. [25] Tether's former auditor, Friedman LLP, has also been issued a subpoena. Noble Bank in Puerto Rico was reportedly handling dollar transfers for Tether. Noble, in turn, used the Bank of New York Mellon Corporation as its custodian. As of October 2018, Noble Bank has put itself up for sale and reportedly no longer has banking relationships with Tether, Bitfinex, or Bank of New York Mellon. Though Bitfinex lacks the banking connections to accept dollar deposits, it has denied that it is insolvent.
Tether announced a new banking relationship with Bahamas-based Deltec Bank in November 2018, releasing a letter, purportedly from Deltec, that said it had $ 1.8 billion on deposit with the bank. The letter was two paragraphs long and signed with an illegible squiggle, without a printed author's name. A Deltec spokesperson declined to confirm the information in the letter to Bloomberg reporters.
Some studies [who?] Have argued that use of Tether in trading on online cryptocurrency exchanges has resulted in arbitrage trading strategies between countries. In fact, it has even been thought [who?] That arbitrage trading of Tether in countries of low Bitcoin premium to high Bitcoin premium accounts for up to 80% of all Bitcoin returns on these exchanges.
During the course of a price manipulation investigation by the U.S. Commodity Futures Trading Commission and the United States Department of Justice, Phil Potter, Chief Strategy Officer of Bitfinex and an executive of Tether Limited, departed Bitfinex in 2018. [45] The investigation was continuing on 20 November 2018 and focusing on Tether and Bitfinex, according to Bloomber.
Security and liquidity
Tether claims that it intends to hold all United States dollars in reserve so that it can meet customer withdrawals upon demand, though it was unable to meet all withdrawal requests in 2017. Tether purports to make reserve account holdings transparent via external audit; however, Tether never produced an audit showing it had the purported reserve. In January 2018 Tether announced that they no longer had a relationship with their auditor. [Citation needed]
About $ 31 million of USDT tokens were stolen from Tether in November 2017. Later analysis of the Bitcoin distributed LEDGER showed a close connection between the Tether hack and the January 2015 hack of Bitstamp. [Citation needed] In response to the theft, Tether suspended trading, and stated it would roll out new software to implement an emergency " hard fork "in order to render all of the tokens that Tether identified as stolen in the heist untradable. Tether has stated that as of 19 December 2017, it has re-enabled limited cryptocurrency wallet services and has begun processing the backlog of pending trades. [Citation needed]
