Tether May Not Be 100% Backed by Fiat as Suggested by its New Terms

  • The company has faced various publicity hurdles over the question if it has sufficient fiat reserves to back its stablecoin, due to the fact the firm has never provided a full independent audit of its fiat collateral.
  • Bloomberg News had also previously reported they have seen Tether bank statement last December, which showed that over four separate months the company had sufficient funds to back their stablecoin.
Federal reserve of Cleveland Building

Tether Limited has all but admitted that its dollar-pegged stablecoin is not always backed 100% by fiat reserves, in an update to the terms on their website.

The company has faced various publicity hurdles over the question if it has sufficient fiat reserves to back its stablecoin, due to the fact the firm has never provided a full independent audit of its fiat collateral. As a proof of their reserves, however, the company did release a letter from the Bahamas-based Deltec Bank last November.

Bloomberg News had also previously reported they have seen Tether bank statement last December, which showed that over four separate months the company had sufficient funds to back their stablecoin.

As seen on the Internet Archive, the previous terms stated that “Every tether is always backed 1-to-1, by traditional currency held in our reserves.”. The new terms, however indicate that while USDT is 100% backed, it’s not always entirely by fiat funds. The new text reads:

“Every tether is always 100% backed by our reserves, which 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, which may include affiliated entities (collectively, “reserves”). Every tether is also 1-to-1 pegged to the dollar, so 1 USD₮ is always valued by Tether at 1 USD.”

This changed sparked a heated conversation on Reddit, where people immediately took issue with the stablecoin being backed by anything other than USD. Commenters suggested that backing the stablecoin with cryptocurrency compromises its legitimacy, with one commenter going as far as to compare Tether to alleged ponzi scheme BitConnect.

Twitter users have also shown a fair bit of outrage, as many popular crypto personalities have expressed similar concerns, as the term “tetheral reserve” has seen a resurgence in popularity.

Discussion
Related Coverage
Sam Bankman-Fried Found Guilty on All Charges
  • The New York Jurors took 4 fours of deliberating before pronouncing the former FTX CEO guilty of all seven charges of fraud and conspiracy to commit fraud.
  • Bankman-Fried will now have to appear in court on 28 March, 2024, where he will face a potential maximum sentence of 115 years in prison.
November 3, 2023, 8:54 AM
sbf

Former CEO of FTX Sam Bankman-Fried leaves the Federal Court in New York after pleading not guilty, 3 January, 2022.
lev radin/Shutterstock

DoJ Requests SBF’s Expert Witnesses be Barred From Testifying
  • The U.S. Department of Justice has expressed its concerns over Sam Bankman-Fried’s seven expert witnesses, and requested they be barred from testifying on the case.
  • The DoJ claimed most of the proposed experts lacked the necessary foundation for their opinions, making them unqualified to be an expert witness.
U.S. Prosecutors File Fraud Charges Against Do Kwon
  • Do Kwon was charged with conspiracy to defraud, commodities fraud, securities fraud, wire fraud, and conspiracy to engage in market manipulation.
  • A spokesperson for the Manhattan U.S. attorney’s office, which brought the charges against Do Kwon, said the Department of Justice (DoJ) will seek his extradition.