Tether

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Tether Ltd.
Tether logo.jpg
Founded 2014
Headquarters British Virgin Islands, Hong Kong, Isle of Man (formerly)
Key People Brock Pierce, founder; JL van der Velde, CEO; Giancarlo Devasini, CFO; Stuart Hoegner, General Counsel
Employees 5-10
Products Tether (USDT)
Twitter @Tether_to
LinkedIn Profile
Facebook tether.to
Website tether.to

Tether (USDT) is a cryptocurrency that was designed to have a 1:1 exchange rate with the U.S. dollar (USD) in order to make it easier to liquidate cryptocurrencies like bitcoin or buy cryptocurrencies with fiat currency.[1] The company that made Tether, Tether Ltd., is closely tied to the cryptocurrency exchange Bitfinex.[2][3]

Background

Tether was founded in 2014 by Brock Pierce. It started in the Isle of Man, but later moved to the British Virgin Islands. The company is also incorporated in Hong Kong.[4][5] Tether was originally called "Realcoin," but the name was changed to "Tether" to avoid brand confusion with other altcoin projects of the same name.[6][7]

Originally, Tether used bitcoin's blockchain to record and verify transactions. In June 2017, Tether transitioned to using Litecoin instead.[8]

Tether's founders and executives are the same executives of the cryptocurrency exchange Bitfinex.[9]

Overview

The basic idea behind Tether is simple: create a "stablecoin," or digital asset that is designed not to fluctuate in value, then use this coin as a medium for crypto-to-fiat and fiat-to-crypto transactions. According to the company's web site, each Tether coin in circulation is pegged to an equivalent amount of real-world fiat currency. As of first quarter 2018, there were approximately 2.2 billion Tether (USDT) coins in circulation. The creators of Tether say they have at least this much in fiat currency backing the coins, but this claim has been under a great deal of scrutiny since 2017.[10]

Tether is a popular cryptocurrency, used by many exchanges as an intermediary currency to help protect traders from volatility. It is also used to aid in transactions between exchanges and to engage in margin trading.[11]

Issues of Transparency

Tether's official website asserts that its platform was "built to be fully transparent at all times."[12] Despite this, the company has not complied with public pressure to publish clear proof that its fiat currency reserves contain at least enough money to back each USDT coin in circulation with an equal amount of U.S. dollars. A large number of concerned users on Twitter, Facebook and Reddit began publicly calling for this proof in April 2017 when news surfaced that the Bank of Taiwan and Wells Fargo would no longer be assisting in Tether's transactions.[13]

A document was released on Tether's website on September 28, 2018 that purported to summarize Tether's liquid assets. The company that provided the consulting report was an accounting firm called Friedman LLP. After the document was released, Tether confirmed it had cut its ties with Friedman LLP. The document stated that as of September 15, 2018, Tether Ltd. had $442,984,592 and €1,590 in multiple bank accounts. Unfortunately, the names of the banks associated with these accounts were blacked out on the report. This made it very difficult to verify the information published in the report, which cited an amount of USDT in circulation at the time similar to the amount of money in each account.[14][15]

Research provided by the cryptocurrency research website BitMEX suggests one of the banks in the report could be the Puerto Rico-based Noble Bank.[16][17]

Tether Ltd. has received subpoenas from the CFTC; representatives from Tether have declined to comment on this subject.[18]

On June 20, 2018 Tether reported that it had hired Freeh, Sporkin & Sullivan LLP, a U.S. law firm, to review the adequacy of its U.S. dollar reserves and the firm reported that there were sufficient holdings on June 1, 2018.[19] Tether has said it is still seeking an auditor to conduct a full audit.[20] 

In November, Tether released a letter of confirmation from the Bahamas-based Deltec Bank & Trust Ltd., which stated that the bank held $1,831,322,828 for Tether. The form included what appeared to be a signature without an accompanying printed name.[21] Jean Chalopin, the chairman of Deltec, sent a message to Coindesk saying that the letter is authentic. The bank itself did not issue an official statement.[22]

In March 2019, Tether updated the terms on its website, saying that USDT is not, contrary to what the company has said for years, backed 100 percent by fiat currency reserves, but by a combination of fiat reserves and "cash equivalent" holdings, which may refer to other cryptocurrencies.[23]

Price Manipulation

On May 18, 2018, Tether increased the number of USDT coins in circulation by 250,000,000.[24] In January 2018, Tether had increased the number of tokens in circulation by 850,000,000. Both instances coincide with bitcoin price increases. Along with existing public concerns over the company's transparency issues, this has caused concerns about price manipulation. Some believe the company does not actually possess enough USD to back all USDT tokens in circulation.[25]

An anonymous report released in January 2018 concluded that "Tether printing moves the market appreciably." Using data available on Tether's own website, the anonymous author of the report demonstrated an apparent relationship between the price of bitcoin and the minting of new USDT tokens.[26] Another study released on June 13, 2018, made similar claims. This study, titled "Is Bitcoin Really Un-Tethered?" was published by University of Texas, Austin professor John M. Griffin and graduate student Amin Shams. The 66-page report concluded that there was substantial evidence that Tether had been used to "pump" the prices of certain cryptocurrencies like bitcoin in certain instances and that the price increases in those instances could be accounted for by typical market behaviors.[27][28]

Tether's price falls below $1

In October 2018, Tether experienced the most significant price decrease in the coin's history, which coincided with a significant price increase for nearly every other cryptocurrency in the market, including other stablecoins like Gemini dollar. The price decrease was broadly speculated to be the direct result of widespread loss of confidence in the coin, due to long-standing issues regarding the coin's lack of transparency, as well as recent accusations of insolvency against Tether's partner firm, Bitfinex.[29][30]

In December 2018, Tether was in the top 5 cryptocurrencies by market cap, according to CoinMarketCap.[31]

Key People

  • Brock Pierce - Founder (no longer with the company)[32]
  • JL van der Velde - CEO
  • Giancarlo Devasini - CFO
  • Stuart Hoegner - General Counsel[33]

References

  1. All you need to know about tether, the cryptocurrency that could have 'devastating' effects on the market. CNBC.
  2. All you need to know about tether, the cryptocurrency that could have 'devastating' effects on the market. CNBC.
  3. Tether Case, Explained. Cointelegraph.
  4. Brock Pierce Announces Dollar-backed Cryptocurrency 'Realcoin'. Coindesk.
  5. All you need to know about tether, the cryptocurrency that could have 'devastating' effects on the market. CNBC.
  6. Brock Pierce Announces Dollar-backed Cryptocurrency 'Realcoin'. Coindesk.
  7. Realcoin Rebrands as 'Tether' to Avoid Altcoin Association. Coindesk.
  8. What is Tether?. Cointelegraph.
  9. WHY TETHER'S COLLAPSE WOULD BE BAD FOR CRYPTOCURRENCIES. Wired.
  10. Tether Might Still Be Crypto's Ticking Time Bomb. Coindesk.
  11. WHY TETHER'S COLLAPSE WOULD BE BAD FOR CRYPTOCURRENCIES. Wired.
  12. About Us. Tether.
  13. Tether Case, Explained. Cointelegraph.
  14. WHY TETHER'S COLLAPSE WOULD BE BAD FOR CRYPTOCURRENCIES. Wired.
  15. Memorandum Regarding Consulting Services Performed. Tether.
  16. Research Suggests Tether Has Banking Relationship with Puerto Rico-based Noble Bank. CCN.
  17. Tether: New financial data released by Puerto Rico. BitMEX.
  18. U.S. Regulators Subpoena Crypto Exchange Bitfinex, Tether. Bloomberg.
  19. FSS1JUN18 Account Snapshot Statement. Tether.
  20. Cryptocurrency firm Tether releases law firm report attesting to U.S. dollar reserves. Reuters.
  21. Crypto Firm Tether Says It Has $1.8 Billion in Bahamian Bank. Bloomberg.
  22. Deltec Chairman Says Tether Letter on Bank Relationship Is ‘Authentic’. Coindesk.
  23. Tether's U.S. Dollar Peg Is No Longer Credible. Forbes.
  24. Tether Mints $250 Mln of New USDT Tokens, Rekindles Controversy. Cointelegraph.
  25. All you need to know about tether, the cryptocurrency that could have 'devastating' effects on the market. CNBC.
  26. Quantifying the Effect of Tether. The Tether Report.
  27. New Report Blames Tether for Bitcoin’s Bull Run. Bitcoin.com.
  28. Tether Used to Manipulate Price of Bitcoin During 2017 Peak: New Study. Bloomberg.
  29. Crypto Markets Roiled as Traders Question Tether's Dollar Peg. Bloomberg.
  30. Price of 'Stable' Cryptocurrency Tether Tanks to 18-Month Low. Coindesk.
  31. You know things are bad when Tether is in the crypto top 5. Financial Times.
  32. Former Child Actor Brock Pierce Vows To Give Away $1B From His Crypto Fortune. Forbes.
  33. About Us. Tether.io.