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15.03.2019

Tether Quietly Dilutes USD Reserve Claims, Drawing Community Criticism

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Tether, the company behind the controversial USDT stablecoin, has recently quietly updated its website to dilute its claims every USDT token was backed by a US dollar in its reserves, to now include “cash equivalents” and third-party loans.

As first spotted by a Reddit user, Tether’s website now no longer claims every USDT token is backed by a dollar in reserves, although it maintains that its value is pegged to that of the USD. The website now 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.

The stablecoin has been a target for critics in the cryptocurrency community, who believe the company, which shares management with cryptocurrency exchange Bitfinex, doesn’t have the $2 billion to cover the over 2 billion USDT tokens in circulation.

Last year, evidence started pointing to the contrary, however, as a Bloomberg report suggested the firm did really have $1 in its reserves to cover every USDT in circulation. Despite the reserves seemingly being there, investors have shown caution with the stablecoin.

Back in October Bitfinex halted fiat deposits for “certain customers in the face of processing complications,” which led to a significant Bitcoin-Tether premium. In a statement Bitfinex noted the deposits were only temporarily suspended, and that it was working to put in place a “new and increasingly robust fiat deposit system.”

Commenting on Tether recent move to alter its USD backing claims,  Reddit users claimed that USDT is now officially not backed 100% by USD,” and that this could mean the company now has cryptocurrencies in its reserves as well.

The recent change may, on the other hand, be related to investigations being conducted by the US Department of Justice (DOJ) and the Commodity Futures Trading Commission (CFTC) on both Tether and Bitfinex’s operations.

Despite the doubts various cryptocurrency enthusiasts have had on Tether’s USDT token, it has been dominating the stablecoin sector, even though cryptocurrencies like the TUSD, PAX, and USDC have been gaining influence.