There have been multiple recent developments concerning Tether and its issuance of USDT. Although the company has had some issues in the past regarding its banking situation, those problems have mostly been resolved. However, a lot of new tokens were brought into circulation out of the blue over the past few days. This is particularly worrying because the company has yet to provide an audit or a balance sheet to explain the discrepancy.
Another Strange Move by Tether
The past twelve months have been filled with a fair bit of controversy for the Tether project. For those who are unaware, Tether digitizes a few fiat currencies to create so-called Tethers. These digital tokens are effectively pegged to the value of the fiat currency they represent. For instance, 1 USDT will always be worth US$1. That is how things are supposed to work, at least, but a recent incident involving Tether shows that is not necessarily the case.
The company had some issues with its bank a few months ago. As a result, it was unable to redeem USDT for USD through its own service, forcing users to find liquidity elsewhere. Due to these issues, a slight gap between the USDT and USD value became noticeable. At one point, users were paying a 7% premium to convert their Tethers back to U.S. dollars. At the time, one USDT was valued at US$0.93. That situation was since resolved, and some people made good money from buying up these cheaper USDT.
We have a new controversial situation involving Tether. According to the Omni explorer, the company suddenly issued another 20 million USDT for no apparent reason. Considering that every USDT needs to be represented by an equivalent USD value, it appears there is a US$20 million discrepancy right now. The company has yet to release an official statement or a reason as to why this has happened.
To make things even more interesting, it appears the 20 million USDT have been sent to the Bitfinex exchange, although that has not been officially confirmed at this stage. It is certainly possible some of the conspiracy theories on the internet are true. More specifically, the issuance of these 20 million tokens coincides with the Bitcoin price experiencing a large correction over the past 48 hours. Some people claim these USDT were issued to prop up the price again – a very wild and baseless accusation for now, though one to keep in the back of your head regardless.
$13 Million just removed from margin lending markets. pic.twitter.com/2VvSB6QkiC
— BitCrypto'ed? (@Bitfinexed) September 2, 2017
Considering how Bitfinex is looking to exit the USD market sooner rather than later, this whole USDT scenario makes even less sense. An official audit of Tether’s liquidity and its balance sheet would be highly appreciated. The company has withheld that information for some time now, which only fuels speculation further. Although Tether started out as a perfectly legitimate project, its recent issues and decisions raise more questions than answers for the time being. An official statement by the company is direly needed at this point, but it is doubtful we will get one anytime soon.
All of this goes to show that it is not all that easy to create a pegged cryptocurrency. Various other companies have tried in the past, and all of them failed miserably. There is certainly a demand for digital dollars pegged in value to the real thing. Tether may not necessarily be the best company for the job, although the jury is still out on that one. The involvement of Bitfinex in all of this also raises some additional concerns.