Tether Issues an Additional 20 Million USDT Unexpectedly

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.

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.

  • Tracy Kondracki

    Given that all the crypto markets are in a correction right now, there must be a huge demand for USDT. In order to keep their value from going up above $1 USD, Tether would HAVE to issue more tokens. More and more people are entering the crypto markets and their investments would have to be matched by more fiat tethers.

    • Ravi Bhojwani

      Without the right KYC and AML this will get messy.

    • Lance Abel

      Yes, this is correct. But there’s nothing wrong with that. See my comment above. If coins weren’t issued, USDT/USD could trade even further away from $1.00. Issuing more means it can match $1.00 more closely. If USDT/USD went to 0.9, then the number of outstanding tethers would decrease.
      The problem arises if the bank holding the tethers goes bankrupt or otherwise blocks withdrawals

  • Ravi Bhojwani

    Good to see Omni Layer and Foundation all over this.

  • House. Of. Cards.

    • concerndcitizen

      Fractional. Reserve. Banking. House. Of. Cards.

    • Lance Abel

      The article perfectly describes exactly how Tether is supposed to work
      It’s trading above 1 (i.e. Tether USD is more valuable than USD), so to make it trade near 1, the company or somebody else deposits USD, and creates Tethers, which they sell in the open market. Each tether created is matched by a real world USD
      I’m not saying many of these coins aren’t a house of cards, but if so it’s not for the reason this article describes!

      • Lance Abel

        When it trades too far below 1, then somebody withdraws USD, and gives their Tether., which they buy back in the open market. The price goes back up toward 1.

      • Black Pirate

        I agree with you to a point. Tether is a better way to store and trade USD then USD it self. But Tether function is/was to match Tether to USD 1 – 1 ratio.
        The obvious question is – when 20M USDT were injected then they need to show 20M of USD deposit. Otherwise the function of USDT is no longer valid!

        If exchanges are adopting USDT for USD so they can continue function without gov. bureaucracy, then they them self need to make sure USDT is not running fractional reserves or they them self are at risk.

  • sircarl

    That should create about .55 of one percent inflation, assuming that 20 million is not backed 20 million extra dollars.

  • Are we printing money again? LOL!

    • Lance Abel

      No, no printing is taking place. See my comment above

  • Lance Abel

    This is actually not unexpected at all.
    Suppose USDT/USD trades over 1. This means the people at tether or their market makers can CREATE tethers by depositing USD in Tether’s bank, and sell them on the open market above $1.00. If they sell at $1.03 for 20 mln, they make $60,000. A tidy little business
    As for why USDT/USD seems to always trade over 1 when the market is falling, I don’t know. I just bought it at 1.02 so that I could move my USDT to Poloniex to buy ETHER, since Poloniex always moves down (and up) harder than Kraken