Tether: A Controversial Titan in the Crypto World

In the world of cryptocurrencies, stablecoins play a crucial role. As digital assets pegged to stable real-world assets like the US dollar, they’re designed to offer the benefits of cryptocurrency — fast, secure, decentralized transactions — without the wild price swings. But one of the biggest players in the stablecoin market, Tether, is making waves not for its innovation, but for its controversy.

Tether, or USDT, has been a subject of contention for a while now, with critics accusing the company behind it of less-than-transparent practices. Central to the allegations is the claim that Tether isn’t fully backed by US dollars, as it claims to be. The company has often been accused of lying, and in fact, recently found itself in the crosshairs of Bloomberg, which published an investigation into Tether’s practices.

Documents released by the New York Attorney General revealed that Tether was once backed by securities from Chinese companies, and even held securities from big-name companies like Deutsche Bank AG, Barclays Bank Plc, and ArcelorMittal SA: https://www.bloomberg.com/news/articles/2023-06-16/biggest-crypto-stablecoin-was-once-backed-by-chinese-securities

Now, let’s get something straight. It’s clear that Tether isn’t always transparent. Maybe Paolo Ardoino can shed some light on the allegations that are more substantial than simply dismissing them as “FUD” (fear, uncertainty, and doubt). Yeah, there’s a chance that USDT is not 100% collateralized. But even with that possibility, I don’t believe that the severity of the undercollateralization is too massive, especially with the high percentage of reserves: https://twitter.com/paoloardoino/status/1669380966706561027

We also now know about Tether’s bank accounts, and you can bet these banks are going to face some serious pressure. But the biggest question for me is not about the actual backing, but whether USDT will stay fully redeemable — that’s what really matters. We’ve seen similar situations with Circle’s $USDC earlier this year: https://www.coindesk.com/markets/2023/03/11/usdc-stablecoin-depegs-from-1-circle-says-operations-are-normal/

I’ve seen Tether haters like Bitfinexed having their say, and sure, they might have some valid points. But I don’t believe that USDT is going to hit zero anytime soon. In my opinion, their best chance to take Tether down has already passed. But hey, those could be my famous last words ;) https://thenextweb.com/news/bitfinexed-bitfinex-tether-twitter-ban

Now, full disclosure: at CakeDeFi, we have no principal issuance with Tether, and our $USDT exposure on the platform with customers has always been tiny. Neither I nor our company’s treasury has any material USDT exposure: https://bit.ly/CakeDeFi_JH

As always, these are just my 2 cents on the matter. Let me know what you think about all this!!

Julian